jackie100

Does paying off collections increase your score a lot?

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I have some collections which I want to pay off, I was wondering by how much my score would improve if I paid them off... I know that no one exactly knows the exact amount that my score would improve, but just say for example if I have 5 derogatory accounts, collections and charge offs...

If I pay them all off would it make a significant difference or just a small difference?

I understand that if the items are not deleted on a goodwill basis, it will just stay as a "paid collection" instead of collection, but does a paid collection make a big difference over unpaid? I know that their both negative anyways, but what difference does the paid collection make in terms of scoring?

Like by how many points approximately could it increase my score?

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I know for me that before I paid off my collections my scores were in the upper 500 range. After I paid them, I went to the mid to upper 600's and I was able to obtain two AMEX cards. But keep in mind that I also had a Crap 1 card with a perfect payment history 1.5 years prior to paying off the debts. I suggest paying them, it just feels good.

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I know for me that before I paid off my collections my scores were in the upper 500 range. After I paid them, I went to the mid to upper 600's and I was able to obtain two AMEX cards. But keep in mind that I also had a Crap 1 card with a perfect payment history 1.5 years prior to paying off the debts. I suggest paying them, it just feels good.

Thanks a lot.... If paying it off can increase my score by around 100 points thats a lot. Right now my credit score is between the low and mid 500's with all three bureaus (I just pulled a merged file). I want to buy a new car so I want my credit to be in order. I could afford to pay for the car in cash, but I'd rather get a loan so I can rebuild my credit since it's messed up right now.

Most of the bad credit will fall off late next year, but I'm eager for a new car and to rebuild my credit so I think I will pay it off anyways. I'll try to get the CA's to delete it of course, but if they won't I would still pay for it if it helps significantly...

100 points is a lot, it can bring the credit from "unacceptable and high risk" to "fair or average".

Thanks a lot for your advice, that's very encouraging.

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You're welcome, I'm glad it helped. And congrats on saving enough money to buy the car w/CASH! That is the type of attitude that will get and keep great credit. So while you pay down the car with funds you already have, you're building great credit and earning interest. And if you're savvy, you could even invest your money....but that's another forum!

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I did dispute it already a long time ago. Some of it was deleted, but mainly I want to pay them off because they are my debts and I do actually owe them so I just wanna get it over with. I don't want to dispute them anymore because technically there's nothing inaccurate about them, I screwed up a long time ago but I'm making a lot more money now and I want a nice car so I thought paying it would help my score.

Umm, seriously...do you believe "paid collection" affects your FICO scores in a positive way OTHER than a manual review?

I don't know really, that's why I'm asking. I thought at least it would look a bit better than unpaid CLA and reflect so in the fico score.

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jackie100 it is going to be the same a paid collection is still a collection. Have you tried doing the DV way? Trust me it works. My hubby had 16 CO on his report. He is down to 7. It really works. And trust me they were all his. But hey if anything works then so be it!

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You're welcome, I'm glad it helped. And congrats on saving enough money to buy the car w/CASH! That is the type of attitude that will get and keep great credit. So while you pay down the car with funds you already have, you're building great credit and earning interest. And if you're savvy, you could even invest your money....but that's another forum!

If I paid in cash the most I would probably want to pay though is around 20k or so... My dream car, the one I really want is 40k and it's probably better if I get it financed and put around 15-20k down because I don't want to pay that much in cash... If I saved a bit longer then I could but I really don't want to because I also want to save up for a mortgage in the near future...

I haven't been saving super hard though to be honest. I am careful of what I spend, but I think I'm only able to save this much because of my income has gone up and I have a lot of residual income even when I don't work so I'm very lucky... But my saving and financial skills are probably not the best... lol

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Since I formerly worked special finance for a dealership, here's what an unpaid collection vs. a paid collection will likely do for you:

Unpaid collections -- High likelihood of being denied. If approved, you'll need about 1/3 down payment, a co-signer, and will have a high interest rate. You'll be offered a choice of the lot's previous daily rentals.

Paid collections -- 50-50 chance of being denied. If approved, you'll need a 1/3 down payment and have a high interest rate. You may have a chance at a new car (depending on how much you qualify for) but most likely you'll pick from the previous daily rentals.

I agree with cavazos -- PFD is the way to go if you want a valid, open collection off your report. Offer it 'til they accept.

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jackie100 it is going to be the same a paid collection is still a collection. Have you tried doing the DV way? Trust me it works. My hubby had 16 CO on his report. He is down to 7. It really works. And trust me they were all his. But hey if anything works then so be it!

I didn't do the dv way yet, just disputed it with the CRA's directly. When you say "dv" you mean contact the collection agencies and directly and asking them to verify the debt with a sample letter like this? http://www.creditinfocenter.com/forms/sampleletter9.shtml

I thought it would be easier to just pay it off because it seems like a lot of work to mail everything out to the collection agencies. I prefer disputing it with the CRA's because I can just do it on-line with TU and Experian so it's much easier and convenient. If worst comes to worst I guess I'll have to dv.

