collections

[Anonymous]

I know that if you pay a collection account in full it's just as bad as an unpaid account, but will paying the collection decrease your score?

[Junejer]

Hi looking, I believe that it could, because your status gets updated to a more recent date. Others who have actually experienced the pain can weigh in with their experiences. In my consumer banking days, we wanted people to pay those CAs off before lending, and inevitably the score would almost always drop. Nothing written in stone however.

[Anonymous]

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lookingforhome wrote:

I know that if you pay a collection account in full it's just as bad as an unpaid account, but will paying the collection decrease your score?

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Agree with Byrd.  FICO determines the recency of a collection by the last time there was activity on it. 

This is one part of the FICO algorithm that makes absolutely zero sense.  I believe this is being addressed in FICO08.

[Anonymous]

Cheddar, I was hit by a drunk driver several years ago and have outstanding medical bills totaling less than $600.00 that are in collections which have killed by FICO score. The claim is finally about to get settled and I want to pay off the old debt but from what I've read, paying off the debt can actually hurt my score even more. I've also been told that I can write to TU, EQ and EX so that there is an explanation attached to the medical collection accounts which might help my credit score. In a response to someone, you said that the issue of paying off old debts might be addressed in FICO08, does this mean that there is a movement to not penalize indvs for wanting to clear out there old debt? The other item that is negatively impacting my credit is a high credit card balance, which I will pay off or pay down. This entire FICO business has been disheartening to me. I'm am better financially than I've ever been in and my credit score is the worse that it has ever been in. From 2002-2006 I really struggled but in 2006 I managed to pay all but one $7500 credit card off and since paying off the majority of my debt, my credit score has actually decreased. Paying off my debt really did not help which is quite a shame. I am really at a loss as to how I can increase my credit rating when I do not have that much debt and the one credit card that I do have is paid on time. If I pay the old medical bills, my score will drop? What do I do?

[haulingthescoreup]

Hi, paris, welcome to the forums, and I'm sorry to hear about your accident and all that followed.

First of all, are you in Firefox? If so, you have to click the box at the bottom left of the text box that says "Automatically convert carriage returns to HTML line breaks," or you will wind up with a giant blob. If that's what happened to your post, click "Options" at the top right of your message, then "edit." When the text box opens up, click that box at the bottom left, and then re-insert your paragraphs. You might see < div > or < br > where the paragraphs used to be.

I'm going to leave the collections problems to others, but I'll bring up my little obsession. Your CCC's (credit card companies) generally report the balance that's on your statements to the CRA's (credit bureaus.) This is the number that is compared to your credit limit on each card, and used for scoring purposes to determine your utilization ("util"; balance owed divided by credit limit.) If you wait until the statement posts online or comes in the mail before paying, this can hurt your scores.

Take a look at each account, and see when the statements have posted. They often vary by a few days each month. BTW (by the way), the statement date is NOT the due date. The statement date is when the summary of the previous month's activity, and the new balance and minimum payment, are listed. Anyway, about 5 days before you think it's due to post again, pay your account down or off online, and let that new low balance post. This is a quick way to improve scores, and relatively quick, if the CCC's will report to the CRA's, and if the CRA's will go ahead and update.

When you're getting ready to apply for something, you can do a final fine-tune by having almost all of your cards report a $0 balance, and one or two report very, very low util, under 10% or even better, under 5%. You can still use your cards as much as you like, you just pay sooner than you used to. HTH (hope that helps)