Paying negotiated amount of collection debt

Asked by Vanderstokker, 21211 Wed Jul 6, 2011

I was offered a settlement fee on a collection account but need to get my score up. Will it help to pay the settlement fee or should I pay the whole thing. which one will increase my score

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the740agency, Other Pro, Smyrna, GA
Thu Oct 23, 2014
I know this is an old question but in case someone else comes across this...

Paying off old debt can in some cases decrease your credit score.

In this particular case, before paying anything make sure they offer a Letter of Deletion otherwise known as a delete for payment. Be sure that they not only send the Letter of Deletion into the Credit Reporting Companies (which by the way are NOT government agencies) but to the original creditor so the debt isn't mistakenly resold to another debt collector then put on your credit report yet again.

Deleting the collection will improve your credit score. Also, keep in mind that your score isn't the ONLY thing mortgage companies, etc look at. They tend to go through the report so one less collection item is an improvement!

If you have anyone has questions about how this works, please don't hesitate to contact me.

Hope this helps!
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Jessica Hood…, Agent, Gambrills, MD
Wed Jul 6, 2011
Hi Vander,

I'm hoping you are working with a trusted lender who has reviewed your credit. If not, get one since they would be you best guide on how best to proceed. Lenders are happy to assist you in repairing your credit so that you will be a future client. We have some great companies we work with if you need suggestions.
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Lance Tiso, Agent, Baltimore, MD
Wed Jul 6, 2011
My advise would be to pay it off. Not the settlement fee. You can ask if this will affect your credit but I would not take their word for it. They just want you to pay. Another way to increase your credit is a secured credit card. you give the bank a certain amount of money and they give you a credit card for that amount. Pay on it every month and your credit get better a bit faster. I know citibank does this.
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Michael Carn…, Agent, Baltimore, MD
Wed Jul 6, 2011
You will really want to ask a credit person, such as a home loan person. I suspect that this debt is now owned by a debt collection agency, which means that it is possibly a separate issue on your credit report. You will probably still have the credit account holder show it as a bad debt on your report. You can call Tim Milauskas, at 443-623-1287. He is with First Home Mortgage and knows a great deal about credit rebuilding.

Good Luck!

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Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Wed Jul 6, 2011
Depending on when this collection happened, neither may help, as often when a collection account is paid off, it updates the "date of last activity" on the account, which can impact the credit score. Credit scores are sensitive to the event that happened and when it happened... so if the collection is from 2007, and you pay it off, the credit scoring models can think it's actually a fresh collection from July of 2011, hurting your scores.

I haven't noticed any difference in scores between someone who has a lot of paid collections and a lot of owing collections, it's just the fact that a collection exists is damaging in itself.

If you are to pay it off, then I'd ask the collection agency if they can refrain from updating the date of last activity (make that deal, in writing, before you pay them).

Paying the full amount vs. paying a "settled" amount won't impact your scores any differently from what I've seen. For further advice (not just regarding this collection, but for advice regarding your overall credit situation) I recommend you speak to people who are "credit guru's", which you can find a plethora of them in the "Understanding FICO® Scoring" section at - they answer your questions for free, just like here at Trulia.
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Samson Doyle, Mortgage Broker Or Lender, Columbia, MD
Wed Jul 6, 2011
Vanderstokker, Thier are collections that are bad when you pay them off and some that are good. One thing you should do is contact the Creditor and ask for a Letter of Deletion. If they dont offer a Letter of Deletion then there is a good chance if you pay it off it might decrease your score.
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