The Paid Charge-Off/Collection Blog: What Happened When YOU Paid YOUR Charge-Off or Collection?

[Tuscani]

I think it really depends on your overall file. Personally, I have seen scores drop more often than increase after paying a collection.

[Anonymous]

There are a lot of reasons why. Some we may never know. However, there are some things to consider when paying off a collection versus paying off an account thats in good standing.

Paying off an account that's in good standing. Meaning that you have never missed a payment.

One of the things that you are scored on is the amount of credit usage. Typically, the more you pay on your balance the higher your score. When the balance is paid off, the score usually stabilizes because you have fufilled a perfect obligation to those creditors in the sense that you ran up a debt and you paid it off. There is nothing more you can do. To that account to improve your score unless you ask for a credit line increase.

Paying of a collection or charge off gets more dificult because the science of paying off a collection is more complex. Paying off a collection usually does nothing to improve your score because you aren't given a positive remark when paying off a collection. Of course not paying it off is what will damage it. You usually dont get a positive remark because there is nothing positive about having the collection in the first place

1. Did you settle on the collection or did you pay it off in full? Settling on a collection may drop it.

2. Did you pay your collection through a debt management company? If so that will hurt your credit as well. Now the credit bureau has a new identifyer for potential creditors to see if you paid your account (even if you paid it in full with no settlement) In the credit history section for each trade there is a number system used to tell the creditor what status the account it's in. If there is a #7 it means that you are paying the account through a debt management or consolidation program and that lowers your score even after paying it off.

3. Is there more than one collection company collecting on the same account? If so you need to mail your paid in full letter to all three credit bureaus to get them to remove the other collectors. This will eliminate the other collectors off of your report and increase your score because the other collectors will be deleted off the report as if they were never there.

4. Did you review your paid in full letter? This is very important especially if you settled on an account. The letter needs to state that the account has been paid and CLOSED regardless of whether you paid the amount in full or took a settlement. With a date. Usually the credit bureaus will go with the date on the letter. You then need to make three copies and mail them to all three credit bureaus. This wiill stop your creditors from contunuing to update your account after you have already paid them off.

5. Do you keep your paid in full letters for at least seven years? This is important, especially if you settled on an account. Accounts whether they are in good standing or not stay on your record for seven years. As long as the information is correct (including negative information) you creditor has the right to leave it on until it drops as long as they are reporting the correct status of the account.

Message Edited by imnotreallyacreditcnslr on 04-29-2007 09:37 AM

[Anonymous]

It hurt my score to pay off the old co, but just the one score.  The other two are fine.  It had to be paid so that when I apply for a mortgage in a year or two all of my old debt is paid.

I still don't understand why EQ is so much different than TU and EX.

[Anonymous]

I have gotten some removed as well as paid on some. I think in a weird way it affects hx if it is an old collection it may be bad but it is still hx. If in some of your cases the debt was old I think when you paid it or removed it the loss was hx related. Whereas someone who has a new collection and pays it quickly may see no, to little increase after paying it off. As you guys say it is hard to figure them out. My collections were close to falling off anyway within a matter of months from 7 years but as brammy said I didn't want to gamble with it coming back again and again due to non-payment. I took a hit on eq on the deletion of the collections. I lucked up and one somehow is  reporting 0 balance 7 year hx and current go figure? All collections are now reporting as paid, zero, closed or transferred.

My scores for eq is recovering only after a few weeks and the other bureaus are flourishing.

This is based on myfico data. Truecredit still hasn't reported a change in over a month.

[Anonymous]

Mindnumb, I don't know if this will answer your question, however, I had a similar situation.  A charge off was showing on my CB - it showed as a charge off and not a collection.  However, the account was never technically charged off.  It went 30 days late, we had declared a BK 13, but this creditor was not included as part of the BK.  We continued to pay the account as agreed until paid in full.  It was paid in full, however, it continued to report as a charge off.  I called the OC and asked for an explanation.  Apparently, when one files for BK, OC's do something internally to protect their interest, and although the account may not actually and technically be charged off, it is listed and reported that way [sucks, I know].  However, I spoke with the OC and becasue I paid the account in full, I did get them to change the reporting on the CB to paid as agreed, no charge off, yada yada....  I just did this yesterday, so I don't know if it will have any effect on the FICO, but I'll let you know.  As far as I am concerned, it would be better to take the score hit now and get the inaccurate and negative information removed for good. 

[Anonymous]

Please post the final posting on your charge off account after asking them to change in as paid in full as I have two accounts that was put in charge off instead of collection

[MidnightVoice]

There is always the beneficial effect of knowing that you did the right thing and paid your debts 

[Anonymous]

My report for a recent Medical Collection was updated to Paid in Full recently. No effect on score.

I have two more outstanding collections from the same period (2001-2002), with Collection Agenceis that I was on payment plans on.

Finding out that I was hurting my score, that paying in full would likely hurt more, and that the CAs probably bought the debt for pennies on the dollar and had been paid 10x that amount with my monthly payments, I totally question the point of paying in full.

The ONLY way I'd do this is for PFD, and I am surprised more CAs don't do this in circumstances where a) the debt is SOL b) the item is due to retire from the CRA in the next few months. I mean what is the point of sticking to the 'no delete' if it means they can collect several hundred dollars they have no way of collecting on when they bought the debt for $10?

I ended up coming to MyFico forums because I borrowed $10k so I could settle up debts incurred during a hard time in 2001-2002. I was naively planning on mailing out checks to PIF for accounts I had been making good faith monthly payments on. Only to find out a) PIF would have slammed me b) The good faith payments were doing nothing except lining the pockets of CRAs who I had no valid debt with.

[haulingthescoreup]

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@Anonymous wrote:
Please post the final posting on your charge off account after asking them to change in as paid in full as I have two accounts that was put in charge off instead of collection

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Hi, cristina, welcome to the forums! This is a really old thread that you've updated (which is fine), and I don't know how often many of the posters are still around, especially whichever one you were replying to. Just FYI. good luck

[Anonymous]

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@MidnightVoice wrote:

There is always the beneficial effect of knowing that you did the right thing and paid your debts

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Pretty much where I naively started. What is the point of paying of a CA if;

1) It is only going to lower your score
2) If they bought the debt for 2 cents on the dollar and you are paying them 50x what is owed AND generally interest they are illegally collecting.

I tried contacting the original creditors for my accounts, they said they are closed. I offered to pay in full PLUS any collection fees. They said they are written off.

So why is there any reason on earth to pay the CA? I don't owe them a thing except *maybe* the purchase price of my debt. I certainly don't owe them interest since I never agreed to pay them interest.

I totally get doing the right thing even when it hurts to do so, but in these cases there is zero benefit to anyone but a predatory CA.

In only one case, my outstanding medical debt, was I able to contact them directly and offer (and be accepted) to pay for their collection costs. They were pretty surprised, but THAT felt right. Paying a CA $1,500 on a debt that was $1,000 and $500 in illegal interest AND that they bought for $20? Not me.