Source
r/YouShouldKnow•
davidquick

YSK (in the US) paying off a debt that is in collections does not improve your credit score and can possibly hurt your score.

If a debt is in collections it goes away in 5+ years this is the only way that it will stop hurting your credit. Your credit score sees accounts in active collection and collections accounts that are "paid in full" as essentially the same thing.

Paying off these debts can hurt your score because it will change their effective reporting date on your credit record. Most scoring agencies take into account how recent the derogatory mark is. So by paying anything you update the last reported date on your credit report.

So long story short, for any debts less than what it would cost to take you to court there's no point in paying these unless you can convince the debt collector to delete the entry from your credit report.

Edit: 7 years not 5+

Second edit: I am entirely not the person to take financial advice from for a variety of reasons. That said, I would say this advice only applies to debts <$1k and maybe even smaller than that.

Posted Mar 29, 2018, 5:21 PM UTC · edited

1.1K140
jonzey231•

Yeah I always heard this. Then when I got my bonus one spring I paid off a bunch of debt including a collection over a period of a couple months and watching Credit Karma along the way.

I did the collection last, after everything else had been recorded, and it jumped my score 45 more points than it already did from paying off all the other debt. Credit Karma even specifically said something along the lines of "congrats you paid off a collection account and your score has increased!"

So I guess I understand the logic of just letting it go for 5+ years but personally, I won't do it.

538
arsenik509•

I did the same. Not as dramatic of an increase but I paid off all my collections and my score on credit karma went up. Last year I couldn't get approved for a credit card. Today I was able to get one.

155
jonzey231•

Congratulations on your progress and discipline, sir. 👍

67
johnnysivilian•

They never learn

-17
arsenik509•

If you're commenting on me getting a credit card when I have bad credit you're wrong. You have to have an available credit limit to increase your credit score. Just because someone has a credit card doesn't mean they have to use it or they can just pay it off every month. It's been 10+ years since I've had an open credit card because of mistakes I made when I was younger. I grew up, now I'm growing my credit.

28
johnnysivilian•

Im not hatin brother im in the same boat, i meant the credit card people.

2
davidquickOP•

So one other thing I've learned in this process is that credit karma's score is not the same scoring that's used for houses and maybe not even cars. It's more like what they use for determining credit worthiness for financing furniture or electronics or credit cards.

My mortgage lender credit score is, for my middle score, almost 60 points lower than credit karma.

70
move_machine•

Credit Karma is not your FICO score.

43
faceerase•

Yes, exactly. Discover gives out free FICO scores to everyone (you don’t need to be a cardholder): https://www.discover.com/free-credit-score/

I have no idea why people use CreditKarma. Mine is like 50 points off from my FICO score

47
spgb-•

This seems like a great way to signal to Discover that you want to get hounded with a flood of credit card snail mail if you have a decent score.

13
IMSITTINGINYOURCHAIR•

I use it as a guide and do not take it as my complete report or correct score. It makes for a good tool to keep an eye on things and potentially even catch the first attempts at I'd theift.

7
hannahsaurusflex•

Wow. It actually says my FICO score is like 60 points higher than the score on credit karma. Nice.

4
[deleted]•

[deleted]

2
[deleted]•

[removed]

1
CreamyGoodnss•

My guess is that companies like CreditKarma underscore you so you'll sign up for whatever premium services they offer

0
jonzey231•

I agree with that. Credit Karma is more like a running credit score, whereas large purchase credit checks are usually a bit more harsh.

33
MuvHugginInc•

Credit Karma isn't your credit score because they don't run a credit check (soft nor hard) to give you that score. They make an estimate based on your balances, the amount of debt and your previous credit history. They are often WILDLY off from a standard tri-merge credit report. No one can give you your credit score without running an actual credit report.

Source: worked as a licensed loan officer.

16
Mekiya•

We're in the process of getting a mortgage now and my scores were higher there than Credit Karma.

That said, if you're on the low end of the credit scores paying off that debt can make a big difference when your loan has to go through manual under wrighting.

