Why Didn’t My Credit Score Go Up After Paying Off A Collection?

The following question was sent to me by a Facebook friend.  If you’ve got a question for me please feel free to send it to me via Facebook or via Twitter @johnulzheimer.  I try my best to answer all of them.

Q: John, I’ve been working on fixing my credit report for years now.  I check my credit scores now and then to see if my work is paying off with higher credit scores.  What I don’t understand is why my scores don’t go up that much after I pay off a collection. Is there something wrong with credit scores?

A: This is a very common question from people who are in a score improvement mode and are working to pay off defaulted debt. I wish I had a better answer for you but paying off a collection or any defaulted debt isn’t going to cause your score to go up much, if at all. This is true for paying collections, settling collections or otherwise paying or settling any other defaulted debts.

Do you have collection accounts that are dragging your score down? Check your updated credit report and scores.

The issue when it comes to the impact on your score isn’t so much the balance of the negative item, it’s the fact that the negative item exists. And, because paying the debt doesn’t cause it to be removed from your credit reports the derogatory item can still have a profound negative impact to your scores.

Don’t get me wrong, it was a good thing to pay your collection.  Or, if you settled the collection that was a good idea as well.  You’ve stopped the collector calls and you’ve eliminated the possibility that the collector will sue you. All in all, good move!

Now, be sure that your credit reports do reflect the fact that the balance is now $0 on that collection. Once you’ve done that your score will benefit from the item aging.  Eventually, 7 years after the original account went into default, the collection will be removed. At that point it will be so old that its impact to your score will be so small that you may be again surprised when your scores don’t go up much, if at all. As negative items age their impact to your scores lessens.

Thanks very much for your question.

Do you have collection accounts that are dragging your score down? Click here to see your updated credit report and scores.

Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

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