Paying off collections - How does this improve my score?

[RobertEG]

FICO scores the fact that a delinquency occured, and its severity.  Paying it does remove the delinquency, and thus help your score.

PFD offers are very iffy.  They rely upon greed of the CA to put immediate money in their pocket in exchange for ignoring their reporting agreement with the CRAs, which specifically instructs them NOT to delete a CA from your CR based on payment of the debt.

Lendors dont look only at FICO scores.  Having a large debt under collection puts them at least second in line should you default.  They want to see CAs paid, and that there are no creditors gnawing at you before thay put tens of thousands of their money on the line.  So paying it may have an impact in manual review, but not in FICO score.

[BungalowMo]

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@donkort wrote:

I made that mistake too--not asking for a PFD while paying my medical collection of $50.   It's now a "paid collection" and it's reporting on 10/2009 instead of the previous 1/2008.  It's still a derogatory item.

However, I am fortunate that (1) it only reported on TU, and (2) the FICO score only went down 4 points as a result of the new "youth" of the derogatory account. 

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Donkort...check your PM's

[CLG]

RobertEG:  I think you're right here.  I think I should pay it to show an underwritter that while I may have had some issues in the past, I paid the collections back and am on a different road to financial responsibility.  I am a bit dissapointed that it won't increase my score by much - or even worse, has the potiential to hurt my score, but I'm going to suck it up and pay it anyhow. 

Thanks everyone for your posts, they are super helpful.  I am going to call once I have the money on my debit card and ask them to settle for 50% and also ask for a PFD.  I highly doubt since I'm requesting 50% off the original balance that they'll also offer the PFD.  But I think it's worth asking for.  I would be more than excited if they did both, however don't want to get my hopes up. 

This account was originally with Drive Financial, then it went to a collections agency and recently has shown up on my credit report again as Santander.  I believe Santander purchased Drive Financial.  Does anyone know for sure?  Also, should I call Drive/Santander or should I settle with the CA?  I'm sure either party is going to be happy to receive the money?

[Anonymous]

How do you get companies to delete these from your report? I have a lot of old payoffs, do you just call them and how willing are they to do this? I am interested in this process.

      Thanks

[Anonymous]

You would think that paying things off would give you a better score. Kinda of seems backwards doesnt it.