Pay delinquent debt or declare bankruptcy?

A higher credit score requires time, on-time payments

Question for the expert

Dear Credit Care,
My credit score is very low, in the low 500s to be exact, and I am now trying to get it all cleaned up. However, I am unsure of whether I should file bankruptcy to just wipe it clean, or pay off three of my collections at a time. So my question is: Which would help my score rise quicker and get me back into the high 600s by this time next year -- filing bankruptcy and starting over, or paying off three at a time? -- Caren

Answer for the expert

Dear Caren,
Filing bankruptcy is not going to help improve your credit score. Your score is already very low, so a bankruptcy will not drop it as significantly as it would if your score were in the low 700s, but it will negatively affect your score for the entire time it is on your credit report (10 years, if you file Chapter 7 bankruptcy). A bankruptcy may also negatively affect your ability to get new credit at reasonable terms, hiring and promotion possibilities and even your insurance rates.

The decision whether to file bankruptcy should be made only after you fully understand all of your options. You could consider speaking with a certified, nonprofit credit counselor. During your appointment, your counselor will go over your income, indebtedness and overall financial situation. You will then discuss possible solutions, including filing bankruptcy if you cannot afford to pay what you owe. You can find a good credit counselor through the Association of Independent Consumer Credit Counseling Agencies at or through the National Foundation for Credit Counseling at

The negative items on your credit reports that are dragging down your credit score -- in your case, the collection accounts -- are not going anywhere until seven years from the first date of delinquency (typically 180 days past due). Paying the collection accounts may not immediately raise your credit score. The reason? The fact that the account was in collections in the first place. Eventually paying the account does not keep the scoring models from taking away points for the negative listing of collection accounts. With that said, paying your collection accounts will improve your score over time and will also be viewed less negatively by potential creditors than unpaid collection accounts.

The good news is that as more and more time passes, the negative accounts count for less and less in the credit scoring calculations. What improves credit scores the most is time and positive information being added to your credit reports. The two major credit scoring models, FICO and VantageScore, give more weight to your more recent information than older information. So if you make on-time and as-agreed payments on your accounts for more than a year, your credit score will begin to rise.

Some other tips to keep in mind when trying to improve your credit score:

Handle your credit with care!

See related: State-by-state bankruptcy filings, , VantageScore at 5: what it is, why it matters, 10 things you must know about credit reports, FICO 5: the basic elements of a credit score

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Updated: 01-23-2018