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How does paying my collections off effect my credit score?

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martinwes
Established Member

How does paying my collections off effect my credit score?

Hi.. 

 

Long time lurker here. First time poster.. Thanks for having me. 

 

I have 3 CA's - one is an LVNV for $7.4K (they keep adding charges per month - surprise surprise). Other two are Midland for around $2.5K and Main Street for $2K. All are due to fall of around May/June of 2015. 

 

Should I go ahead and pay these off? I am receiving decent settlements since they are passed the SOL in my state, but according to some mortgage folks, they say they are really keeping my score down. I am afraid of paying them off and my score dropping like a rock, but will it rebound faster without these showing unpaid balances?

 

Thanks!

Message 1 of 5
4 REPLIES 4
guiness56
Epic Contributor

Re: How does paying my collections off effect my credit score?

Paid, settled or unpaid they are all scored the same.  The settlement would be the worse as that comment will impact your score and future creditors.

 

I would try for a pay for delete.  You pay, they delete.  Try the settlement terms and if they won't, try a bit higher.

 

Your only improvement comes from deletion.  If the accounts have not updated in awhile it can further drop your score by paying them.

Message 2 of 5
RobertEG
Legendary Contributor

Re: How does paying my collections off effect my credit score?

I would urge that a decision on payment of a delinquent debt not be based solely on credit score implications.

As long as a debt remains unsatisfied, it can, in and of iitself, be a basis for denial of future credit if the potential creditor becomes aware of the unpaid debt.

That applies even if derogs reported on the debt, such as a collection, no longer appear in your credit report.

 

It is always best, other than $$ out of pocket, to have no unpaid, delinquent debt, aside from any credit scoring implications.

Message 3 of 5
martinwes
Established Member

Re: How does paying my collections off effect my credit score?

 

What do you mean (see purple text) by that statement? If they fall off the report in 2015, how that can still hurt me?

 

@RobertEG wrote:

I would urge that a decision on payment of a delinquent debt not be based solely on credit score implications.

As long as a debt remains unsatisfied, it can, in and of iitself, be a basis for denial of future credit if the potential creditor becomes aware of the unpaid debt.

That applies even if derogs reported on the debt, such as a collection, no longer appear in your credit report.

 

It is always best, other than $$ out of pocket, to have no unpaid, delinquent debt, aside from any credit scoring implications.


 

Message 4 of 5
DaveSignal
Valued Contributor

Re: How does paying my collections off effect my credit score?

He means that if a creditor finds out that you have unpaid accounts in collections, you will face adverse action (ie: account closures).

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