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It depends on several factors. How old is the collection? How much of your available credit are you utilizing with your credit cards? Are you paying your credit cards on time?
Collections impact your score less the older they get. Likewise late or missed payments impact your score less the older they get. It also depends on what type of collection it is. If the collection is from a credit card which hasn't been paid and sent to collections that is much worse than if it is unpaid utilities.
Having debt is not in itself a negative thing. On the contrary responsible use of credit is what a good credit score is all about. For instance it is much better to have a car loan, installment loan (i.e. furniture or personal loan), and 15 credit cards then to have no credit experience at all. People with the best credit scores are not the people who never use credit and pay for everything in cash. People with the best credit scores are ones who have a mix of several long established accounts and have managed those accounts responsibly. By a mix i mean several different types of credit such as auto loan, mortgage, personal installment loans, and credit cards. Even within credit cards it is best to have a variety of major bank credit cards, department store cards, and one gas card.
Having several credit cards is actually a good thing as long as you pay on time and use no more than 30% of you available balance. To really tweak your score use no more than 10% of your balance. Also the amount of time your accounts have been open is also a factor so don't go closing your oldest account just because you don't use it anymore. Likewise don't open several accounts all at once as it will shorten your average age of accounts.
-35% affects Payment History. Meaning any lates; collections; charge offs; bankruptcies; judgments; liens or the such will hurt the score. All is time based, the older the information the less it is contributing to the scores.
-30% affects Utilization. It is best to have several accounts with low balances distributed then it is to have fewer accounts maxed out. To figure utilization: Balance (divided) by Credit Limit = percentage. Lower than 10% recommended per account, this is one of the fastest means for increasing the over all credit score.
-15% affects Established History. The longer you maintain open accounts with creditors the better. When first starting out of course this is not easy; but this is where getting added as an Authorized User to another persons established credit comes in best. Remember that the contributor must have an account that has long history; clean payment record; high credit limit; and low balance. Also need to check with the creditor to insure that they have a policy to report authorized user accounts to all three major credit reporting agencies.
-10% affects Inquiries. Don't apply for credit unless you know you can get it or that you need to get it; unnecessary credit inquiries are going to hurt the scores - especially if your over all credit file is small to begin with.
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