One of the biggest "dings" to your credit is having an account in collections. But what exactly does "collections" mean? 

That's when an account falls seriously behind on its payments (around 3-6 months usually) and the creditor turns it over to a collections department or third-party agency to "collect" the debt.

Here's why that could dramatically affect your credit score —  the #1 factor that lenders use to determine an applicant's creditworthiness is their ability to pay back debt.

So it raises a major red flag when someone Isn't making, at least, the minimum payments on the debts they currently owe. 

The down low on collections

When facing collections, folks generally fall into two camps:

They are either:

• • Behind on their payments and on the brink of being sent to collections
  • Or, their account has already been written off and a collections attempt is underway

If you fall into the first camp, there's good news! 

Your creditor wants to get their money back. So they are generally open to adjusting your payments or working with you to create a plan to avoid going to collections so that you can get back on your feet.

However, there is still hope if your debt has already been sent to collections!

First, it's important to know that the faster you get out of collections, the less impact the delinquency will have on your credit score. 

Now, there are typically two paths out of collections:

1. 1. You can pay off the debt in a lump sum or negotiate a new payback agreement. This will not save your account, but it will get the debt collectors off your back.
   2. If you are severely behind, your creditor may be open to negotiating a settlement. This means that you agree to pay a total amount less than the original amount you owed.

One important thing to note, the collection/settlement may remain on your account for up to 7 years, but the faster you get out of collections, the faster you can begin making positive steps forward!