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To Pay or Not to Pay
That is the Question!
Shakespeare almost put it, To Pay Or Not To Pay, that is the question:
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).
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!