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Question By
Clay282

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1 Person Helped
Credit score CRASHED after I paid collection accounts off.
I have been trying to raise my score and have been paying things off. I had 4 accounts in collections, %100 on time payment history for my auto loans and credit cards and my credit utilization was actually the same before I paid off the 4 accounts in collections. Paying the accounts in collections off has taken 3 months and my score went from a high of just under 700 to 599 today when I checked it. HOW DOES MY SCORE DROP WHEN I AM PAYING PAST DEBT OFF? The point of all this was to refinance my truck at a better rate but since I have paid off the collections, my score is so low I wouldn't even be able to get a candy bar on credit. WHY? Is this normal? If it is... Why would anyone ever pay off old accounts in collections?

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Negotiate! Negotiate! Negotiate

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Before you pay off any of your collectons or bad debt...negotiate! Try to get the creditors to agree to delete your collections for payment. The person you call at the collection companies do not have a lot of power so it would probably be best to ask for a supervisor. Remember to be polite and keep in mind these people are in business to make money. The way it works is they buy uncollected debts from companies for pennies on the dollar. If you pay them and they do not change your status, you will just have 7 years of paid in full bad accounts on your credit reports. You want a complete deletion or pays as agrees status next to your accounts. Try to get the payment reduced first but if they will only agree to delete for full payment. Pay them BUT MAKE SURE YOU GET A PAYMENT FOR DELETION LETTER FIRST! GET IT IN WRITING FIRST! Having credit cards isn't a bad thing! Credit cards don't hurt your credit scores. Usage of the credit card does! In order to get a good credit score you have to have a good credit mix. Revolving credit (credit cards), installment credit (personal loans, car loans, mortgages, student loans). An example of a good credit mix would be:  2 credit cards, 1 mortagage and 1 car loan. Bottom line...negotiate your bad debt before you agree to pay anything. I hope this helps. Also google how credit works to get a better understanding of credit. Also go to link below to better understand how credit works. 

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Top Contributor
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Does *not* reset the clock

Just to clarify - the account stays on from the date of  YOUR FIRST MISSED PAYMENT, not the date of your last payment. So if you were reported late on 6/2013, and paid the collection on 1/2015, you can request removal on 12/2020 (7 years + 6 months).

Paying your collection bills does not help your credit score unless your negotiate for deletion. However, when going for a mortgage, often they want all outstanding collections paid prior to continuing the mortgage process. And for our family, we felt it was just the right thing to do.

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