6
[deleted]•

[deleted]

3
FatalDosesOfOsmosis•

Experian agrees with you:

Paying A Collection Account Can Help Credit Scores

Some of the newer credit scoring models exclude paid collection accounts when calculating your score, so paying off a collection account has the potential to increase your credit scores right away.

Even if the scoring model being used does include paid collections, lenders may view a paid collection less negatively than an unpaid one. Paying off the past due debt also will reduce the total amount of debt you owe.

More from Experian on the benefits of paying your debts:

TL;DR: OP is full of shit.

60
jonzey231•

Good call, sir.

4
Rickard403•

This comment should be upvoted for visibility

18
MartinMan2213•

The score credit karma provides is not a FICO score and is no what will be used when you have lines of credit.

6
biscuitpotter•

Huh, TIL. Then what is it?

4
MartinMan2213•

credit karma uses a vantage score 4.0 as of last year. There are different versions of vantage scoring and fico scoring and each place can pick and choose which one it uses

https://www.creditkarma.com/advice/i/new-vantagescore-4-0-explained/

11
Arnold_Mal•

My FICO score dropped 98 points when a debt went into collection. I paid it off 6 months later, and my score went up 81 points.

2
AtlasWontPutMeDown•

My husband had a repo before we met. 4.8k. About 5-6 years into the relationship, we’re finally able to pay it off. But it had interest. We paid 7.8k or so. Husband’s score jumped. I don’t know how much. I know when I met him it was in the low 400s (he had some other debts). Now it’s in the high 600s.

2
[deleted]•

[deleted]

114
sky_b•

I am actually a debt negotiator for the consumer, not the creditors. This is almost exactly how it works for 99% of people.

Typical collection cycle is as follows:

  • First 1-3 months non-payment are in delinquent status. This is where you get the friendly reminder calls and subtle cues to pay the past due amounts

-4-6 months of non-payment are spent in internal collections of the original creditor. This is where you can expect the more intimidating and less subtle tactics like letters with big red fonts, more phone calls that are very rude, and even threats.

-Around month 6, something called "charge off" occurs and it's for the same tax reasons mentioned above. It is the technical point where the balance becomes a principle amount and usually stops accruing late fees and interest. This is also the point its typically turned over to a 3rd party collection agency.

-Months 7-9 of non payment (usually) are handled by the 3rd party agencies. Its more calls, letters, etc. and can actually bounce around to different companies. Some may spend more or less time in this stage. This is a good, but not the best time to negotiate.

-Finally, months 10ish and beyond are spent with a "debt buyer" who is the one who pays pennies on the dollar for debt as mentioned above. They may have paid $100 for an account you owe thousands on. So if you even if they only collect $500 when you owe $3000, they come out ahead. Obviously, this is the best time to negotiate.

Legal situations happen with some creditors more than others (Discover is probably the worst about it) and it depends on other factors that they try to learn about you. Some of these factors are: are you full or part time employed, if you're on SSI or Disability, do you own any property they could place a lein on... If you meet their specific criteria, they could sue.

When suing, they are trying to obtain a judgment from the court stating you owe them the specified amount. It allows them to do a few special things if they win. They can collect longer than the normal 7yrs, they can attempt to garnish wages, place a lein on property, or levy your bank account.

Garnishment is not an issue if your only receiving SSI, disabilty, pension, or live in a non garnishable state.

Lein is not an issue if you don't plan to sell the property before you take care of the debt/account

Bank levies have loopholes kinda. Some people remove their names of the accounts they share with others temporarily. Only community property states allow them to levy spouse accounts for your debt. Also, certain states have exemption limits that say your first X amount of money is safe from levy. Non-garnishable wages are also exempt.

Typed this on mobile so sure it looks horrid. Hope it helps though.

Tried to edit some mistakes out, but you get the idea.

13
slowestmojo•

I have a $1200 collections account that is pretty old, but not more than 7 I think. How do I get in contact with the people that now own the debt and if I work something out where I can just pay it off on one go how can I trust that they will actually do that?

5
DrMazen•

Pull your credit report, which will most likely have the current creditor’s info.

