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Paying off collection accounts in no way improves your credit and may, under certain circumstances, HARM it by lowering your scores. Once an account goes into default, it is a derogatory mark against your credit. The derogatory nature, PLUS the "date last reported" combine to cause deductions to the score, even if the account has been paid off. If the date last reported falls within the past 12 months, the deduction can be huge. In the simpliest terms, a credit report is a history of how you have managed debt in the past. So, obviously, the recent past (last 12 months) has the most impact on your scores. Any derogatory mark falling within that time frame is a "score killer". This is the reason that paying off old collection accounts don't help your credit. They often cause the account to (confusingly) appear to be more recent. The only true way to improve your credit is to pay a collection account in exchange for its' REMOVAL from your credit. Unfortunately, this is not easily accomplished. However it is still worth the effort because that is the only way to actually improve your credit by paying defaulted debts.

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โˆ™ 2006-02-18 22:23:23
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Q: With three accounts in collections can you raise your FICO score quicker by paying them off in full one by one or by making payments on all of them?
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Related questions

If you pay on your medical bills can they turn you over to collections?

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Does paying off collection balances in full or making consistent payments raise your FICO score quicker?

Consistent payments will raise your FICO faster than payoffs. Banks don't like it when you pay off the ballances in full because they are not making any money when you do that. Folks that pay off their credit cards every month are essentially getting a free 30-day float, which does not help their FICO as much as maintaining a balance and making payments on it. The previous answer applies to making payments on a positive, revolving, account like a credit card. It is not a good answer the question posed, namely: Does paying off a collection account or making payments raise your score quicker? Paying off derogatory accounts does nothing to improve your credit score and can, under certain circumstances, lower your score. The reason this happens is that paying off a defaulted account updates the account to NOW. The NOW causes the scoring software to calculate the account as a default that just occurred, instead of something you are trying to "clean up". This hits the score in the History category, which accounts for up to 35% of the total. Once any account goes into default, the entire balance is due and payable in full. If a creditor chooses to take payments, they do so at their own discretion. Payments at this point does nothing to improve the situation, except make the outlay of funds easier to bear. So, neither action improves your score. If you want to raise your credit score, you need to look to other activities.


I'm making monthly medical payments can they still send me to collections?

YES! Unfortunate, but true. If the company has had your file for the max time, even if you are making payments, they can still send it to collections. I know this from several past experiences. I would tell them that I will pay $5 a month and you have to take it. Yes, they have to accept the money, but if the payment plan isn't good enough for them they will send your records to a collectionsl PLEASE NOTE, this may vary from state to state, so don't take this as a for sure, but I know of several states that do this.


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