Paying Off Old Debts May HURT Your Credit Score!

Paying off old collection debts may hurt your credit score. Read on to find out why.

Borrowers are often concerned about old credit mistakes that show up on their credit reports. This is a reasonable worry, but what seems to be the obvious path of resolving those old mistakes may hurt your credit scores.


If a borrower is worried about how an old collection might affect their current credit, the most common urge is to try and clear the books by paying off the old collection. This would seem to make sense, if there’s an owing balance, and that balance owed could be hurting your credit. Wouldn’t it make sense to pay off that balance and get rid of the collection account?


Not necessarily.


How could paying old collection debts hurt your credit score?

Did you know that by paying a collection you are:

  1. Admitting fault and accepting the debt, therefore validating the account
  2. Lowering your score in the short term as the date of last activity is updated making the account look recent
  3. Updating the account to a paid collection, therefore the account will still show on your credit


Old collection accounts can and do show up on your credit report. When you pay off a collection they only update the balance. The negative blemish will still appear on your credit report which affects your credit scores.


New payment activity could "reactivate" old debts that would have fallen off of your report!

The official site of the Consumer Financial Protection Bureau, the U.S. government’s consumer watchdog agency, says that most negative credit information stops being reported in approximately seven years. If your collection account is paid off before it falls off your credit report, the existence of that collection will be reaffirmed by the new activity-the payoff of the account. Could the credit reporting agencies bump that collection account information back to the top of your credit report showing the new activity on the collection, even though it’s a payoff?


Unless an agreement has been made with the collection company, and written proof is provided requesting for it to be deleted from the three credit bureaus, the credit bureaus will only update unpaid collections to show paid. When this change is made the date of last activity on the account is updated therefore making your account look recent and the collection will still report on your credit. Since close to 35% of your credit score comes from payment history and recent negative marks have more an effect on your credit score, your credit score may be temporarily lowered.


The best way to make sure you're helping your credit score: consult a professional!

Before you make plans to pay, exercise your consumer rights! Audit your credit report to ensure the items reporting are 100% accurate per federal law. MSI Credit Solutions leverages your consumer rights and works on your behalf to remove negative items from your credit report which results in an increase to your credit scores. Over the past 10+ years we have averaged a 50-80% removal rate!

We encourage you to consult with a credit expert like MSI Credit Solutions to learn about your options. Contact us today at 866-217-9841.


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MSI NEW LOGOMSI Credit Solutions provides superior credit restoration and comprehensive consulting services that are reliable and affordable. For any questions or to schedule a free credit consultation, contact us at (866) 217-9841.


 *The information in this article has been provided strictly for educational purposes.