I was hoping that paying it off would make a difference in score for me like it did with Skyfox2020.. Even if it's a hundred points that's a big difference I think.

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I'm so glad that you will be able to get your dream car, but a few questions.

If you put down all of your money down on the car, what will you have in case of emergencies? Do you have disability insurance that will cover this note and all your expenses if you get sick? You should have at least 3-6 months worth of living expenses saved. Secondly, you said you wanted to buy a house. Why not save that money for property that will most likely appreciate in value? A car is a losing proposition the moment you drive it off the lot. I don't want to be a party pooper, but you've come so far, and saved so diligently, why not use your hard earned funds wisely? You can always get the dream car later.

And having an unpaid collection, is ALWAYS worse than a paid one. Yes the ideal situation is to get it deleted, but don't be fooled into thinking they are the same. They're not. You could dispute/DV or simply pay what you owe. You can already tell I'm a little biased. But if you can afford to, pay it, accept responsibility, and learn from your mistakes. I realize that many people on this forum can not actually pay what they owe(greedy CC companies with their compounding interest and fees make it darn near impossible). But if you can, why not? It just seems to be the ethical thing to do. And after you pay then start disputing/DV. Just my humble opinion.

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Since I formerly worked special finance for a dealership, here's what an unpaid collection vs. a paid collection will likely do for you:

Unpaid collections -- High likelihood of being denied. If approved, you'll need about 1/3 down payment, a co-signer, and will have a high interest rate. You'll be offered a choice of the lot's previous daily rentals.

Paid collections -- 50-50 chance of being denied. If approved, you'll need a 1/3 down payment and have a high interest rate. You may have a chance at a new car (depending on how much you qualify for) but most likely you'll pick from the previous daily rentals.

I agree with cavazos -- PFD is the way to go if you want a valid, open collection off your report. Offer it 'til they accept.

Thanks for your advice... I don't want to go through a car dealership though, I really want a new car and was thinking of going through carsdirect.com so I don't have to negotiate with a salesperson. I would want to get through financing independently though, like perhaps with Capital1 Auto Financing or something similar.

I don't mind putting down 1/3rd or even higher down payment, and I don't care too much about high interest rates, because I know I can pay off the car really fast. I just don't want to pay it in one payment, but I know I can pay it off in a year or so...

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I'm so glad that you will be able to get your dream car, but a few questions.

If you put down all of your money down on the car, what will you have in case of emergencies? Do you have disability insurance that will cover this note and all your expenses if you get sick? You should have at least 3-6 months worth of living expenses saved. Secondly, you said you wanted to buy a house. Why not save that money for property that will most likely appreciate in value? A car is a losing proposition the moment you drive it off the lot. I don't want to be a party pooper, but you've come so far, and saved so diligently, why not use your hard earned funds wisely? You can always get the dream car later.

And having an unpaid collection, is ALWAYS worse than a paid one. Yes the ideal situation is to get it deleted, but don't be fooled into thinking they are the same. They're not. You could dispute/DV or simply pay what you owe. You can already tell I'm a little biased. But if you can afford to, pay it, accept responsibility, and learn from your mistakes. I realize that many people on this forum can not actually pay what they owe(greedy CC companies with there compounding interest and fees make it darn near impossible). But if you can, why not? It just seems to be the ethical thing to do. And after you pay then start disputing/DV. Just my humble opinion.

Even after putting down 20k down I still have a lot left over for emergencies, more than 6 months living funds... I run an internet business so even when I don't work at all I still have checks coming in because of the sales that are being generated because of all the pages that are out there already. Plus I have recurring income too from those sales even when I'm not working.

I know wanting a nice car is not the best financial decision, but I feel like I only live once and I want something nice. I know that's what gets people in trouble in the first place INCLUDING ME but I feel like my income is high enough now that it's ok. The bad credit happened when I was not making as much and also because I was lazy back then, but now that I realized how IMPORTANT credit is I don't think I will mess up again.

I don't feel that putting 20k down is too much because it takes

me around 2 months to make it, but then I also have to save a lot of it to pay quarterly taxes... But still, I'm just so tired of driving an ugly car, I really want a nice car... lol

I think I agree with you, I would rather pay the debt first and then dispute/dv...

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I don't mind putting down 1/3rd or even higher down payment, and I don't care too much about high interest rates, because I know I can pay off the car really fast. I just don't want to pay it in one payment, but I know I can pay it off in a year or so...

If that's the case, then a high credit score doesn't really matter, anyway. I hate to burst your bubble, but your chances of buying a new car with a collection on your report won't be very good, unless you're paying in full.

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I don't mind putting down 1/3rd or even higher down payment, and I don't care too much about high interest rates, because I know I can pay off the car really fast. I just don't want to pay it in one payment, but I know I can pay it off in a year or so...

If that's the case, then a high credit score doesn't really matter, anyway. I hate to burst your bubble, but your chances of buying a new car with a collection on your report won't be very good, unless you're paying in full.

