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Should I pay off small collection accounts before applying for an auto loan?
I am planning on getting an auto loan in about 3 months. I have never had one before. According to credit Karma my credit is between 681-741. I have 2 small accounts in collections. One is a medical bill (95.00) from about 6 years ago scheduled to fall off in Feb of 2017. The other is a bill that I forgot to pay when switching auto insurance (141.00) This one is just a couple years old. Would it improve my chances of getting a better rate if I were to pay either of these off? I've heard that once you pay an account iin collections it stays on your credit for another 7 years AFTER the date you made the payment. I wouldn't want to pay them if that's the case, since it seems kind of counter productive. How can I get the collections erased?

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Getting an unpaid collection marked as a paid collection does nothing to help your scores. In fact, it may cause a score decrease when the payment reflects on the account if the account has not updated in a long time. When a negative account updates for any reason, it causes a ding to your scores because the negative account looks fresh to the scoring system whenever it is updated. However, getting unpaid collection accounts marked as paid does look better under manual review of your credit reports, but that is not done that much any more, usually a computer will decide if you are approved or not.


Paying off a collection account does not restart the seven year reporting time period. The seven year reporting time period begins from the date that the original account became delinquent.


You want to do some extensive reading on "Pay For Delete Agreements". A "pay for delete" is when you get the collection company to agree to completely remove the account from your reports in exchange for you paying it off. Obviously, you want to get this agreement PRIOR to paying.


When it comes to auto loans, keep in mind that more goes into a lender's decision than your scores. Your overall credit profile will be a factor as will previous auto loan history, debt to income ratio, time with current employer, year and mileage of auto to be financed, amount of down payment, etc. Also keep in mind that most lenders will use a version of FICO scores, usually an auto version.  

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