Paying off collections - How does this improve my score?

[CLG]

I'm scheduled to receive a bonus from work and plan on paying off an auto loan collection (the car was repossessed in 2007).  The debt has a balance of $6,888 dollars.  I plan on settling for 50% = $3,444.  This is the largest collection debt I currently have on my credit report.  My question is, does the amount of the collection directly affect the points raise?  For example, If I pay off a $3,000 collection account vs. a $200 collection account, is there a difference in the point increase I should expect to see on my credit report once this is reported?  Logic tells me yes, a payment of $3,000+ should show that I am definitely trying to repair my credit.  However, I realize that credit scoring is based on number analysis and this may not be the case. 

I don't want to set myself up for disappointment if I only see my score increase by a few points.  Does anyone have experience here?  Any advice?  

I should also add that once this account is settled, this should reduced my installment balance.  I assume this will affect my score (in a positive light) as well? 

Thanks!

[moondog7324]

Try to negotiate a PFD - if you pay 50% they will delete the item entirely from your credit report- They may not do it. Without the PFD whether you pay or not it's still going to show as a collection- 

[CLG]

What is PFD? 

[moondog7324]

PFD= Pay For Delete

[CLG]

Thanks for clarfication!  I will definitely ask for it.

I'm trying to purchase a house by next May and the mortgage company that pulled my credit said, no matter what I have to pay that specific collection off before I'm able to get a line of credit offered to me.  So unfortunately, I have no choice - even if it stays on my report.    

I still would like to know how much this pay off will effect my credit score?  I feel this is a lot of money to put towards a debt and I want every cent to count!  

Has anyone experienced this?  

[greent]

I payed $3,250 worth of medical collections and my credit score went up 22 points. I got the company to DELETE the two collections and they don't show up on my credit report anymore. As if it never happened.

If you just pay them your credit score will NOT go up you have to make them agree that they will delete from your report in order for your score to increase a bit.

I have another collection i just paid off and did not negotiate with them and it still shows there but now it just has a $0 balance and my score did not go up (this was before i knew that you have to negotiate with them to delete from your credit report).

So, if you want to see your score increase they need to delete it from your record.

[CLG]

Good to know!  I recently paid off three collections.  This was before I knew to negoitate the deletion.  So like you, they remain on my report, but state Paid, After Collection.  $0 Balance.  And my score went up 37 points.

Just when I feel like I understand how to improve my credit, I get discouraged, because I never truly know what's driving the score.  It's a bit frustrating.

[AndySoCal]

Be careful with this account. A settled account is considered dergatory. I have seen settling accounts lower a score. I am not sure if the re-reporting the account as a paid repossion and having the message of a settled account will lower your score more than just a paid repossesion.  If you look at the score reasons /factors they are in order of what is impacting your score either positively or negatively.  The more recent the negative items are the bigger the impact on the score. As negative items get older the impact lessens. You can try for a PFD but I doubt it will be accepted when you are settleing the account.

Message Edited by AndySoCal on 11-05-2009 07:24 PM

[donkort]

I made that mistake too--not asking for a PFD while paying my medical collection of $50.   It's now a "paid collection" and it's reporting on 10/2009 instead of the previous 1/2008.  It's still a derogatory item.

However, I am fortunate that (1) it only reported on TU, and (2) the FICO score only went down 4 points as a result of the new "youth" of the derogatory account. 

[boireann]

I paid off my 3 collections before I knew about PFD.  My TU score went up by 5 points, but my EQ and EX scores both went down by 10-20 points.  It wasn't until one aged off my reports and the other two agreed to remove 3 months early that my scores finally moved up.

So definitely get a PFD!