Need clarification on paying an old collection account

[muumike]

I have a CA reporting a 500 dollar balance on my CRs. The line has been reporting since 10/2009.

If I paid this off today, would my score drop initially? As in, if it was paid and it then updated to report a $0 balance.

I read on another forum that it would drop initially, but I was always under the assumption is that the Paid/Unpaid doesn't matter, or is it just that Paid / Unpaid doesn't matter when initially listed?

Thanks in advance.

[DaBears]

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@muumike wrote:

I have a CA reporting a 500 dollar balance on my CRs. The line has been reporting since 10/2009.

If I paid this off today, would my score drop initially? As in, if it was paid and it then updated to report a $0 balance.

I read on another forum that it would drop initially, but I was always under the assumption is that the Paid/Unpaid doesn't matter, or is it just that Paid / Unpaid doesn't matter when initially listed?

Thanks in advance.

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Hi muumike and wecome to the forums!!!! Paid or unpaid collections have no affect on fico scoring unless it has a bal greater than the credit line. If thats the case then it would affect your overall UTIL. However it will look better paid in full in a manual review of your credit reports.

[muumike]

So if it initially reports $500 from 10/2009 - present and tomorrow I decide to pay it off and they only update it to show Paid $0 rather than delete it, it won't have any further effect on my score once updated?

[guiness56]

3rd party collections are not factored into utilization.  In some rare instances, when the CRAs have them in the account section they can.

Paying a collection should have no impact on your score one way the other.  YMMV.  I've seen it go both ways.

The big issue is if the account has been dormant for a few years, ie they are not reporting each month.  If that is the case, if you pay it, it will update to the current date and make it appear as though it is a new collection and possibly drop your score.

[muumike]

The account is currently in dispute and I believe they do update it every month outside of the dispute right now.

So just to be clear, since they update every month as it is and they only list as a collection, when I pay them it won't further drop my score?

If it were to drop my score and I am currently int he 680-690 range, could it potentially drop my score more than say 20-30 points?

[guiness56]

It could but since it updates regularly I don't think it will.  There have been a few that got points for paying a collection to 0.  Even though it isn't supposed to, YMMV.

[DaBears]

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@guiness56 wrote:

3rd party collections are not factored into utilization.  In some rare instances, when the CRAs have them in the account section they can.

Paying a collection should have no impact on your score one way the other.  YMMV.  I've seen it go both ways.

The big issue is if the account has been dormant for a few years, ie they are not reporting each month.  If that is the case, if you pay it, it will update to the current date and make it appear as though it is a new collection and possibly drop your score.

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+1 guiness, I clearly missed that one. Was thinking OC accounts.