I just started fixing up my credit report, my score is around 605 which i thought was good but i was mistaken,

Question

I just started fixing up my credit report, my score is around 605 which i thought was good but i was mistaken,what i am trying to figure out is how come when i finished paying off one collection account and it now shows paid in full my score went from 612 to 605, i thought paying off collection accounts was a good thing or am i wrong? Also i would like some advice on what i should or should not pay, i will provide the details if anyone is interested in helping me out.

Thanks

MM

Answer 1

You just learned the hard way that you should negotiate before you pay them anything.

You might try sending them a goodwill deletion request. See if they'll delete it since you did the "right thing".

If that doesn't work, dispute the accounts and see if they answer. There is now no compelling reason for them to take the time to answer a dispute since the debt is paid.

As for any remaining unpaid collections, pay for deletion is what you need.

Answer 2

So since you have already paid the other accounts minus the Pay to delete letter, just start cleaning up the rest of your credit report ie: inquiries, other collection account, debt ratio, pay on time or before time, pay the minimum or more than the minimum amount each month, only use 30-40% of your credit limit.

Answer 3

You can use credit repair agency to fix your credit - for example this one - http://creditreport.imess.net - They can clean lots of bad stuff from your credit report - and do it much faster than yourself, so your credit will go up fast.

Answer 4

Paying off the collection account is good, but that does not make the negative history go away.  Only time will do that.  You can negotiate with a lender to delete the negative remarks in return for payment in full.  However, paying it off will reduce your overall debt and will cause you to start getting good reports from that creditor so things should start to improve in a few quarters.

Your credit score is supposed to be a measure of how well you use credit.  A lender will view this as how much of a risk he is taking by lending you money.  Paying things off on time will make your score go up, as will having a low amount owed.  It's kind of counter intuitive, but not charging anything will cause your score to drop because they don't have any history to judge your habits.

So, pay on time, every time.  Pay everything off.  AFTER you pay everything off, use your credit occasionally and pay it off every month.

EDIT: No a Paid In Full statement is not the same as a Pay For Delete.  With Pay For Delete, you are using payment of the debit as incentive for the lender to remove the negative statements on your payment history.  If you have already paid off the debt, they have no reason to do anything for you.

Answer 5

The older the item, the less impact on your score.  Paying old debt won't increase your score, unless you get the item deleted.  As you have discovered, initially you score will go down.  When you pay old debt, it becomes a current transaction and counts more in your score calculation, including the negative parts.

The best way to work on cleaning up your credit file is to start with the newest items and work back to the oldest.  Derogatory items age off in 7 years so you may want to let anything close to 7 years just fall off on it's own.

If you have single entry items like cell phone, medical, and utility bills, negotiate a delete for pay.  This doesn't work as well for regularly reported items like credit cards.  The collector can only remove what they reported.  The original creditor's charge off would stay.

You can usually settle for less than full balance.  If the debt is over 3 years old, offer 25%; 2 or 3 years old, offer 50%; less than 2 years old, offer 75%.  Lump sum gets the best deal.  Payment plans have to be short term.

Get any settlement agreement in writing and save it, along with your payment proof, forever.  Do not give collector's direct access to your bank account.

While paying off old debt won't immediately increase your score,  creditors look at more than just your score.  Paid old debt always looks better than unpaid.

You will need at least 24 months of consistent, on time payment history to see your score improve.  The longer the history, the better the score.

Answer 6

Paying off is a good thing since it shows it has been resolved and over time it will have less of an impact. You should NEVER pay off a collections item without getting a pay for delete letter. Your scores will jump significantly if and only if these entries are removed off your credit which can happen if you get a pay for delete letter like this URL states

http://www.creditliberty.com/credit-repa...

I am guessing there are other collection items on your report that are putting you in the low 600s. Just 2-3 collection items are suffecient enough to plunge your score in the low 600s. After those 2-3 other collection items are like piling on more c**p which doesnt hurt. For scores over 700, your report should be clean of any collection items and charge offs.

Are you making good credit right now? Most ppl forget that to have a high score, not only should your report not have negative marks but also should have good credit on it. Start making it now and in the next year or so your scores should be higher.

Pay in full is not the same as pay for delete. You should try it with your other items. As other posts say, over time your score will get better since this entry will be older. FICO scores are really wierd becuase when an old bad debt is paid off, it becomes "current" and over time its impact is reduced. Showing it paid off is a lot better than having it say charged off.