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Paying off accoutns/raise my score?

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Anonymous
Not applicable

Paying off accoutns/raise my score?

Hi all. I just looked at my credit report and decided to pay off some accounts in collections. Ive spoken to a few of the agencies (theres about 5 or 6 accounts that Im going to pay off) and they said they will report the accounts as "paid as agreed" or "closed". Does anyone know how long it will take before I see an increase in my FICO score? Im thinking about 30 days. Also, Id like to know if a "closed" account (obviously because im payin git off) is seen as a good thing when applying for credit. I need a new car.  Smiley Happy

Message 1 of 17
16 REPLIES 16
IamB2
Established Contributor

Re: Paying off accoutns/raise my score?


@Anonymous wrote:

Hi all. I just looked at my credit report and decided to pay off some accounts in collections. Ive spoken to a few of the agencies (theres about 5 or 6 accounts that Im going to pay off) and they said they will report the accounts as "paid as agreed" or "closed". Does anyone know how long it will take before I see an increase in my FICO score? Im thinking about 30 days. Also, Id like to know if a "closed" account (obviously because im payin git off) is seen as a good thing when applying for credit. I need a new car.  Smiley Happy


I am personally not aware that collection agencies can report the account as "Paid as Agreed". Unless the account is still owned by the Original Credito, the collection agency can only update their reporting to reflect "Paid" or "Closed". They simply own the right to collect on an account and once paid it can only show as "Paid" but not "Paid as agreed" but that will still remain as a collection on your report (albeit a paid collection)

 

With collections, you want to negotiate a PFD (Pay For Delete) which basically means the Collection will be completely removed once you pay it off. Simply updating it as "Paid" and/or "Closed" doesn't mean that your credit score will really receive a "bump". It may look good in manual underwriting, but it will do very little to help your score.

 

I am definitely no expert, and I am sure others will chime in and may provide better advice. This is simply based on my own experience.

FICO® EQ 717 (3/5/15); TU08 732 (3/5/15); EX: 723 (3/5/15) - Last app 3/15/15; Inquiries: A TON!

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Starting Scores: 590s on 12/2013. Hover over card image to view details! *After Amex approvals - [I was supposed to be] Gardening!*
Message 2 of 17
abbafan
Regular Contributor

Re: Paying off accoutns/raise my score?


@Anonymous wrote:

Hi all. I just looked at my credit report and decided to pay off some accounts in collections. Ive spoken to a few of the agencies (theres about 5 or 6 accounts that Im going to pay off) and they said they will report the accounts as "paid as agreed" or "closed". Does anyone know how long it will take before I see an increase in my FICO score? Im thinking about 30 days. Also, Id like to know if a "closed" account (obviously because im payin git off) is seen as a good thing when applying for credit. I need a new car.  Smiley Happy


It IS seen as a good thing during manual reviews, however, simply paying them off won't raise your FICO score. As a matter of fact, it may even lower it. For example, in my situation where I have 6 charge-off acclunts (one is paid and will disappear from my reports next December), I won't be paying them off because in 2.5 years Statute Of Limitaions will expire on those accounts and they'll fall off automatically. So, if your collections are fairly old and  the SOL expires within 2-3 years it's totally up to you whether you wanna pay them off or not. 

What you can do, on the other hand, is request those colelction agencies (or original creditors, whoever owns your debt) to delete your accounts from credit reports. This is called Pay For Deletion. Tell them something like "I'm willing to pay off the debt if you exclude my account from all 3 credit bureaus". Remember, there's no law that requires creditors to report your debt Smiley Happy

Discover IT $15500, Barclay Rewards $12380, Barclay Ring $13000, Cap1 Savor $7250, Chase Freedom Unlimited $9000, Best Buy Visa $12000 , Bethpage Low Rate MC - $9000, Bethpage LOC - $15000, CITI Double Cash - $21000
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Message 3 of 17
Anonymous
Not applicable

Re: Paying off accoutns/raise my score?

Thanks so much! Yall have really opened my eyes to some things. Ive seen PFD posts on here and Im wondering if I can request that over the phone or if it needs to be in writing? these entries are from about 4 years ago so they wont fall off any time too soon that Im willing to wait around for. Id rather just pay them off, especially if I can do a PFD.  Smiley Happy  We really need a new car and I so dont wanna go the Buy Here, Pay Here route. Been screwed there before.

Message 4 of 17
Anonymous
Not applicable

Re: Paying off accoutns/raise my score?

Do you know what your scores are currently? Do you have any revolving accounts and what are the balances if any?

