Should I Pay a Negative Account in Full or Make Payments?

Reader Question: Is it best to pay a negative account in full or to make payments over time?

That's up to you. If you want the negative item to come off your credit report as quickly as possible, then you'd be better off paying the debt all at once, as a lump sum. If you cannot afford to pay it in full, then you could set up a payment plan with the creditor or collection agency that currently holds the accounts.

So it's a question of budget versus expediency:

• The "all at once" approach will get the negative item removed from your reports sooner, which means your credit score will probably increase to some degree.
• The "over time" approach will delay the removal of the item (and the effect it has on your score).

Your credit report will only be updated to reflect the paid item when it's paid in full -- it probably won't be updated in increments if you pay over time. So, from a reporting and scoring perspective, the benefits will only come with the debt is paid off and the negative item is removed from your credit reports.

If you do decide to pay it off all at once, make sure you're in a good position to do so. For example, consider your income and the chance that it may be affected by economic "forces." Don't dip into any emergency funds to pay a debt off in full. I offer this last bit of advice because we live in very uncertain times, economically speaking.

Related Q&A sessions:

• Should I pay off my debt to increase my credit score?
• How long does it take to make significant improvements?

Hope that helps you out. Good luck, and happy holidays.