What if I pay all the collections off though? Then I have a 50/50 chance right? Just with a higher interest rate right? If everything shows paid and in order.

Regardless if I'm buying the car or not I still want to clear this mess up and pay it all off...

Most of the stuff will drop off next year, but one of the suckers won't drop off for 2 more years. I don't want to wait that long I just want to take care of it now so I can start rebuilding my credit.

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Well since you put it that way...If you've got extraneous funds then go for it. I thought you were an average joe or something. Great job. And I thought you said you were'nt financially savvy. Starting and growing a PROFITABLE business is one tough task. I should be asking you questions...But as far as getting a car loan, once you've paid off the collections, you should be good to go. I've noticed that money can make lenders turn a blind eye to a lot of things. You've got a substantial down payment, excess income (they will probably want tax returns because you're self employed; two years worth to make sure this isn't a fluke) and no other debt(right?). I think your odds are greater than 50/50. My sister got approved with no credit and limited income. Go for it! What car are you buying?

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By the way, if you are self-employed you REALLY need disability insurance. Because if you can't run that business, you don't get paid. And there is no "employer" to give you that insurance. America is horrifically underinsured. Also have you talked to a tax accountant about you tax situation? Are you classified as sole proprietor? If you are you should consider setting up a corporation. There are so many LEGAL tax loopholes. Just a thought...

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I think I agree with you, I would rather pay the debt first and then dispute/dv...

It is incredibly hard to remove paid accounts. I have gotten lucky with a few. But if you pay, DV won't work and you will be stuck with bad credit. I understand you want to pay but the system is backwards. It will punish you instead of helping you.

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Well since you put it that way...If you've got extraneous funds then go for it. I thought you were an average joe or something. Great job. And I thought you said you were'nt financially savvy. Starting and growing a PROFITABLE business is one tough task. I should be asking you questions...But as far as getting a car loan, once you've paid off the collections, you should be good to go. I've noticed that money can make lenders turn a blind eye to a lot of things. You've got a substantial down payment, excess income (they will probably want tax returns because you're self employed; two years worth to make sure this isn't a fluke) and no other debt(right?). I think your odds are greater than 50/50. My sister got approved with no credit and limited income. Go for it! What car are you buying?

Yea, I really want to pay off the collections and bad credit accounts... It's not just collections but I have some bad accounts too (charged off) but I just want to pay everything and a lot of it is collections. I feel weird dv'ing, I think I would be more comfortable with just asking them to delete the accounts for payment and if not then that's fine too, as it would be an accurate reflection of my credit (it really is a paid collection).

I realized credit is really important though, I really learned my lesson. When me and my boyfriend applied for the apartment we are currently in they accepted him even though he was UNEMPLOYED at the time with no income at all and barely any credit (but at least it wasn't any bad credit), and denied me when I was the one with income but just atrocious credit. I've learned that I can still get into an apartment though if I put in an extra month's rent as a deposit.

The car I really want is a SLK 280. After that it's all saving and no more splurging but working on building assets like a home and working on investing and things of that nature. My car is really old now too and giving me problems, I just want something nice to drive in :oops: Or maybe another model Mercedes, but I can't afford anything too expensive (more like the more affordable c-class or a used e-class) , the best deals are on carsdirect.com I think they are lower than what you can negotiate at the dealer. :p

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By the way, if you are self-employed you REALLY need disability insurance. Because if you can't run that business, you don't get paid. And there is no "employer" to give you that insurance. America is horrifically underinsured. Also have you talked to a tax accountant about you tax situation? Are you classified as sole proprietor? If you are you should consider setting up a corporation. There are so many LEGAL tax loopholes. Just a thought...

Yea I'm just a sole proprietor and have to pay taxes quarterly and do everything under my personal ssn. I have health insurance but not disability insurance, I'll look into that for sure. I haven't been incorporated because I think you have to pay corporate taxes that way and it just makes it more complicated I think. I'm not really sure though. I probably have to talk to an expert about that in the future. Thanks a lot for all your help.

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I think I agree with you, I would rather pay the debt first and then dispute/dv...

It is incredibly hard to remove paid accounts. I have gotten lucky with a few. But if you pay, DV won't work and you will be stuck with bad credit. I understand you want to pay but the system is backwards. It will punish you instead of helping you.

Of course I'll try to do a "pay for delete" first or ask them kindly to delete it if I pay. I was also wondering why it's considered not so good to call collection agencies?

I was reading the tips on the front page of the site and it said to not ever call them but to only send "pay for delete" letters in writing. Personally I would rather call because it's faster... Is it really bad to call them?

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It's bad to call them because most of them don't follow the rules and they will try to harass you , intimidate you, demand the whole amount, insult your mama, and all that good stuff. Writing letters is good because you need a paper trail. Treat all of your dealings with CA's and creditors as if you'll eventually be in court. It will save your butt. You never know. :)

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