Paying off negatives will NOT improve your credit score
Here's an interesting letter that we received here at Real Life Debt:
Ok, I read your Five Myths about Fixing Your Credit Report article and agree with every one of them.
However, part of what was said isn't accurate.
"Paying off the account before the end of the set term doesn't remove it from your credit report, but will cause the account to be marked as "paid." It is still a good idea to pay your debts, it can improve yourcredit score, but the major improvement will come when the record expires."
Yes, the account will be marked as "paid", or paid charge-off or paid collection, the last two being NEGATIVE entries and NONE of them will RAISE your score. Even a "paid" after a series of lates won't help your score much. Paying off an OLD debt can actually LOWER your scores because it will cause the 'date of last activity' to be updated and FICO will see that as recent AND negative, therefore dropping your scores. Basically - you can't win.
Paying your debts is always a good idea -- paying off old negatives is NOT going to help anyone's scores. It may make a mortgage lender happy, but it won't make scores rise.
Thank you, anonymous letter writer, for your clarification of one of the myths of credit repair article we ran earlier: Five Myths about Fixing Your Credit Report.
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