To Pay or Not to Pay
That is the Question!

As Shakespeare almost put it, To Pay Or Not To Pay, that is the question:

When it comes to your credit scores, paying the right account or the wrong account can make a massive difference in your credit scores. Today let’s focus on what not to pay. One would assume when paying off bad debts on your credit report, the credit scores would always increase. However "one" is not always correct. Paying off items like your utility collection, or your cell phone collection will most likely decrease your scores. This is despite the popular belief that having a $0 balance on your collection accounts must be better than owing money. Balances on collections are irrelevant, for example you could have a one million dollar medical collection or a one dollar medical collection and if everything else is the same the scores would also be the same. The reason why your scores generally decrease when a payment is made is because by making a payment you reactivate the account causing it to report as new again. This is shown as the DLA on a credit report. This DLA or Date of Last Activity represents the weight of the account AND the seven year statute until the item will fall off naturally (which is a whole other problem, but we will save that for another day).

The reasoning behind this madness is that the algorithms that calculate scores cannot discriminate against wealthier/poorer individuals. So the fact that a wealthier person has the ability to pay off a certain dollar amount more easily than a poorer person would be discriminatory on algorithm calculation. 

No, these bureaus are not in your corner, but we are; so please call us today at 303-531-0411 or send us a quick e-mail below to get started!

Sellstate Advisors
Sellstate Advisors
Real Estate Brokers
1333 W. 120th Ave. # 307 Westminster CO 80234