Medical Collections Question

I received a question from a client

This week I received a question from a client about Medical Collections.

"Hi Dan, Thought I would come to the expert on credit scores. ... I was asked a question regarding medical collections that have been reported on a person’s credit report. How long do they last on the credit report and what type of impact does it have as to creditworthiness for a consumer?”

A medical collection could impact a score by 20-40 points in the first 24 months. If the person has a lot of good pay history over the years, then 1 collection may be less than 20 points. If they show any other late payments (even just 30 days late) on any account in the last 2 years with a collection the impact would be 40+. The problems occur when there are more than one collection. The impact could be 70 to 80 points. Only collections of more than $200 matter for scoring. Collections will stay on the credit for 7 years but the credit scoring is really only impacted heavily in the first 24 months.

If a collection is more than 24 months old, I would not recommend they pay it off because the scoring system changes the account from an unpaid collection (over 24 months old) to a PAID Current collection (the date paid- within 24 months). this persons score will actually drop because they pay the account off. And it will now be on their credit for 7 years from the paid date (the last activity on the account).

Hope this helps.

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