Paying off Collections

[Anonymous]

I am wanting to buy a home in the near future, and have been working on paying off my debt. Today I paid off 2 collections and a charge off. It feels good to have those debts paid, but now I am in fear that my score is going to drop. If the scores do fall, how long will it take for them to increase?

[Remedios]

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@Anonymous wrote:
I am wanting to buy a home in the near future, and have been working on paying off my debt. Today I paid off 2 collections and a charge off. It feels good to have those debts paid, but now I am in fear that my score is going to drop. If the scores do fall, how long will it take for them to increase?

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There might be a drop in scores once collection accounts and CO update, how much of drop depends if they were alreday updating or not. 

If these accounts were updating, there will be less of a drop. 

Points are recovered gradually over time. There is no way to tell how many points will be gained at any period of time, so try holding off as long as you can. 

[Vulcan1]

So if the 2 collections are paid off and the collection companies both do a delete, will that change the score and by approx. how many points?

[Remedios]

I dont think anyone can tell you that. You will still have a CO on your CR, so that complicates things as you'll still have negatives on your CR

Bottom line, if CO(s) is paid off and collections are removed, there will be scoring improvement over time, but how much and when, it's really impossible to tell. 

[Vulcan1]

So, the PFD does not remove the CO? Then what is the use?

[Anonymous]

PFD is typically used on a collection agent. You pay them, they delete their tradeline. But you still have the entry from the original creditor (the bank or whomever originally issued you credit). That is unaffected by paying the CA, and will remain unless you’re one of the lucky few able to convince them to delete their entry as well (OCs rarely delete).

[Remedios]

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@Vulcan1 wrote:

So, the PFD does not remove the CO? Then what is the use?

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The point is, if you have unpaid collection/CO that's updating, it will keep your scores suppressed entire time it's present. Paid CO, while still a negative should not be updating, so there is some score recovery.  

In your case, paying off collections and charge offs is usually a requirement with most mortgage lenders so it would have to be done either way if you're looking to buy a house. 

Earlier you pay before you start the process, longer your scores have to gain at least some points back. 

[sjt]

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@Vulcan1 wrote:

So, the PFD does not remove the CO? Then what is the use?

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Was the CO that you paid still owned by the original creditor and was it reporting monthly?

[spiritcraft1]

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@sjt wrote:

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@Vulcan1 wrote:

So, the PFD does not remove the CO? Then what is the use?

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Was the CO that you paid still owned by the original creditor and was it reporting monthly?

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Does the balance say zero on your report?  If so, then the debt was purchased by the CA (JDB = Junk Debt Buyer)  and the original creditor does not own the account.  If there remains a balance, they hired a CA to collect only.  Two different deals.