Should I pay the deliquint account or leave it?

I'm trying to raise my credit score. I've heard that once an account goes into collections you should leave it alone because if you pay it, then ur score gets lower. One of my derragatory accounts is 2 months old from verizon. I'm wondering if I should pay it off because it's so new or should I just leave it alone because it will lower my score? I have no idea how this credit stuff works.

Once again there are alot of answers that are well intended but flat out wrong.

Julz gave a good answer and Jen has the right idea, but I want to expand on it and add more information. That'll come here later.

Cody C's answer on the other hand is completely wrong and is right from the debt collectors playbook, hardly surprising since he is says right in his answer that he works for a collection agency.

First off let me address his answer.

He says that if you don't pay now you may lose the ability to make payments. That is totally wrong. Infact, the opposite is true. The older a delinquent account gets, the collection agency knows that their chance to collect gets smaller and after awhile they will be happy to get just about anything in return for it, especially since they purchase these debts for pennies on the dollar. That includes making settlements on the amount owed and payment plans.

Next he says that this listing will damage your credit more the longer you let it sit...another lie. When an account is charged off (which is generally when the creditor calls it a loss, writes it off on their taxes and sells the debt to a collection agency) it is at it's worst state and your score has taken the biggest hit. However anyone who understands a little bit about FICO scores knows that the greatest importance is placed on recent items, and as time passes on those negative listings have LESS effect on your credit score. Once that account gets charged off you've already taken the biggest hit and the only thing worse could be a court judgement against you because of the debt (unlikely unless it's over $2000).

Alright, now that I've finished my little rant, let me address your question.

To clarify what you were told, it's a good idea to ignore collection items 5 years or older. At that point they are not effecting your score much and only 2 years away from dropping off your report entirely.

Now as far as your delinquent account, right now this is a recent item so you are infact taking a pretty big hit as far as your credit score goes. Paying it will make it even more recent but it will be listed as paid so your score may or may not drop again. Many variables could be involved there.

But there is a simple solution to this. It's called a pay to delete agreement. Basically what this entails is an agreement between you and the collection agency saying that in exchange for paying X amount of dollars on this account, they consider it paid in full and remove it from your credit report.

Despite what you may be told by some people, this is 100% legal and nothing is stopping the collectors from doing this. If they tell you it is against the law, ask them to cite them law...they can't!

A couple pointers about these agreements. ALWAYS send them certified/return receipt mail and make sure they are signed by you and the collection agent. Make sure that they consider the debt "paid in full" and remove the negative listing entirely from your credit report. You can even try settling the debt for less.

Here below are a couple great links I've found. Read over them carefully and you will learn alot about how credit and collection agencies work. They do sell stuff on this site but I am not affliated with them, just passing on good information. Feel free to email me if you need any further help.

Settle your debts for less.

http://www.creditinfocenter.com/debt/settle_debts.shtml

Negotiating the credit listing

http://www.creditinfocenter.com/debt/neg_rating_after_settle.shtml

Crazyjester is correct....

And where do you get off hacking up Cody's answer? That's my job! I got seniority!!!

Cree, here is how the "game" works.

If you pay this debt, all they are required to do is show the balance as zero and show "paid" on your credit reports. But it will still show late payments and collections, and it will still be a derogatory report, and WILL continue to hurt your credit. Cody didn't mention that.

And note that as debts become older on your credit report, they lose importance. After 4-5 years, your score will actually begin to improve. But if you pay off such a debt, you turn it into a "recent activity" and it will actually cause your credit score to drop! Yes, paying off a debt CAN hurt your credit score. Cody doesn't mention this fact either.

But in your case, the debt is only a few months old, and at this point it is doing it's greatest damage. Paying it off will help your score, but only slightly.

It is always my suggestion to negotiate a settlement with the collection agency that if you pay the debt, they MUST delete the entry from your credit score. This is referred to as a "pay for delete" agreement. GET IT IN WRITING before you pay the debt.

If it's only two months old, pay it off. You can usually make a deal with the collection agency and offer them less. Make sure they give you a "paid as agreed" letter, so that will go on your report.

I heard something like that too. But I also heard that if you have something that is like 5years past due not to pay it because after 7 is goes off your credit report. So yeah 2 months I would pay it because you have a long way to go.

Always pay what you owe.... and if they were ever talking about NOT paying something then I'm guessing it was really old - which means years and not months.

Pay your bills or your credit score is going to suck.

pay off the bill and don't let it go to collections. You can learn about personal finance from Yahoo. URL is http://finance.yahoo.com/ under Personal Finance.

Studly is correct, what the heck happened to you man. Haven't seen you for ages in here.
Yes if you are going to pay them ask them to remove negative info. You will have a verbal agreement then ask for it in writing. Don't send them a dime until you have this in your hand. then after that send a money order, giving these folks a check you would see about the same results as if you giving a personal check to the MOB.
BTW this will help you credit score, newer accounts in collection or delinquent have more of a negative impact on that credit.

Pay it right away. You need a new analyzer

No paying never helps your score. I would pay what I owe.

Pay it. You are in default right now and you if you don't pay now, you can lose the option of having payments. It will damage your credit even more the longer it sits there. It will not harm your credit by paying it. Every month your past due, it takes 15-40 points off your credit/FICO score. If you don't pay it you will continue to damage your credit very fast. Again, it will not damage your score to pay your bill. Whomever said that needs to be corrected.

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