Is it true that if you pay off collection accounts on your credit report, that it will hurt your score?

Question

i got a few collection accounts on my credit report that i havent paid.

they are 2 - 3 years old. would it hurt my score if i paid them off? or should i just wait til the 7 years are up.

i know it would hurt the score because they updated it, but i hear people saying both ways...

Answer 1

Pay off any debts.........

Answer 2

Bravo, Crazyjester,  I couldn't have said it better myself!

Paying on these debts will hurt in the short term but it will get better.  Also unpaid debts will lose their effect on your credit the longer they remain your reports, even before the  7 yr. mark.

Answer 3

It will hurt it in the short-term. If you do not plan to apply for any new loans for a while, then your best thing would be to pay off the collection accounts. It is true that it will decrease your score in the short term because it will re age the account and show recent activity on the bad account. However, in the long run after the old accounts settle down, it will ultimately raise your credit score in the long run.

Basically, it will hurt your score if you pay them in the short term but it will raise your score over a period of time.

If you don't pay it, then it will continue to hurt your score and your score will be lower until these bad accounts hit the 7 year period.

Ask yourself if you are planning any recent purchases that you would have to buy on credit. If your answer to that is no, then you may want to look into paying them off so you will be better off in the long run.

I can relate to your situation. I am there myself.

Good luck!

Answer 4

I would pay it off if you can.  There are recovery companies that buy peoples debt, and the company you originally owed money to gets paid off, but then the company that is recovering your debt and coming after you like the debt is new, and it is recorded on your report as new once the company contacts you regarding payment.  I've had it happen twice, both times it didn't happen till about a year before it was supposed to go off my credit report.  So if you have the money you should pay it off so you don't have to worry about a new ding on your report

Answer 5

YES, this is true, and let me explain why.

The two things to consider here is that A) your Fico scores are mainly made up of the last 24 months of activity and B) once a collection account is posted to your credit report, it has done the worst damage it can do.

As time goes on, those old collection accounts have less and less of an impact on your credit score, but if you pay them off it will make them appear more recent (due to new activity) and your score drops. This happens because all the negative information about charge off and collections is still there, it just shows a zero balance and paid.

This is my many others and myself advise people to NEVER pay off any old debts unless the collection agency agrees to completely remove the listing from your credit report.

Think about it...why pay a debt and have it still hurt your credit?

Edit - Matt is incorrect...NOTHING can legally reset the 7 year reporting period, this is clearly defined in the Fair Credit Reporting Act.

Answer 6

It does and it doesn't.  It depends on your situation.

With your debts being that young, you would be better off trying to pay them off.

It would hurt if they were near the 7 years because beginning to pay it off starts that 7 year cycle over again.

Answer 7

Pay them

I just cleaned up my report to buy a house last year

It will not make them go off the report but after paying them it will show a zero balance

it is better to show a zero balance than to show you still owe money

Answer 8

NO, simple fact, it will improve your score (not by a lot) but it will go from a derogatroy entry to a positive one.

Hope this answers your question.

Answer 9

No, paying off debt is ALWAYS good.

If you don't pay them off, the next guy won't want to loan you any money at any interest rate.

If you do pay off late, it looks like you fell on hard times but are GROWN-UP enough to settle your debts when possible, so the next lender sees that you should be trustworthy enough to loan money too, but at a higher rate of interest for the next few years.

Answer 10

It will make your credit better. Paying off any collection will show a willingness to pay, so even if it does "refresh" the collection - like bringing it current with a paid off date, it will reflect as good on your credit. If you do wait the 7 years, it will fall off, but there is a column on your credit that shows the entire history, but the past 2 years is mainly what is considered for your score and general review of creditworthiness.