Question regarding paying collections

[Goal_Getter]

I have two collection accounts showing on my reports that total around 3500.00. I’ve come up with a plan to pay them all off within six months by making weekly payments. My question is: will my reports show the balances decreasing every month? Will it even matter if the balances are lowered? Will it affect my report at all?

Thanks

[Anonymous]

Don't bother with payments, you'll just be begging the collection agencies to harrass you, each payment restarts the 7 year reporting period on your credit history, and each payment restarts the collection's statue of limitations.

You will lower your score by paying as it will show a fresh, updated collection derogatory negative! If the collection is at the two year mark, supposedly it doesn't affect your score that much.

If you really want to pay vs contributing to your emergency savings and/or retirement IRA, save up about $1000 and offer in writing to settle for that amount only if the collection is removed from all of your credit histories. My lawyer suggested a letter stating this along with the check enclosed. I don't trust collection agencies that much, thus would rather have the agreement in writing before payment.

Before paying good money after bad, imagine that the day after you send the check, something happened such as the water heater blew up, the toliet sank, the kid broke an arm, an illegal alien rammed into your car, or you got fired. What money would you use to pay the bills for the ER visit, insurance deductible, plumber, builder's supply, etc? How much are you carrying on your credit cards? What's in your retirement account (btw, a Roth IRA can be an emergency saving account)? Review your answers and think again about the goid money after bad vs. having a "life happens" cushion.

[Anonymous]

How old are the debts? Since if they are close to seven years it might be better to just wait for them to just fall off. 

I will be honest. I paid two of my debts off and it had hardly any impact on my credit maybe a point or two. All it did was improve the comment on my collections to charge off to paid off collection and decrease my balance owed on that collection to 0.

I would recommend trying to get a pfd first before you begin paying the company weekly. Something I didn't do. That way once it's paid it can be removed and most likely your score will increase. Since it won't just be on there as a paid in full collection, but nothing will be there instead. Which should help improve your score. Since removing badies like collections have definitely helped me improve my own score. 

So the good thing is it can show creditors you paid, but unless you do a pfd in my own experience I haven't seen a huge change in my score from doing so. Hope this helps. Though I wish you all the luck in getting it resolved! 

[RobertEG]

The answer to the question regarding balances is yes, they should update, but you cant rely on it.

FCRA 623(a)(2) requires that any party who has reported information to a CRA is required to "promptly" update that reporting as necessary to maintain its current accuracy.

In an ideal world where everyone complied with each provision of law or regulation, they should update monthly.

However, it is common practice, as demonstrated by numerous posts over the years, that debt collectors are frequently negligent in updating the remaining balance monthly as payments are made, and often wait until the debt is paid in full before updating the balance.

You could resort to monthly disputes whenever they fail to update, but that is a lot of hassle.......

As for advice on making payments, that can be a good way to prevent a debt collector from escalating to bringing civil action.

It is often beneficial, and I would not advise never to make payments.

Just be aware that if you default on a formal repayment agreement, that can be basis for its own civil action, with a later SOL period of its own, so dont enter into a plan if you are not sure that you can make the agreed payments.

As for payments resetting the credit report exclusion period, that is not the case.

Credit report exclusion is based only on the DOFD, and is not reset by any payments.

Finally, as for the suggested option of waiting for credit report exclusion as an option to paying the debt, they are apples and oranges.

Credit report exclusion does not discharge the debt.  It only makes it more difficult for others to become aware of the unpaid delinquent debt by simply pulling your credit report, and it removes the collection from scoring.

Paying a collection even though it has become excluded discharges the debt, and thus totally removes it from any future obligation to disclose the unpaid, delinquent debt, such as in a mortgage application process.

[Goal_Getter]

Rhe collections are fairly new. Not wven a year old. I would like to start the process of purchasing a home near the end of 2019. I thought paying the collections off would help? But i do like the idea of saving at least half of the debt owed and offer settlement with pfd instead. To be honest, those new collections BARELY affected my scores, if at all.

[Brian_Earl_Spilner]

The number of collections and totals can affect applying for credit.  I actually have a fair, towards good score, but can't get approved because of my collections. About to pay my current balances down to zero, then knock out the collections. Also, before going after settlements, remember that any amount that is forgiven will be filed with the IRS as additional income. So, for example, if they forgive $3400 of your debt, you owe taxes on that $3400.