Does Paying a Debt That's Already on Credit Report - Does It Help?

© 2009, Brandon Cornett. All rights reserved.

Reader Question: "If you have had great credit for years and then you get a collection on your credit report for $50 dollars, which drops your score down to an average score, how much does it affect you if you don't pay it back and just let it stay on showing unpaid? I had a bill that was charged to me after the fact and don't want to pay, especially now that they put it on my credit history. I have nothing else negative on my history but previously where my score was in the high 700s it's now 660 because of this unpaid debt. Does paying a debt help your score that much since it's already on your report?"

Response:

I posted a response earlier today on a very similar subject. So I would start with this Q&A session. Paying off a collection item will not remove it from your report. Once the collection agency reports the account to the reporting agencies, it will stay on your report for up to seven years -- unless the item was filed in error and you can improve it.

However, when you pay the item off, the line item on your credit report will (or should) be updated to say "Paid Collection." So while the item will remain, it will at least show that you paid off the debt. This may help your credit score in the long run, and it may help you

The real question is, do you want bill collectors bothering you (possibly for years) over a $50 outstanding debt. Credit scores aside, if I were in your shoes I'd find a way to resolve the debt by disputing it successfully or paying it off. But that's just me.