Will paying off accounts in collections lower your credit score?

Asked by Tracy Jones, Houston, TX Thu Jan 31, 2013

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, ,
Fri Feb 1, 2013
Paying off collections may lower your credit score. Credit bureaus look at the last date of activity on each account to determine the impact it has on the overall score. So when you make a payment, it resets the clock renewing the last date of activity and makes the collection fresh again.

Your credit score could drop temporarily but will go back up with time.


Anna Maria Durr, NMLS 266699, TREC 596662, Codemark Financial
2626 Richmond Ave., Houston, Texas 77098
281-592-0667, anna@codemarkfinancial.com
1 vote
, ,
Wed Feb 6, 2013
Good morning Tracy,

I see you've received lots of conflicting responses. Here's the correct response based on my professional experience as a Mortgage Banker and based on MyFICO.com and their education tab on the website: Recent activity on ANY credit account (whether that be a good or a bad account) has a lot to do with your current credit score. If you're paying all your bills on time, that's a good thing and that has a positive impact on your credit score. By contrast, if you pay off a collection account and the collection agency updates your credit report to reflect that account as PAID, then that recent activity will have an effect on your score, albeit a negative one.

You should know, also, that depending on the loan program you're applying for the mortgage with, you may not be required to pay off a collection account depending on the circumstances of that account. Therefore you want to identify and meet with a Local Mortgage Banker to get prequalified BEFORE you pay off any collection accounts. Your Mortgage Banker will review your credit report and other qualifications and can guide you accordingly on whether or not to pay off the collection accounts.

For other information about credit from a non-biased source I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website. http://www.consumer-action.org/

Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE. http://www.consumer.ftc.gov/articles/0058-credit-repair-how-…

If you determine you will pay off those collection accounts, see my advice on my Trulia blog about how to pay off a collection account linked below.


Trevor Curran
NMLS #40140
Mobile: 516-582-9181
Office: 516-829-2900
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
NMLS#3528

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4 votes
AmieDignan, , Lees Summit, MO
Thu Oct 20, 2016
Hi Tracy,

My name is Amie, I currently work for a law firm specializing in Credit Repair. We are a contingency based program and do not ask for you to pay any fees upfront. We are definitely one of a kind. We always suggest that you do not pay them in full until we have had a chance to negotiate for you. As paying them will update the date of last activity and could possibly affect your score negatively. If at all possible you could pay and ask them to delete if paid in full, most companies refuse to do this. We have over 500 companies that have agreed to delete if our client pays.

Please feel free to contact me with any questions you may have, I don't mind answering them for you.
Thank you,
Amie Dignan
Credit Law Center
amied@creditlawcenter.com
816-875-5567
0 votes
Jennywright0…, Home Buyer, New York, NY
Wed Oct 19, 2016
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0 votes
Jennywright0…, Home Buyer, New York, NY
Wed Oct 19, 2016
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0 votes
Harrywest360, Home Buyer, Jacksonville, FL
Fri Oct 14, 2016
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0 votes
, ,
Sat Feb 23, 2013
No. Not 100%

I speak from experience too. As a 9 year veteran as a loan officer reading credit reports.

I have run score simulations for clients. Sometimes it lowers the score. Sometimes it raises the scores. Sometimes it does nothing.
Having a loan officer who can run the ACCURATE score simulations is a lot better than calling some credit repair hack who wants your money.

Consider the previous post SPAM!!!!!!!!!!

Your best resource is MyFICO.com as they are owned by the people who developed the FICO score.... The Fair Isaac Co




Tom Burris
Mortgage Banker
http://www.servicefirstmckinney.com/
(214) 763-4629 cell/text/nights/weekends(Really!!)
tburris@servicefirstmtg.com
Lending all across the entire Great State of Texas!!
NMLS# 335055
Search Dallas area MLS for FREE. No registration => http://www.ntreisinnovia.net/cgi-ntr/BR_login?0501134
0 votes
Mike Matthews, Other Pro, Houston, TX
Sat Feb 23, 2013
YES 100%. You score will drop more as the credit will read paid but 120 days past due and then you will still have to dispute the negative remarks on your credit score. I am speaking from personal experience. Don't do it. The damge is already done. Hire http://www.Academycredit.com to remove it fro your report.
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Sun Feb 3, 2013
No paying off accounts in collections will ultimately raise your score. Accounts in collection are a significant negative. It' won't be instantaneous as the fact that you've had accounts go to collection is a negative and it takes some time for them to no longer be considered but rest assured paying these accounts off is to your benefit.
0 votes
Howard Persky, Agent, Sugar Land, TX
Sun Feb 3, 2013
You should speak with a credit counselling expert from a reputable company. A few of those companies that my clients have used and are pleased with are:

Tranquility Credit Repair
http://greatcredit123.com

Lexington Law
http://www.lexingtonlaw.com/

Caravan Credit Services
http://www.caravancredit.com/

Credit Recovery Group
http://creditrecoverygroup.us/

Improve My Credit
http://www.improvemycreditusa.com

Information from the Federal Trade Commission:
http://www.consumer.ftc.gov/articles/0058-credit-repair-how-…
0 votes
My wife and I signed up with Pyramid Credit Repair recently and they're pretty great too. Look into them as well. https://pyramidcreditrepair.com
Flag Tue Mar 7, 2017
Yes Howard is correct Lexington Law works great. They don't repair your credit. They delete the negative from it!!
Flag Sat Feb 23, 2013
, ,
Fri Feb 1, 2013
It might lower them.... It might raise them.

Now, collections usually do not need to be paid as a condition of loan approval. I wouldn't touch them until after you get a mortgage.

If you are trying to buy a house, your loan officer might have access to a score simulator that they can apply to your credit report.... I have done this for clients.
0 votes
Al Geffon, Agent, Houston, TX
Fri Feb 1, 2013
Tracy ...

Not at all ... in fact it will eventually raise it. But be aware that lenders are more concerned about the fact that the debts went to collection in the first place. Paying them off will ultimately reduce your debt ratio, which will positively affect your FICO score. Pay off those bad accounts. I wish you well.

Al Geffon
(713) 213-6350
al@geffon.net
Web Reference:  http://www.har.com/algeffon
0 votes
Ruth and Per…, Agent, Los Gatos, CA
Thu Jan 31, 2013
Dear Tracy

Pay off your debts in Collections, it will not lower your credit score.

It will actually help improve it longer term, in 90 days.

Best regards
Perry
Web Reference:  http://www.ruthandperry.com
0 votes
Bruce Lynn, Agent, Coppell, TX
Thu Jan 31, 2013
I would think it would improve it, but you have to have the promise in writing to get it removed.

Check out this website for more info.
http://www.creditkarma.com/question/if-i-pay-off-a-collectio…
0 votes
Diana Merced, Agent, Houston, TX
Thu Jan 31, 2013
May or may not. I would suggest you speak with a loan officer or a bank. They can pull your credit report and look at your averall picture. It is also important that if you do pay off any account that you get written approval that the account has been paid
(0 balance )and that they will take it off the credit report.

Hope this will help you.
Feel free to contact me if you need assistant.
Dee Diana@dmerced.com
713-444-9905
Remax 360
0 votes
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