3
sky_b•

I think someone responded to you already with this, but generally once they have stopped sending letters and calling, pulling credit report or a simple phone call to the original creditor to ask (last resort) is how you find what's going on. If you don't see it on the report (of any bureau) , it's probably past the statute of limitations and I would just leave it alone. If you call, you can quickly end the call before they try to scare or intimidate you after you get the info you need.

2
slowestmojo•

awsome thank you

1
no_secrets_here•

Thank you so much for the tips! I’m not as bad as you were at the moment but sometimes it just feels so helpless when no one tells you anything until you start hitting the 30 day mark of missed payments & it adds up so fast😪

1
davidquickOP•

I think you're sortof arguing the metaphor on this. For a debt that's worth suing over sure they'll take you to court. But for $500? They're just going to try to harass you into paying.

In the grand scheme of things this isn't going to seriously affect my debt to income ratio and the bigger impact will be from having a collections mark on my record.

If the mark is 4 years old, there's really no reason for me to pay it because paying it will make it stick around for 7 years instead of 4.

-16
tedivm•

This comment is so wrong it hurts.

Yes, you will absolutely get sued over $500. Collection agencies eat that shit up- they buy the debt at a fraction of the cost, normally in batches (so they buy $50,000 of debt from the company). They'll attempt to settle with you (recording each attempt, making you look worse if it makes it to a judge), and then if nothing else works they sue. It is not a ton of work for them- they have all the forms templated out, and can bang out dozens of these "cases" before a judge before you hit lunch.

Here's the deal- if you get sued you will lose, and then you won't have a "collections" record on your account, you'll have a "default". Your seven year timer starts fresh for the new default, and defaults will destroy your credit far more than a collections account will. Not only that, but once they sue you you end up on the hook not just for the $500, but also for all of the court fees and time spent by the lawyers- it can easily balloon to thousands of dollars.

I know this because it happened to me (sort of). I had an invalid piece of debt, about $600, that was bought by a collections agency. Even though I had actually paid this $600 off a computer glitch fucked me over and I got taken to court over it. I was told after that that I owed close to $2200, and my credit was fucked. It took me a couple of years to actually prove I had paid it off, at which point the default was removed.

My best advice here is to pay the debt, wait a year, and then challenge the record on your report. Once the debt is already paid off most collection agencies don't bother responding to the challenges if it won't make them money, and if they don't respond in thirty days it'll simply be removed.

9
relevantzero•

My score was mid 700’s.. I paid off $10000 in credit card debt and my score dropped to 699... no other changes

Seems like there is some “agreement” amongst the banks and the credit scorers where they get the score-generating companies to tank your score for paying off debt and while increasing your score for lining the banks’ pockets with interest payments.

Gotta go... 3 Blackhawk helicopters just started hovering overhead.

57
jcinterrante•

It's not exactly that they're punishing you for paying off debt. They actually do reward you for having a low balance on your cards. Hard to say without knowing the full details of what happened, but my guess would be that you not only paid down your balances (which would raise your scores) but you also closed the accounts. That could hurt your score by 1) decreasing the number of lines of credit you have and 2) decreasing the average age of your lines of credit

The rules can be a little arcane, but once you understand the factors it's much easier to control your score. This site has a good rundown of what the credit bureaus look at https://www.equifax.com/cs/Satellite?c=DS_General_Cont_C&childpagename=DecisionSimple%2FDS_General_Cont_C%2FDSGeneralContentTemplate&cid=1189578994233&pagename=DecisionSimple%2FPage%2FDSLayoutTemplate&ParentLinkID=1162919656130

22
arlenreyb•

I had a stupid, pointless Gap credit card that I signed up for because I'm dumb, and after never using it ever again I decided to just cancel it. Having an account open that you never use, and therefore never even check, is a risk not worth having, right? Well, it tanked my credit score by about 50 points, and took an entire year to get back up to 700+. The rules are definitely idiotic.

