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If you fail to pay a merchant's debt, that company will more than likely refer your delinquent account to a collection agency. Once this happens, the debt remains on your credit report for seven years even if you pay it off. The best way to help fix your credit after this happens is to stop using credit and begin paying the rest of your debts on time. Gradually, your credit score will increase due to on-time payments and decreasing balances. The exact length of time varies depending on your current situation. The number of bad debts, public records such as bankruptcies, and inquires on your report will weigh into your score.
Creditors vary in their reporting policies. Many creditors report late payments to the credit bureaus after 30 days of nonpayment. If you don't pay and become delinquent for another 30 days, the creditor reports your debt as 60 days late, further lowering your credit score. The best way to fix this problem once the late payments hits at 30 days is to pay the debt or make payment arrangements to stop the debt from getting worse. When deciding your credit worthiness, creditors look less-kindly on a history of bad payments as opposed to one error in judgment. If you stay up with your payments, your one-time late payment of 30 days should have a minimal impact.
Satisfied In Full
In the credit reporting world, there is a term used called "satisfied in full." When you negotiate a settlement with
a debt collector, and you pay the agreed amount to satisfy your debt in full, you can request that the collection agency mark your debt as "satisfied in full," meaning you paid the debt according to requirements; it doesn't look as negative as paying a lower amount on a settled debt. If the collection agency doesn't have authority to do this, get the name and a contact number for the original debtor, the agency for whom you first acquired the debt, and ask them to make the change.
Avoid paying credit repair companies who allege that they can fix your credit. This money can be better spent lowering your debt. Beware of agencies that tell you they can erase bad debts from your credit report, because they can't. The only way to get a negatively assessed item off your credit report is to wait the seven to 10 years it takes for it to disappear, or contact the creditor and ask the creditor to remove the debt once you pay it even though they are not obligated. While this may sound like bad news, creditors generally look to your past two years of credit history to make determinations on your credit worthiness. Start from where you are now and continue paying your bills on time. Read up on the The Credit Repair Organizations Act. It explains exactly what credit repair companies can and cannot do for you. If you still feel you need help fixing your credit after paying a debt, contact a nonprofit agency such as Consumer Credit Counseling.