A company will generally send your bill to collections after 180 of no payments. From this point on, you will be working with the collections agency to negotiate repayment. (note:the original company may not notify you that they are selling your debt to a collections agency. You can find this info on your credit report.)
The impact that this will have on your credit score will depend on the amount of debt, the type of debt, and your credit score before. If the bill was small (ie. $100 or less) it probably won’t change your credit score very much. Larger amount will have an increasing affect. Generally it doesn’t matter what type of debt it is unless it is medical bills. Newer credit scores such as the VantageScore 4.0 and FICO® Score 9 give less wait to delinquent medical bills. As to be expected, the higher your credit score when a bill is sold to collections, the bigger negative impact it can have.
You have a couple of options once your bill is already in collections. You can pay the bill in full. You can try to negotiate a lower settlement amount. With this tactic, make sure the collections agency agrees (in writing) to update your credit report once you pay the lowered settlement amount. Collections agencies have been known to play hardball. The third option is to not pay your bill at all. This will obviously have the worst impact on your credit score because your delinquent bill will stay on your report the longest with this tactic. Once a bill has been in collections for 7 years, you can request that it be removed.
Some people think they can play the system by simply ignoring the collections agency and waiting the 7 years. While this tactic does exist, it can have the worst impact on the other parts of your life. With a low credit score, you will have trouble qualifying for a mortgage, credit cards, and other financing.And if you do qualify, it will be at much higher rates. This alone can cost you hundreds and even thousands of dollars very quickly. While it may be tempting to try to play the system, the consequences tend to make a dramatic difference over a lifetime.
Bottom Line: Pay your bills on time!!!