How much of a boost in credit score will removal of collection account yield?

[Sheila H]

I’m considering applying for a car loan, but I’ll need to raise my credit score first. I have a collection account that I want to remove, but before I send a dispute to the credit bureaus I was wondering just how much o a boost in credit score will removal of collection account yield?

[KENDRICK]

That depends on three factors:

Assuming that you can remove a collection account, the affect it may have on your credit score depend on the following 3 factors:

1. Type of collection account
2. Age of collection account
3. Other derogatory accounts you have

However, remember that disputing an account won’t necessarily remove it from your report. Disputing an account removes it only if the account is not yours, is beyond the credit report time frame or can no longer be verified.

In any case, here’s a breakdown of how each of the 3 factors can affect your credit score:

Type of collection account
If the collection account is a single entry item (e.g. unpaid parking ticket, unpaid medical/gym/cellular/utility/cable bill) than removing it may result in a significant credit boost (up to 100 points!).

On the other hand, if the collection account is a result of a multiple entry item such as a defaulted loan or unpaid credit card bills than removing it won’t boost your score e because the defaulted accounts and/or late payments will continue to appear on your report and weights down on your score.

Age of collection account
The older the collection account is – the less it affects your credit score and therefore the less it will boost your credit score if removed.

Account age is a major factor in the credit score formula. Up to 90% of your score is determined by information from the past two years. Thus, if your collection is 5 yrs old it has a small effect on your score and you’ll see only a small increase when it’s removed.

Other derogatory account you may have
If that collection account is the only derogatory item on your report then removing it may indeed boost your credit score (up to 100 points!). If however you have many other derogatory accounts, then removing a single collection account will have a minor effect, if any at all.

Try a FICO simulator
Perhaps the best answer to your question can be answered by a FICO Score Simulator. All you need to do is run the simulator with or w/o that collection account and see if and how much of a credit score boost the removal of that collection account will will yield.

Hope this clarifies the subject.

[Author]

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