9
relevantzero•

Like I said, no other changes. Accounts still open

4
thatdumb8oy•

By increasing your available limit you do increase the risk that you might go spent happy. The score drop accounts for this. If you reduce your credit utilization to under 30% and maintain that you will see your score shoot back up.

5
relevantzero•

I was at 18% utilization when I paid off the 10000$

But I think I see your point. Thanks!

4
jcinterrante•

You can also request your credit report, which will tell you what factors are counting against you. https://www.annualcreditreport.com/index.action

1
SmokinDroRogan•

Not just closing accounts. If you pay off all of your debt you have zero utilization which isn't great for your score. Utilizing 30% and paying it off monthly is the ticket.

4
ashikkins•

It's so infuriating that something that can radically impact your life is so arbitrary and unclear/unexplained like this.

3
jcinterrante•

I agree. There are so many problems with credit reporting -- it's inaccurate, it's insecure, it's accountable to the wrong parties, it's owned by corporate interests. There needs to be a better solution. I think there's two possible options: 1) Something will go horribly wrong with the credit rating agencies and the Federal Government will create a public option for credit scoring (similar to what China is doing) or 2) we'll get far along technologically that an open source, decentralized credit scoring option will become available (you can think of this option as "bitcoin for credit scores")

2
davidquickOP•

So at $1k plus I'd probably lean towards paying it off because that starts to be worth going to court over. Although if you don't have any assets it might be better to stall until the statute of limitations passes.

10
acepincter•

"Creditworthiness" seems to be the term for "Someone willing to play ball" with the rules of the economy that benefit the lenders.

"Neither a borrower or a lender be" was once great advice, a credit score might, in this context, be an account of how far one strays from the wisdom. It's for this reason that I reject my own score.

8
NinjaChemist•

Something is not right. By "paid off credit card debt", did you close any accounts? Were those debt in collections?

Your score improves by lowering your debt:credit ratio.

6
relevantzero•

Not true...source: my credit score

-2
[deleted]•

[deleted]

1
LemonsForLimeaid•

Look a bit more into it. I routinely open 0% cards yearly, put 10k on it and pay off month before the rate expires. And I'll go from 800 down to 760 then back to 800. Might be worth pulling one of your free reports and taking a detailed look

1
nats15•

From what you described, you paid off past due credit cards that may have been closed but weren’t charged off. Your score will not rise or fall dramatically because it isn’t the same as paying of a collections account. It’s also entirely plausible any gains you saw were negated if you pull any of the CBRs more than once a year.

1
RevolCisum•

Fuck. I just paid off a bunch of medical Bill's in collections and wondered why my score didn't prove. The derogatory marks are gone, but score stayed the same. I should have used that money to pay off other things.

42
davidquickOP•

The marks are still there. Once it goes into collections it's just going to be seen as an entry that went into collections until it drops off your report. It sucks.

23
RevolCisum•

So, I should just not pay any that go into collections from now on? I can't figure what is hurting my damn score so much.

5
davidquickOP•

I'd they go into collections, the damage is done. The internet says some collectors can be talked into removing the entry altogether if you make them a good settlement offer but I've never gotten that to work.

11
RevolCisum•

Thanks for the info. Hopefully, no more collections for me now, so, maybe my score will raise.

2
RevolCisum•

Happy cake day by the way!

3
davidquickOP•

Thanks you

2
redfrojoe•

Can it go back on your credit report? Why would it just go away?

1
jjkmk•

Is it the save deal for student loans?

1
vgmgc•

I've had multiple medical bills go into collections over the years and I have never had any impact on my credit from them. This even happened recently. No negative impact when they went to collections and no positive impact when I paid them.

The only negative hits on my credit are from 5 years ago. 2 months of late credit card payments when I was in grad school with no summer income have stuck with me for fucking ever.

5
Boudrodog•

If possible, just ride it out for another two years. I just had a long conversation with a credit counselor (contact deets below), and she explained the statute of limitations for collection accounts is 7 years. After that, the negative accounts should drop off your report. Not sure if that means you no longer have to pay though.

I am by no means an expert. Just another schmuck trying to unfuck his credit so he can keep a roof over his family.

