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Will paying off collections increase or decrease score???

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Brandon1972
Valued Member

Will paying off collections increase or decrease score???

I know this question has been beat around the bush so many times. My wife and I are looking at buying a home in about a year. She has a nice list of collections on her report. Our loan officer wants certain collections to be paid. Will paying off collections and those accounts updated to reflect paid or zero balance hurt or help her score? Alot of them are medical and it seems like a pain in the rear to use the so called HIPPA method. My question is, is a paid collection better than an unpaid collection but remaining on her report? Thanks, Brandon
Message 1 of 10
9 REPLIES 9
Whitneyy
Valued Contributor

Re: Will paying off collections increase or decrease score???

Paid and unpaid hurts the same, pay them and then send off a GW letter or just do a PFD to begin with.

 

Good luck!

GOAL - 700 FICO across the board!
Message 2 of 10
Dbremer
New Contributor

Re: Will paying off collections increase or decrease score???

The HIPAA process may seem like a pain but it works!! Totally worth it!
Message 3 of 10
Santi78342
Established Contributor

Re: Will paying off collections increase or decrease score???

Does the HIPAA process still work if you have already paid the CA?

Message 4 of 10
Lechte
Frequent Contributor

Re: Will paying off collections increase or decrease score???

As to whether it would hurt your score to pay depends on when the CA last reported.   If they are reporting monthly or at least recently, then paying it should not affect your score.  If they haven't reported in a while, your score will drop once the CA updates your account to paid.  

(EX08 - 654) --- (TU08 - 643) --- (EQ08 - 667) --- (EQ04 - 676)


Message 5 of 10
Season79
Contributor

Re: Will paying off collections increase or decrease score???

Remember, even if your score drops from paying the CA... a manual review will be done in the mortgage process and it looks much better to have paid them. GOOD LUCK!!

Message 6 of 10
Brandon1972
Valued Member

Re: Will paying off collections increase or decrease score???

Thanks for the clarification everyone.  Was trying to avoid doing the HIPPAA thing because it seems like a royal pain.  Most of her collections are in the 1 to 2 year old range that update regularly. 

Message 7 of 10
Lechte
Frequent Contributor

Re: Will paying off collections increase or decrease score???


@Brandon1972 wrote:

Thanks for the clarification everyone.  Was trying to avoid doing the HIPPAA thing because it seems like a royal pain.  Most of her collections are in the 1 to 2 year old range that update regularly. 


Idk how HIPPA works, but if nothing else, I would pay them soon.  Once paid, the CA's will stop updating, which will give your scores time to increase in a year and you won't have to worry about dealing with them later.   You definitely don't wanna wait til the last minute.

(EX08 - 654) --- (TU08 - 643) --- (EQ08 - 667) --- (EQ04 - 676)


Message 8 of 10
myjourney
Super Contributor

Re: Will paying off collections increase or decrease score???

Hippa is not to be discussed on the forum 

Thanks 

MJ

Before you app think...
Have you done your research of the CC?
Does it fit your spending?
Do you have a plan for the bonus w/o going into debt?
Can you afford the AF?
Do you know the cards benefits? Is it worth the HP?
Message 9 of 10
RobertEG
Legendary Contributor

Re: Will paying off collections increase or decrease score???

Most mortage app processes will ask for disclosure of any unpaid, delinquent debt.

Even if the collection were past its credit report exclusion date, they most likely would not need to see a collection in your CR in order to be aware of the unpaid, delinquent debt.

 

There is no question that showing satisfaction of the debt will look better on any manual review if the collection is still in your CR.  FICO scoring is not the only issue.

 

With a year to go before apping, I would pursue a PFD offer, which would obtain both satisfacton of the debt, and thus remove any issue of an unpaid debt in your future app process, and additonally remove the collection from scoring.

If you cannot get PFD acceptance, then payment would still provide the beneficial removal of a unpaid, delinquent debt.

 

 

 

Message 10 of 10
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