Message 5 of 17
Anonymous
Not applicable

Re: Paying off accoutns/raise my score?


@Anonymous wrote:

Do you know what your scores are currently? Do you have any revolving accounts and what are the balances if any?


My FICO is currently 580. I dont have any credit accounts right now. I do have my student loan which is current.

Message 6 of 17
IamB2
Established Contributor

Re: Paying off accoutns/raise my score?


@Anonymous wrote:

Thanks so much! Yall have really opened my eyes to some things. Ive seen PFD posts on here and Im wondering if I can request that over the phone or if it needs to be in writing? these entries are from about 4 years ago so they wont fall off any time too soon that Im willing to wait around for. Id rather just pay them off, especially if I can do a PFD.  Smiley Happy  We really need a new car and I so dont wanna go the Buy Here, Pay Here route. Been screwed there before.


Everything should be done in writing. I removed 4 baddies this way. These were charge offs for pretty large sums. One was $5500 (agreed to settle on $2500 and Delete the tradeline completely from my record) and most recently my reposession (paid just over $3300) and they deleted the tradeline) and a couple of smaller ones.

 

On each occasion, I sent a letter explaining the circumstances of why the derogatory happened and that I was owning up to the debt. I was hoping that in interest of fairness, to have this removed from my report as it is causing me undue hardship. Never did I dispute the debt. Simply was "hoping" that they remove it.

 

At the end of the day, the worst they can say is no. Then you can pay them and get it over with. Why not try?

 

One thing worth mentioning however that when you PFD, the entire tradeline is removed. This can cause your Average Age of Account to be lowered as that account is no longer present. However, payment history has a 35% weight on FICO while Account Age has a 10% weight - having derogatory items is worse than having short history.

FICO® EQ 717 (3/5/15); TU08 732 (3/5/15); EX: 723 (3/5/15) - Last app 3/15/15; Inquiries: A TON!

CITI ThankYou Preferred - CL: $2,000




Starting Scores: 590s on 12/2013. Hover over card image to view details! *After Amex approvals - [I was supposed to be] Gardening!*
Message 7 of 17
Anonymous
Not applicable

Re: Paying off accoutns/raise my score?


@IamB2 wrote:

@Anonymous wrote:

Thanks so much! Yall have really opened my eyes to some things. Ive seen PFD posts on here and Im wondering if I can request that over the phone or if it needs to be in writing? these entries are from about 4 years ago so they wont fall off any time too soon that Im willing to wait around for. Id rather just pay them off, especially if I can do a PFD.  Smiley Happy  We really need a new car and I so dont wanna go the Buy Here, Pay Here route. Been screwed there before.


Everything should be done in writing. I removed 4 baddies this way. These were charge offs for pretty large sums. One was $5500 (agreed to settle on $2500 and Delete the tradeline completely from my record) and most recently my reposession (paid just over $3300) and they deleted the tradeline) and a couple of smaller ones.

 

On each occasion, I sent a letter explaining the circumstances of why the derogatory happened and that I was owning up to the debt. I was hoping that in interest of fairness, to have this removed from my report as it is causing me undue hardship. Never did I dispute the debt. Simply was "hoping" that they remove it.

 

At the end of the day, the worst they can say is no. Then you can pay them and get it over with. Why not try?

 

One thing worth mentioning however that when you PFD, the entire tradeline is removed. This can cause your Average Age of Account to be lowered as that account is no longer present. However, payment history has a 35% weight on FICO while Account Age has a 10% weight - having derogatory items is worse than having short history.


Aw man congrats!!! that is awesome!!! Im going to see if I can find an email template to send becuase Im too impatient to wait for a mail response.  Smiley Happy  I hope I have similar success. 

Message 8 of 17
Anonymous
Not applicable

Re: Paying off accoutns/raise my score?

You need to work on the positive side of the credit equation as well. Go to the Capital One website and do their preapproval link. You should qualify for a platinum card with a 300-500 limit. If not, get one of their secured cards. Six months of good payment history will give you a score boost, and you should get a couple of more accounts. Keep things under tight control and after 12 months of good payment history you could be well into the 600's *without* doing anything else.

Message 9 of 17
Anonymous
Not applicable

Re: Paying off accoutns/raise my score?

FWIW, you should be able to get financed at 580 without too much trouble. I was able to get financed ($9000 used car, $6500 upside down trade-in and large $8500 down payment) for $7300 @ 18.99% for 36 months with a 501 FICO score. They raped me on my trade-in, but I got the car I wanted, reduced my monthly payment by $125, and reduced my monthly gas cost by at least another $100 per month.

Message 10 of 17
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