Credit counselor: Jen Jones; www.newdaycreditwa.com

0
kevin777777777•

You still legally owe the debt and they can still chase you for it, it's just not visible on your report anymore.

1
dominant_driver•

it goes away in 5+ years

7.5 years from the date of first delinquency, and only if you don't re-age the debt by making a partial payment or payment arrangements.

Also, be aware that you can be sued by creditors if the debt is still within the statute of limitations for your state and the type of debt that it is. And the creditor will win the lawsuit.

If you're still within the SOL, you may need to consider paying the debt rather than having a judgement filed against you, which will hurt your credit score even more.

31
wadewatts23•

Depends on the state it varies from 5-7.5 years. Also normally these creditors will sell if the original debt to a debt collector for cents on the dollar. Any time you get taken to court the only thing you gave to request is proof that the debt is yours. By your signature, most of the time they don’t have this and the case will get thrown out.

7
dominant_driver•

The 7.5 year reporting period is not state dependent. The SOL IS state dependent.

And yes, the OC will provide all the relevant documents to the debt collectors that purchase the debt.

Please know what you're talking about before you post a YSK.

4†
GeishaB•

You know you're allowed to fight lawsuits, right?

3
wadewatts23•

SOL was what I was talking about and can vary from 3-6 years depending on your STATE. And before you preach to me I’m speaking from experience. Was taken to court from a debt collector, before our court time they pulled me in a side room giving me a last ditch effort for me to make a pay off. The entire time I refused to acknowledge the debt was mine. Went in front of a judge and I again refuted the debt was mine and asked for proof. The only thing they had was my name address and telephone number. They could not provide my social, my birthday, or a signature that proved the debt was mine. The judge dismissed the case. It was nearing the SOL so they were attempting a last ditch effort. So YSK what your talking about before questioning me. ✌🏻

12
davidquickOP•

Glad it worked out for you

3
buddymundane•

How much was debt and did they offer for you to pay a reduced amount?

1
wadewatts23•

Debt was $1,250 and they offered a $400 payoff. But I was worried if I accepted they could then use that as me acknowledging the debt was mine.

4
Bloodysamflint•

It's also worthwhile to note that the only thing a credit score is an indicator of is "will this person use debt in a way that is profitable to the lender?" It is NOT a measure of financial responsibility or stability. I have a dead-center credit score, the only debt/credit I have is a 13-year old mortgage. Paid on time, extra payment every other year. Comfortable savings account, no credit cards of any kind. Family friends who carry balances on multiple cards, occasionally late, generally only make minimum payments are 100+ points "ahead" of me. Great folks, but I wouldn't trade my savings for their credit score.

10
self-proclaimed_____•

Some other good advice is to focus on non-medical collections if possible. However, medical collections still affect your score just as much as non-medical.

If you have over $2000 in outstanding collection debt that is non-medical, you won't be able to get a mortgage loan. However, you could theoretically have a million in medical collections and still get a loan.

The dollar amount doesn't matter either. A $1 collection will hurt you just as much as a $100,000 collection.

It is definitely worth it to call the creditors or collections agencies and ask them to remove any and all derogatory information from credit if you agree to settle with them. Most times, they will be willing to settle for pennies on the dollar. Ask for something in writing stating their agreement to remove the debts from credit. They will be much more willing to do this if they know you're going to pay up. If you pay first, they already got their $ and will be way less likely to help you out.

8
davidquickOP•

100% agree

2
overtmind•

So by paying anything you update the last reported date on your credit report.

In my experience they find a way to "update it" anyway somehow.

7
davidquickOP•

That's always a possibility.

2
DarwinZDF42•

YSK that the banking/credit system is designed to screw you.

7
acepincter•

Interesting, but I'd still have to lean towards paying it off. But the 5+ year thing is good to know. I suppose I'll check my score in 2 more years when that last one expires.

5
davidquickOP•

I'm in the process of buying a house and in getting qualified for a mortgage I found a couple old bills that were in collections and my lender advised me not to pay off anything until after the purchase was finished unless I could get the collectors to pull the derogatory mark.

