Will paying off bad debt help my credit score? Will paying old bills make my credit score go up?
Why paying off collection accounts will lower your credit score. Counterintuitive? Absolutely!
The FICO Credit Scoring model calculates your credit score. Your bank's credit report looks decidedly different than the one you see. Every account has a number associated with it, ranging from 1 to 9, identifying the present status of that account.
1 – Good standing
2 – 30 days delinquent
3 – 60 days delinquent
4 – 90 days delinquent
5 – 120 days delinquent
6 – 150 days delinquent
7 – 180 days delinquent
8 – Repossession / Foreclosure
9 – Collection / Charge-off
You decide to pay off the collection account to raise your credit score, but your score goes down. Why?
Greg Frank, known as the Credit Educator, shares his extensive knowledge and experience on debt and credit, gained while working at businesses such as Superior Credit Care.