topic Re: Paying a collection account in Understanding FICO® Scoring

Paying a collection account

Anonymous — Sun, 25 Mar 2018 22:16:46 GMT

If someone has a collection that is about 6 months since the creditor has reported it to the credit bureaus and they pay it, and the creditor now updates to a zero balance is it possible that the FICO scores could actually go down in the short term because you are reactivating a collection. The software doesn't distinguish between a paid collection and a collection being reported but the most current reporting date will have more of a negative impact on the FICO.

Re: Paying a collection account

RobertEG — Tue, 27 Mar 2018 20:01:37 GMT

Yes, it is possible.

When a debt collector reports to the CRA, it provides a positive statement that the period of delinquency has increased since their last reporting. Similar to an update by a creditor of delinquency extending to 90-late from a prior reporting of a 60-late, increased period of delinquency is a negative scoring factor.

By paying, you thereafter prevent further updates that show continued delinquency, and thus permit the collection to age as a closed, paid collection.

The collection will ultimately become excluded no later than 7 years plus 180 days from the reported DOFD, whether paid or unpaid, but in the interim, it is still viewed as having increased scoring impact when updated to show continued status as unpaid.

Re: Paying a collection account

Anonymous — Tue, 27 Mar 2018 20:30:25 GMT

I think the only thing that I would add, in case it applies to anyone's situation, is that gov't education loans may not come off after 7 years if unpaid. This is what I've gathered from various posts on here. I don't know about it firsthand, though, as I rehabilitated my student loans from collections, and then, somehow - grace of God - was able to get the negative student loan accounts removed when the positive, performing, no-late, rehabilitated, consolidated student loan account was placed on my report (this worked with EQ and TU, I'm in the process of attempting it with EX now ... I just claimed it was a duplicate and needed to be removed).

Re: Paying a collection account

Anonymous — Wed, 28 Mar 2018 03:03:33 GMT

With some Fico verisons, paying a collection may affect your score negatively. With Fico 9 paying a collection will help your score, as it will not longer be counted against you.