Does paying off old debt help improve your credit score?

[Anonymous]

Hi, I am new with credit and I am wondering if paying off old debt would be positive or negative to my credit score.

[llecs]

What type of old debt are you referring to? Old collection agency? Old CC charge-off? Old utility charge-off? In general, paying off an old bad debt generally doesn't help your score, and in some cases can hurt it. But it depends on what it is and what changes.

[Anonymous]

two cell phone accounts that went into collections a few months ago for about $150 each and a Library account that went to collections about 2 years ago for $76.

[llecs]

If collection agencies report each, and having reported not long ago, paying them off won't do anything to your score, hurt or improve. If thinking about paying them, I would at least try to negotiate a pay-to-delete agreement to at least have the chance at a higher score.

[Anonymous]

Just out of curiousity - is the library one Unique National Collections?

[Anonymous]

No it is southwest collections. Why?

[Anonymous]

Unique is really weird in terms of CA's; they don't PFD at all (nor do they validate, oddly) so it's good that yours isn't with them.

[RobertEG]

When you say "affect your credit," my answer would be yes, paying does help.

As for FICO scoring, while paying does not remove any prior reporting of delinquencies or derogs on the account, and thus does not improve your scoring in payment history, it could, in some cases, affect your % util if the debt is still being reported and scored in that category.

Aside from FICO scoring issues, creditor decisions arent restricted only to your credit score.  Any knowledge that they may have of unpaid, delinquent debt, be it from a pull of your credit report or from other means, tells them you have a history of not paying obligated debt.  Not a favorable factor in their decision making.

[AZHeather]

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@Anonymous wrote:

No it is southwest collections. Why?

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When I first started my credit clean up I had a collection from SW Collection and they did a pay for delete.  They were actually very nice, cooperative, and easy to deal with.

[AZHeather]

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@RobertEG wrote:

When you say "affect your credit," my answer would be yes, paying does help.

As for FICO scoring, while paying does not remove any prior reporting of delinquencies or derogs on the account, and thus does not improve your scoring in payment history, it could, in some cases, affect your % util if the debt is still being reported and scored in that category.

Aside from FICO scoring issues, creditor decisions arent restricted only to your credit score.  Any knowledge that they may have of unpaid, delinquent debt, be it from a pull of your credit report or from other means, tells them you have a history of not paying obligated debt.  Not a favorable factor in their decision making.

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+1,000