Paying back a Derogatory Collection

Paying back a Derogatory Collection
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Hello everyone,

I am trying to figure out what to do on a derogatory account that I saw when I checked my credit on NerdWallet. I thought I had no credit at all, but it turned out there was a derogatory account for over a year old! I am sending a debt validation letter to the collection agency to make sure it is mine, but I was wondering since I have no other credit history other than that, if a secured credit card and credit builder loan would be a good way to combat making that derogatory account active?
Thanks everyone :slight_smile:


Hi @PynkCoffee,
I am not one of the financial advisers for Ner Wallet. I’m just an average Joe, trying to repair my credit and bring up my score. With that settled, onward to your questions.

Way to go on validating the so-called delinquent debt. That’s a sure fire way to see if it is yours or not.

I’ve heard both sides of the coin about paying a debt. Paying it off isn’t going to remove it any faster. I think the debt stays on report for 7 years(don’t quote me on that). Then too, I was told by a lender that not paying it isn’t a bad thing. I asked him why? He replied with, if you pay it off it’s still shows on your report and some lenders may consider you a risk because, you paid it off.

Now, to address secured credit card and credit builder loan. Where your credit file is so thin, both are an excellent choice. Just remember to keep your credit card at(or below)30% of total credit limit. Some say keep it as low as 10%. And ALWAYS pay on time. There’s nothing more damaging than a late payment on your credit file.

I hope this helps.



@Deadmanmoshing got it right – the credit-builder loan and secured card are great ways to build credit. You still owe the amount on your debt, and it stays on your report for seven years.

@PynkCoffee you are taking the right steps already by sending a debt validation letter and working on other aspects of your credit, which you can control. Here’s a detailed story on what to do about a charged-off account and here’s another one on how to deal with debt collectors.

Good luck and let us know what you decide to do!