Credit Score Questions

[RC Didnt Offer]

If I have an old collection on my credit report, say a City of Ausitn bill for $50 from five years ago, would it improve my score to pay it off or would that just update/refresh the date on it and make the situation worse?

In general, does paying items off improve your credit score? I've heard different things about it. Some say that the only way it will get better is after 7 years of inactivity it will drop off.

 

[Ignatius]

A paid collection account is better than an oustanding collection account, but obviously having it gone is the best alternative. You will definitely be better off paying the $50...

 

[ninerhorn]

RC,

the above post is both right and wrong. Paying it will update negative history.

Pay it but before you do get in writing that the negative history will be changed to reflect account in good standing.

 

[DCLonghorn]

One quick question,

Does the 7 year limit begin when it's reported to the credit bureaus or from the date the account is considered deliquent? I ask because I have not lived in Austin for 8 years and Time Warner Cable in Austin indicates that I owe them $112. The first that I heard of it was when I ran my credit report last November. No bill or notices from TW, suggestions? Should I offer to pay or forget about it?

 

[KC-97HORN]

Here's the deal.

In 2 years for sure it will be an uncollectable debt (as long as you dont incur another debt to the city of Austin)

by PAYING the debt, you affirm that its yours AND the system updates that information. So suddenly you go from a $50 unpaid debt which was 60 months ago (and in terms of your credit score probably no more than a 5 point hit- possibly even less) to a "paid' deliquent account that has been past due within the last 30 days.

Believe it or not that past due within 30 days is a HUGE hit on your credit score, to the tune of at least double whatever the existing hit you are taking for such a small old debt (and possibly as much as 30-40 points).

Here is what you should do. Send a lettter to all the credit bureau's that list that bill. DISPUTING the old charge.

Especially from 5 years ago, the debtor has to prove within 30 days that you really owe that amount, otherwise, it gets removed off your credit report and is permenately gone.

if they can prove you owe it, and you feel that you really need to pay it do so.

But my advise is to let it slide. Every month that goes by from now on is going to reduce that score hit you are taking for that collection every month.

I worked mortgages and had to deal daily with the credit files. I could see first hand what a point difference little things could make in their score because we would have to repull a new credit report if the loan look longer than 60 days to close.

Saw huge point differentials over that 60 day period, both positive changes and huge, HUGE negative changes.