pay collection or wait it out?

[expatCanuck]

Greetings -

My scores are currently in the 7-teens to 740s range, the lowest a result of an unpaid 3-yr-old $500 medical collection on that agency's record.  That and high-ish card utilization (~30%) are keeping my scores sub-optimal.

That said, neither the scores nor the collection prevented me from recently refinancing the mortgage at optimal rates.  Further, as a result of paying down debt to improve scores in preparation for the refi (utilization had been >80%), one card vendor just increased a line by $4k/40%.

Bottom line - no day-to-day pain, but I would like to address (read: pay) that collection -- but only if it makes (FICO)  sense to do so.  My research on this forum & elsewhere suggests that if I pay the collection, while it'll show on my report as paid, the account might well be re-aged, starting the 7-year clock again.  Further, it might even end up on a second (or third) agency's report.  And I've also read that I might have a similar re-aging problem if I try to negotiate for removal.

So, it seems that the safest thing to do, from a FICO (8) score perspective, is continue to pay down my cc debt, and wait out the collection.

Am I missing something, or otherwise fundamentally misunderstanding the process?  Any & all insight welcome -- particularly because it seems perverse to me that the collection process would have the opposite effect of getting the debt paid.

Thanks much.

[Anonymous]

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@expatCanuck wrote:

Greetings -

My scores are currently in the 7-teens to 740s range, the lowest a result of an unpaid 3-yr-old $500 medical collection on that agency's record.  That and high-ish card utilization (~30%) are keeping my scores sub-optimal.

That said, neither the scores nor the collection prevented me from recently refinancing the mortgage at optimal rates.  Further, as a result of paying down debt to improve scores in preparation for the refi (utilization had been >80%), one card vendor just increased a line by $4k/40%.

Bottom line - no day-to-day pain, but I would like to address (read: pay) that collection -- but only if it makes (FICO)  sense to do so.  My research on this forum & elsewhere suggests that if I pay the collection, while it'll show on my report as paid, the account might well be re-aged, starting the 7-year clock again.  Further, it might even end up on a second (or third) agency's report.  And I've also read that I might have a similar re-aging problem if I try to negotiate for removal.

So, it seems that the safest thing to do, from a FICO (8) score perspective, is continue to pay down my cc debt, and wait out the collection.

Am I missing something, or otherwise fundamentally misunderstanding the process?  Any & all insight welcome -- particularly because it seems perverse to me that the collection process would have the opposite effect of getting the debt paid.

Thanks much.

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I am in the same boat. Although mine will fall off in the next 6-9 months.  So I'm debating on paying them as I'm not sure they are mine.

That being said, paying it will not reset the timer. It will still be from the DOFD (date of first delinquency) it will improve your fico 9 as paid collections don't affect your score. If you can get it removed after paid with goodwill then that would help fico 8.  If you are seeking new credit it would show better on a manual review to have it paid, if not then you could go either way.  If you know its yours, I would pay it... if for nothing else it would give you internal pride, unless it would put a strain financially on you.  

All of this is only my opinion, what will work best for you, only you will know.