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Derogatory account

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Derogatory account

Question,
I am very diligent and through with my credit report.  I recently pulled a current report from True Credit and saw that there's a derogatory account posted.  The account was posted 03/17/07.  I was not aware of the the balance ($158.27)and it's the only collection account on my report....well the only one I'm aware of.  I was informed that the account will be removed come Oct. 2010, paid or unpaid.
My question is should I pay it off or just wait until it's deleted? How would it affect my score if I pay it and it shows paid in full or the way it is now (no activity) and deleted 2010?
Message 1 of 7
6 REPLIES 6
TheNewWorldMan
Valued Contributor

Re: Derogatory account

FICO doesn't care if a charge-off or collection is paid or unpaid. You'll get absolutely no credit for "doing the right thing" and paying the bill (though of course the FICO system had no problem dinging you for doing the wrong thing...no, not at all...)

However, based on anecdotal evidence I've seen posted here and elsewhere, certain lenders (most notably some credit card issuers, as well as mortgage and other loan agents) MAY weigh the status of the collection (paid versus unpaid) in making decisions regarding issuing cards and credit line increases. Thus paying a collection or charge-off may put you in a better position to get credit cards and credit line increases, which will help your FICO.

It's a trade-off. I would say if you have extra money to devote to credit improvement, focus first on paying anything you're behind on, and on paying down anything over 25% or so on credit card balances. You'll get much more "bang for your buck" improving FICO that way. If, after your utilization levels are trimmed and you're current on all accounts, you have money to burn, you may wish to take a look at collections and charge-offs, beginning with the most recent first.
- - - -
in a credit-scoring postnuclear Stone Age...
Message 2 of 7
Noah_Bodie
Senior Contributor

Re: Derogatory account

Depending upon the state where you live, paying it could reset the clock and it won't go off your report until 2014. So do NOT pay it in the hope it will just go away. It won't.
 
Is it a CA (collection agency) or OC (original creditor)? If it's a CA, send them a DV letter.
 
"I just pulled my credit report, and I discovered you are reporting I owe you a debt. This is the first I knew of this account, and I request debt validation in accordance with FDCPA."
 
Send it CMRRR (certified mail return receipt requested), photocopy your signed letter and save the copy, save the CM receipt, save the RRR green card when it comes back, and save the USPS receipt which also has the CM # on it. Also put a reference number at the top of the letter.
 
USPS CERTIFIED MAIL xxxx xxxx xxxx xxxx xxxx
Message 3 of 7
Brammy
Moderator Emeritus

Re: Derogatory account

Paying it will not reset the cloack.  I have had paid collections and the date it will be removed will be the date of delinquency with the original creditor so paid or unpaid it will come off in the year stated.  Here is the downside to leaving it unpaid or undisputed.  It can be sold again and again resulting in a new hit to your score each time.  Most creditors want to see you collection free for at least two years so will deny you (reread reporting again and again).  Your other creditors can read this as a sign of changed performance resulting in higher intrest rates, lower limits as well as refusal to renew cards that are due to expire....
 
You be the judge.
Message 4 of 7
Noah_Bodie
Senior Contributor

Re: Derogatory account

Depends upon the state in which you live whether it's DOLA or DOFD.
 
Paying a collection does little good. Negotiating for a deletion with payment does good.
Message 5 of 7
Brammy
Moderator Emeritus

Re: Derogatory account



Noah_Bodie wrote:
Depends upon the state in which you live whether it's DOLA or DOFD.
 
Paying a collection does little good. Negotiating for a deletion with payment does good.


 
I believe you are refering to SOL Fico scoring falls under the FCRA which is under federal regulations



Message Edited by Brammy on 04-13-2007 08:52 PM
Message 6 of 7
LadyFICO
Moderator Emeritus

Re: Derogatory account

I think you need to look at your financial goals. Meaning if you need a job w/clearance or mortgage soon or want a better rate on any major purchase and it will not put you in the poor house pay it. Morally, if you owe you should pay. I spoke with credit bureaus and it is true that it still falls off when it is suppose to even if you pay it in full. I also, have found that some creditors will delete it if you negotiate it ahead a time and if lucky sometimes after but try to get everything in writing first! Waiting for it to fall off can end up taking longer than you think because sometimes depending on the creditor the date the bureau has could be different then what the creditor has so find out as much as you can. First make sure it is a legitimate debt and that they can prove you owe it.
Message 7 of 7
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