Your Credit Score could drop if you pay off a collection. Let’s assume it’s an old collection, anyone that repairs credit will tell you that you should not pay off an old collection. Have you noticed if you have an old collection it will get sold and then sold again? So if you never pay it off, how will it disappear from your credit report? That is the hundred dollar question. I know this for a fact, if you negotiate your old debts for pennies on the dollar you can improve your credit score ten times quicker, than waiting for collection to drop off your report. There is a good chance it will never disappear until you resolve the debt owed.



The reason credit repair companies say not to pay off an old collection is when you pay it off, the collection re-reports as a new collection which will drop your credit score. I have personally helped many of my clients increase their credit scores by having them pay off recent collections. Mortgage companies have access to a very neat tool called “Rapid Rescoring". This tool is only available to Mortgage companies, and nobody else. When I provide this trick of the trade, I suggest which collections to pay off so we can get there scores up. Let’s assume you are just trying to improve your overall credit worthiness, and you are not so concerned about your score increasing quickly with the Rapid Rescoring process. If this was the case, I would recommend negotiating all your debts with the collection companies, so that way the collection does not get resold to other companies. Once you have done this, make sure you get letters from everyone of the creditors you paid, or negotiated with. Oh by the way, Rapid Rescoring is a process where we go to our mortgage Credit Report reseller, and have them update your personal credit report with all 3 Bureaus. This process is usually done with the correct documentation from the companies you settled your debts with. Typically this process takes 5 business days if done properly.

Depending on what you are trying to accomplish will determine which direction to go. If you don’t have a relationship with a Mortgage company to help you, you can do this yourself. The only negative part about doing it yourself is you will have to wait 30 days for the update to take place. Remember, if you don’t pay off your old collections they will just get re sold and re sold to other collection companies. I personally have dealt with all of this back during my younger days. Now that I am a Mortgage professional I have the inside scoop on what to do. My advice would be if you owe the debt, negotiate what you owe with the collection company.

Example:

Balance owed on Visa Card.

$1200.00

Offer them $400.00 Bucks.

Remember if you agree to pay it, make sure you follow through with the agreement. Otherwise they will not work with you on any other negotiation attempts

So will paying off collections affect your Credit Score, yes it will affect it. The important thing to remember is that it will help your overall creditworthiness long term. Having a high credit score will save you money long term on any loan you apply for. Your Credit is your life; make sure you manage it well.