An old collection account hurts your credit score, even if you paid it off. If you apply for a apartment that requires a good credit score, the old collection may prevent you from getting it. However, some landlords will run a credit check and others won't. Whether you can get an apartment is a decision a landlord has to make and can vary by apartment.
A collection account will do the most damage to your credit score next to bankruptcy, according to Experian, a credit reporting agency. If you have a collection account, it means you didn't honor the terms of your credit arrangement, even if you paid it off later. Part of the reason collection accounts are so damaging is that accounts don't get to the collection stage unless you have already been seriously delinquent. It's one thing to miss a payment or two, but to get an account to collections it generally means you have missed at least three to six months of payments.
Paid Off Collections
According to Experian, even paying off a collection account isn't likely to help your credit score much. The fact remains that even if you later made good on your debt, you have already shown an inability to meet your credit obligations on time. However, getting an apartment isn't always about your actual credit score. Even if a landlord pulls your credit report and sees your collection account, you can point out how you did make good on your payments. This might hold some weight with the landlord as he is evaluating your apartment application.
Collection accounts stay on your credit report for seven years. The more time that passes since your account went into collections, the less effect it will have on your credit score. If your collection account is about to drop off your credit report, you might want to wait until it does to apply for an apartment. Otherwise, you can emphasize to the landlord how the collection account is ancient history.
Boosting Credit Score
While a collection account will drag down your credit score, there's a lot you can to do improve it. Your payment history is 35 percent of your FICO score, so if you don't miss any payments since the collection, your score will begin to recover. If you keep your outstanding debt to a minimum, that helps to improve an additional 30 percent of your score. Other score boosters include limiting the amount of new credit you request and keeping a blend of different types of accounts open. Other than that, time is the only factor that can help your credit score rise, as 10 percent of your score is based on the length of your credit history.
- Jupiterimages/Creatas/Getty Images
- Does Being Denied a Credit Card Hurt Your Credit?
- Do You Get Bad Credit if a Bill Goes to a Collection Agency?
- "Is ""Account Closed by Consumer"" a Negative on a Credit Report?"
- Will Not Paying Rent Affect a Credit Score?
- Does a Collections Account Affect My Mortgage Approval?
- How Soon Will My Credit Improve After Negative Accounts Are Removed?