Tuesday’s Tip: Paying Off Collections Can Hurt You!

I know, that doesn’t make sense. You would think paying off an overdue debt is a good thing, so it should reflect as such on your credit report. No, in most cases it doesn’t. Some people have reported no change in score, while others have even said after paying off the debt, it caused their score to drop! That’s crazy! The reason, experts say, is when you pay them off, they are considered new activity, which causes the score to drop, since it is in collections.

There’s a better way. Negotiate with the creditor to delete it when it’s paid off. Get it in writing and don’t pay until you see it in writing. Once you pay it, check back in 30 days to see if it’s removed. If you’re not trying to purchase a big ticket item, you can wait a little longer to see of it’s removed. If it’s not removed, dispute it with all 3 credit bureaus. That should bump your score.

Remember, negative items come off after 7 years. The older the collections, the less impact it will have on your credit.

I hope this helps and you found today’s tip useful. If you’re thinking about buying, here’s a blog post about home warranties, like what they cover and what companies to choose from.

Speaking of your home search! If you’re wanting to see what homes are available for sale in the Northeast Florida area, which includes Jacksonville, Orange Park, Fleming Island, Middleburg, Green Cove Springs, St Johns  County, and the Beaches, click the previous link.