Yes, anytime you pay your bill it is an improvement. It will steadily grow over the next few months until it is back where you started.

Paying off a collections account will generally cause your score to drop at first. This is because attention is always drawn to recent payments or activity, therefore there will be more emphasis placed on the recently paid collections account, which is a derogatory/negative account, so your score will decrease slightly at first. Around 6 months after you pay off the collections account, your score will start to increase again and end up being higher than it was before you paid off the collection.

However, the long-term effect of paying a collections account is not significant. The collections account will STILL be on your credit report, paid or not, for 7yrs from the date of the first delinquency that led to the account being turned over to collections. You will observe the BIGGEST increase in your score when the collections account finally falls off your credit reports when it hits the 7yr. mark. It is good to pay off a collections account because a “paid in full” statement on your credit report looks better than an unpaid collections account. Plus, you avoid the risk of the collections agency later suing you for the amount that you owe them(although in your case, it is very unlikely that they’d ever try to sue, since the amounts of your collections accounts are so tiny, therefore not worth the struggle). But I will be honest: If you are expecting like a 100-pt increase in your credit score after pulling together all your savings and vacation funds to pay off a collections account, then you will be rather disappointed.

By the way, the “resetting the clock” bit is a common misconception and is untrue. It is against the law to do that. The 7yr clock starts from the date of the first delinquency/missed payment that led to the account being eventually sent to collections.

Bill collectors do NOT want me telling you this…but there are a few instances where paying off a collections account will HARM you more than help you. For example, do not pay a collections account that is more than 3yrs old. The bad effect of a collections account on your FICO score decreases with time, so a 6-yr-old collections account will have less of a bad effect than a recently new collections account. At that point, you might as well just wait for it to fall off your report. If your collections account is more than 7yrs old, DEFINITELY do not pay this!…by this point, it will be past the Statue of Limitations for reporting this account negatively on your credit reports anyway, so it will not affect your credit one way or another if you pay it. Thirdly, in some instances where you are strapped for cash, it is not a good idea to pay off a collections account. Instead, use your tiny amount of money to keep your other bills in good standing, and to pay for food on the table and a roof over your head. I know of someone who made that mistake…he was a starving student, and put his sole $2000 savings into paying off a collections account, just to end up STILL getting loan rejections. If he’d used the $2000 for tuition instead of paying off a collections account, then he wouldn’t have needed to apply for a loan anyway. The $2000 was all he had to his name and without it, the effects were more devastating than the effects of not paying a collections would have been. This $2000 setback eventually resulted in him falling behind on his other bills a year later, so now he has TWO years of black marks on his credit reports.

I would like to clarify some thing. I do not mean to bash, but speaking from experience (I approve and deny credit all day long and worked for one of the credit bureaus for a few years). Please do not take this the wrong way, but I know what goes on in credit bureaus and want to help people as much as possible.

“By the way, the “resetting the clock” bit is a common misconception and is untrue. It is against the law to do that. The 7yr clock starts from the date of the first delinquency/missed payment that led to the account being eventually sent to collections.”

Any time a payment is made on an account in collections, the clock is reset.

The 7 year clock does start from the date of first delinquency/missed payment and it does reset or re-age when there is activity on the account. Activity means a payment is made, paid in full or any thing else that may be reported concerning the account.

This explains the drop in the score. The account was re-aged to the date of last activity (when they reported the payment/paid in full).