Never Pay a Collection to improve your credit score EXCEPT…

why it’s never a good idea for a
short-term strategy to pay a collection hi everybody Dave Sullivan here for the
Credit Guy TV so what I need to explain is that in the mortgage industry we are all
required to use FICO(r) 5 that is dictated by Fannie and Freddie the version that we use to underwrite a mortgage in that version of the FICO score if you
have a collection that is two years old and you pay it changes the
reporting date to today and that brings your score down because it looks like a more recent collection at least in a FICO version. In some of the newer versions if you pay a collection of won’t count it all in credit score I think that is an improvement but we’re not quite there yet so right
now as of today if you pay an old collection really even a month ago your score is going to go down for a month and then it will start to improve
the most important thing to remember is paying a collection
is going to cause short-term pain for long-term gain except for one situation
I found a situation where if the collection is being reported recently and the balance is being reported as currently past due if you pay that collection the next month
your score will increase so there are two caveats there that the collections be reported
currently and the balence is being reported currently past due in those situations if you pay a
that collection off your score will improve the next month and go up from there this is a very specific
example in every other situation it is going to hurt your score initially and then as time goes by your
score will increase. If you’re looking for other ways to improve your credit score please go to you can get free videos and worksheets to increase your credit
score from a more holistic perspective Dave Sullivan here for the credit a TV show. you a
little bit of me we’re gonna change the credit industry

6 comments on “Never Pay a Collection to improve your credit score EXCEPT…”

  1. Hodaya Yahshar’el says:

    Hi Dave, Your videos are so informative and helpful. I have a client that is in a questionable position and you posted this video just in time. He just received a letter that an old debt was sold to another collection agency. He did not want to pay this old debt at first because they told him they would not do a pay for delete earlier this year. Now they have sold the debt and that company wants to settle? He's walking on thin ice with his credit and doesn't need an extra hit. What options does he have? Thank you.

  2. Kenya Hill says:

    Hi Dave! I have just found your channel and I am excited to watch all of your informative videos. I would like to ask some advice though. I recently started paying off super old collections (I was 18 and did not care about credit, big mistake). All but 3 debts that I have were medical bills. I've paid them in hopes of improving my score. I will be paying of a debt from a gym and then I have a student loan and car loan. Those are also being paid on (both in good standing, not late or anything). But my debt to income ratio is pretty bad. The debt is more then what I make a year but I am diligently working to to pay them down. My credit score was 616 but has dropped to 473 before paying the debts and I've had only one new hard inquiry. My score was working its way up right before last month (new inquiry hit).Am I doing something wrong and can I fix it quickly?

  3. Jessica says:

    Hi Dave,

    I'm in a bit of a situation. My husband and I stupidly got multiple accounts in collections ranging from 5 years to two recently this year . We will be getting a substantial amount with our tax refund next February that would be able to cover all the collections. Should we pay them off? We are trying to buy a house in 3-4 years and need guidance on how to boost our credit score for that big purchase in the future.

  4. Kevohulk says:

    I have a open Verizon collection should I pay it

  5. talawoods25 says:

    Hi Dave! I got a letter from a CA for medical bills from last year. They have NOT put them on my report, but have threatened to do so. Is a debt negotiable at this point? If yes what would you recommend I do while keeping this from being reported?

  6. alba larios says:

    hello dave,
    my husband recently tried to take out a car loan and was denied because of having no score and having a collection of about $150. . The collection dates back to about 4/5 years if he chooses to pay with agreement of getting it deleted from his credit report would that help him build credit or should he leave the collection alone and wait until it falls of can he mean while stablish any sort of credit while having the collection?

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