I called the collectors and offered to pay in full if they would remove the entry. Surprisingly they refused. So I was just amused by this whole situation where I'm willing to pay the debt but I have no incentive to do so. I know it's not enough money for them to sue me over so why would I ever pay it? Especially if paying it would actively hurt me financially.

8
acepincter•

they refused to take your money when offered? What reason could they have not to!?

Did you explain that you plan to pay them a big fat $0.00 as the alternative, waiting them out?

I'm at a loss.

6
davidquickOP•

Yeah. It's baffling.

6
mikefut•

They refused because it violates their agreement with the credit bureaus. They aren’t a supposed to accept payment for deletion. Many do it anyway.

3
anzenketh•

They refused to pull the derogatory mark.

2
bluecastle•

So I'm not american, but I work for a bank in my country, and removing a derogatory entry in a credit report is a HUGE DEAL. We have to go 4 levels up the chain (manager's manager's manager) for approval for that, and it only happens if we screwed something up and they can prove it. Basically going back to a credit bureau and correcting something is saying openly saying "we fucked up and gave you false information that hurt someone", and never enters into deal-making with the collections people.

4
acepincter•

Any idea why all the red tape?

1
dontgetaddicted•

My hunch here is that you called in and acknowledged the debt, which I may very will be wrong, but I believe this resets the 5 (I thought it was 7) year timer.

Now that you have acknowledged the debt, they'll still be able to sit on it until you pay.

2
davidquickOP•

The timer doesn't reset unless you pay them

2
dontgetaddicted•

I guess it depends on the state, according to this it appears that saying the wrong thing can indeed restart the clock:

http://blog.credit.com/2016/07/can-a-debt-collector-restart-the-clock-on-my-old-debt-150464/

In some states, if debt collector calls the consumer and asks, “Do you admit that you owe this debt and you’re just refusing to pay it?” and the consumer says “Yes, I can’t pay it, but I agree I owe it.” That can count as a reaffirmation of the debt, which in some states restarts the statute all over again.

4
0ttr•

Yeah, except failing to pay them outright is gonna be a problem if they sue you. Prior to such action you can often negotiate a reduced amount, after, that's not necessarily the case a certainly not going to be as big of a reduction.

Edit: yes, this happened to me years ago.

5
davidquickOP•

Right, if they're willing to sue you over the amount you should pay it even if it's worse for your credit.

I'm talking about smaller amounts that aren't worth suing over.

2
wadewatts23•

So what would you think that the creditors view as worth going to court over? I’ve heard it is more than $2000 because the legal fees are not worth it for anything above that.

2
davidquickOP•

Id think it would vary. But I would probably pay anything over $1k

0
GeishaB•

All you have to do is answer the lawsuit. They usually stop after that

1
Babosarang•

Well I have a question now. I left college on medical leave and they still billed me after saying that they would put it on hold (I ended up losing my scholarships and Pell Grant from the leave) when I receive the letter , I called to discuss payments to only be told that it had already gone into collections ( I called literally 2 days after getting the letter.) They then sent an "oops we forgot to give you a pamphlet on how to manage your debt to us" that was completely useless since it went to collections. After that it was sold twice before I could even find someone willing to do payments with me. Then it was sold again and I lost track. It came out of my 2016 state tax refund and it's probably going to come out of my 2017 refund too. So my question. Is the 5 year rule still applicable after it was sold the first time in 13 or no? I should mention it was 9k that was sold to 14k and I knocked off 2k before it was sold.

5
Gimbu•

School loan? Nope. You're boned.

Terrible system.

5
Babosarang•

:(

1
davidquickOP•

Student debt is a whole different ball game because the government guarantees it so it never goes away.

2
Babosarang•

Well poo

2
il_biciclista•

Source?

If this is true, that's great.

If not, someone could seriously screw themselves over by taking this advice.

5
FatalDosesOfOsmosis•

I asked the same thing

2
il_biciclista•

and yet, 900 people upvoted this, and none of the top comments are questioning it. Somebody might actually tank their credit based on an unsubstantiated claim from an anonymous redditor.

