Paying off Collections read on From Ty Crandall

Pay off a collection and lower your scores


Paying off a collection DOES lower your credit scores. Many people are surprised to hear this, but it is completely true.
Negative credit items on your reports cause less damage the older they are. This is because the older the bad item is the less risk you are to a debtor.
The credit score monitors the date-of-last-activity to "date" the account on your report. The older it is, the less impact it has on your score.

When you pay ANY payment to a collection or debt company, you automatically update that date-of-last-activity to TODAY.

As the account was getting older and older, your scores were suffering less and starting to increase. But when you make a payment on the account and update the date-of-last-activity, you update the account to TODAY and the scores go down.
Here is where many of our clients think that paying off the debt helps the credit scores. Well, that is not what happens at all.
The credit score is a mathematical calculation to determine your risk of going 90 days late on an account within the next 2 years.

When you default on an account, it is listed as a "9" status on your credit reports.
This is the worst status you can have and has the greatest adverse effect to your scores because if you default on that account your risk is very high of defaulting on another account within the next 2 years.

When you pay down or pay off a collection, your status is still "9" on that account and you still face the exact same risk of defaulting on another account within the next 2 years.

The balance might be paid to 0, but it is not an active balance. This means your high credit and available credit don't affect the scores as it is in a collection status.

Paying off collections WILL lower your credit scores, the only way to help the scores are to have them DELETED