When we're attempting to clean up our credit to purchase a home, car,
or simply to clean up our credit we often look at all the negative
information on there and think "If I just pay all of this off I'll have
good credit!"
That couldn't be furthest from the truth. Even FICO states on their website (Myfico.com) that if a collection is reporting on your credit report; the balance owed - $0 or $10,000 - is irrelevant when it comes to your credit score.
Thus, paying it does nothing. Convincing the collection agency to
delete the item from your credit report for payment does; but often
times they lack the required paperwork to report it on your credit in
the first place; save your money and and ask them to validate that they
have the right to report AND the right to collect.
The ONLY
time to pay off an old debt is if it's with the OC (ORIGINAL CREDITOR).
The company you actually took out the credit with; and that's only for
so long. FICO states that after a certain period of time their scoring
model starts to ignore old debts anyway (typically around the 2yr mark).
It won't be ignored completely, but it starts to have a lesser negative impact on your credit score.
So, if you want to see your scores increase; focus on your
newer debts; pay off the debts that are with original creditors 2 years
and younger, and pay down current debts that are utilized above 30%.
If you need assistance; please feel free to contact us for a free consultation!
No comments:
Post a Comment