1
FatalDosesOfOsmosis•

Right? OP basically read a random blog post and is spreading this like its gospel. I posted the same thing under the top comment, hoping some people will notice.

I also reported the thread for spreading misinformation, but I doubt that'll do anything.

2
comment_preview_bot•

Here is the comment linked in the above comment:

Source?

This sounds like bullshit to me.

Comment by: u/FatalDosesOfOsmosis | Subreddit: r/YouShouldKnow | Date and Time: 2018-03-29 22:44:15 UTC |

I'm a bot. Please click on the link in the original comment to vote.

0
peri_5xg•

“Pay to delete” is your BFF

5
FatalDosesOfOsmosis•

Source?

This sounds like complete and utter bullshit to me.

Edit: Here's what Experian says on the matter:

Paying A Collection Account Can Help Credit Scores

Some of the newer credit scoring models exclude paid collection accounts when calculating your score, so paying off a collection account has the potential to increase your credit scores right away.

Even if the scoring model being used does include paid collections, lenders may view a paid collection less negatively than an unpaid one. Paying off the past due debt also will reduce the total amount of debt you owe.

4
davidquickOP•

https://www.moneytalksnews.com/ask-stacy-will-paying-old-debts-improve-credit-score/

https://www.creditrepair.com/blog/credit-repair/what-happens-to-your-credit-when-you-pay-off-collections-accounts/

Or just Google "does paying off debt collectors help your credit"

-5
FatalDosesOfOsmosis•

I can't say i trust either of those, and they seem to misrepresent what Experian said on the matter (linked in the first article)

From Experian:

Paying A Collection Account Can Help Credit Scores

Some of the newer credit scoring models exclude paid collection accounts when calculating your score, so paying off a collection account has the potential to increase your credit scores right away.

Even if the scoring model being used does include paid collections, lenders may view a paid collection less negatively than an unpaid one. Paying off the past due debt also will reduce the total amount of debt you owe.

In fact, the quote that moneytalknews uses doesn't even exist.

3
davidquickOP•

Ok.

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justinsidebieber•

I do credit repair for friends and family and what I do is have them pay off their debts on collections or create a pay off plan to pay it off, once paid off simply dispute it as incorrect and most collection agency’s can’t be bothered with responding to disputes on paid accounts. Their resources and staff is too busy on what matters to them the most. Works 80% of the time.

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[deleted]•

[deleted]

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zotti_d•

I’m surprised that is hasn’t been brought up yet, but you CAN negotiate to have the collection removed from your credit report.

Yes, simply paying off a debt of a collection account won’t necessarily improve your credit score. But most collection agencies will agree to remove the collection off your credit report in exchange for the the full balance and sometimes interest. Either way it will definitely improve your credit score.

It is definitely possible to do this, you have the money, they have the ability to make it happen. They need to make money obviously. It’s most likely going to happen.

So before you just simply pay it, try to get a Pay for Delete and be stern about getting what you want. It’s worth it in the losing run.

Also for those who are not aware, FICO 9 scores (which has not been adopted yet) will be treating paid off collection accounts differently. Whereas it will not necessarily hurt your credit score for having a paid collection account. We are still on FICO 8 score system so this is applicable just yet.

Keep in mind that the Credit Scores are only a number based on an algorithm that is generated based on the factors of your credit report. So lenders may not always pay attention to your score but focus more on the information within your credit report.

Hope this helps y’all out.

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coolphred•

I would advise everyone here to dispute any negative item on their credit reports with all 3 bureaus directly. They are required by the FCRA to perform an investigation to confirm the accuracy and completeness of the data on the report. If they can't confirm it, they are required to remove it. Sometimes they will remove it without trying to confirm it given the cost associated with a manual confirmation.

Do this before paying any collection related debt.

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swiss487•

Not saying you are entirely wrong... But I just started paying off a Meijer card that was $700. 60 bucks a month for 2 months so far and my score has went up 20 points. Not to say what you are talking about won't still happen ..

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