Will paying off CO / collections increase score?

[nmk94]

A bizarrely newb question for someone who's been trying to rebuild credit for a long time, but I realize I'm not clear on this.

If I pay off a charge off or a collection (in my case, a charge off that became a collection), will that increase my score?

I realize it won't take it off my report. But if it reports as "PAID", will my score go up?

Relatedly, will a potential new creditor look at it as good if it's paid? I didn't think I'd have to do this, but it looks like due to a work-related move we have to sell our house and find a new one, so I'll need to line up mortgage financing.

[egghead88]

It depends.. if it's been updating monthly, it likely to give your score a boost. If it hasn't been updating it will drop your score. I have experience both. You mention that you will be looking for a mortgage soon. Most mortgage UW will require you settle unpaid  collections and chargeoff on your CR. 

[chiefone4u]

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@nmk94 wrote:

A bizarrely newb question for someone who's been trying to rebuild credit for a long time, but I realize I'm not clear on this.

If I pay off a charge off or a collection (in my case, a charge off that became a collection), will that increase my score?

I realize it won't take it off my report. But if it reports as "PAID", will my score go up?

Relatedly, will a potential new creditor look at it as good if it's paid? I didn't think I'd have to do this, but it looks like due to a work-related move we have to sell our house and find a new one, so I'll need to line up mortgage financing.

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A change in reporting from charged off to Paid in Full only matter's or counts in manual underwriting; computer ignores it.

If you can negotiate a pay for delete you'll see a good bump in score (65 points for one of mine YMMV).

Even if they wont delete, your score will begin to improve if they've been updating monthly; as the reporting $0 will be it's final update and the time since most recent delinquency will begin to age. 

You may also get an increase on mortgage scores if it has been reporting as a credit card over the limit (by paying it off).

Best of luck going forward! 

[Red1Blue]

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@nmk94 wrote:

If I pay off a charge off or a collection (in my case, a charge off that became a collection), will that increase my score?

I realize it won't take it off my report. But if it reports as "PAID", will my score go up?

What is the name of the collection agency you are working with ? Some collection agencies do delete after you pay them in full or make a settlement. If you share the name of the collection agency we can give you idea. 

[FireMedic1]

When you pay a charge off if the OC is reporting balance. Yes. A charge off is considered a maxed out CC. And it hurts your util %'s. So yes a score bump. Then the CA has nothing to collect any longer. If the OC has a $0 balance but lists it as a charge off. They sold it to the collection agency and you PIF then no score change.  Two separate roads. But yes paid in full (PIF) look a whole lot better than owedf or settled for less.

[nmk94]

Thanks. I have a few. Midland and Cavalry off the top of my head. I know some of them have changed hands a bunch.

So if something has gone to collection, and I settle, it will still report and also be listed as settled? I have to PIF?

[FireMedic1]

Your lucky. Both of those CA's will pay for delete. Settled or paid they will remove them from your reports like they never happened. Nice score bump. If its your only CA's. Its your lucky day. See what they'll take to settle first. Anything less than full payment. It goes poof either way. Good Luck!

[nmk94]

How about Radius or Client Services? Looks like those are the other two I have.

Radius is a particular problem,  because as far as I can tell they don't own the debt, but they're collecting on behalf of Nordstrom/TD Bank. Can I settle with them and expect it off the report? Or is that up to TD Bank?

[FireMedic1]

If TD Bank owns it and the CA is not on your reports. Make an appt to go in branch and pay it. Ask them to recall the CA since they dont own it. Good Luck!

[Anonymous]

Is Client Services actually reporting to your credit? In my experience they collect on balances but they don't report to the credit bureaus.