Tuesday, April 2, 2013

Will Paying Off Old Collections and Judgments Improve My Credit Score?

One question I get asked a lot is "Will paying off old collections help or improve my credit score?"  The answer to this is No!

Oh, you want an explanation?  Okay, here it is.  If you've read some of my old posts, you'll know that I often say, once bad, always bad.  In other words, if you have a bad trade line or bad credit entry on your report, especially from a collection company, whether you pay it or not it is bad.  If you pay it, it is just a paid bad credit entry.  So, you don't want to pay it, you want to get it removed.

What if you feel like you have a moral responsibility to pay the debt?  My suggestion, get therapy and get over it!  Okay, I'm kind of kidding.  But think about it.  If its a collection company, did you sign a contract with them - uh, nooooo.  You don't sign a contract and set up accounts with collection companies, they buy old bad alleged debts and then try to make you think you owe them.  But you don't owe them.  You NEVER owe them.

Did you watch the video about how loans and credit really work? I love that video.  He makes it so clear.  First of all, banks and creditors don't lend money. They create it with a few strokes on a keyboard.  They don't lend credit - well, actually they do, but that is illegal.  It is fraud and they get away with it all the time because these different entities have brainwashed and manipulated your thinking to make you believe you actually owe money that was never lent to you.  

Besides the fact that none of these creditors every really lend any money to anyone, they insure this made up debt and after 3 months of no payment, they put in a claim for insurance monies and at 6 months, they charge it off and take tax credits as well.  So, how are they hurt? Oh, well, they get hurt in that they didn't make as much of an obscene profit as they were hoping for, but, they still got money from you that you didn't really owe and they got interest for money they never lent, and they got tax credits and they got insurance monies.  

What did you get in return? You got to buy something with credit collateralized by your signature, which they insured and sold many times over and never applied the money they got from the sale of your promissory note to the phony baloney credit you used. You got harassment and credit dings, and higher interest rates and extra exorbitant fees. You probably got denied credit.  Wow, now there's mutual consideration and fair trade.  What you actually got is a void contract that they never disclosed to you, that they actually had no right and have no right to receive any money from you.

So, what good comes of paying collections or judgments? Well, if you're trying to get a loan or some new credit, the lenders/creditors like that you pay your alleged debts. But your score doesn't really go up too noticeably.  It may go up a little bit when you pay off a judgment because it really helps your debt to credit ratio.  But, what you may not realize is that when you pay these old, alleged debts, it resets your date of last activity (DLA) and that's like fresh bad credit and then you get to fight with the bureaus for another 7 to 10 years to get the crap off.

Oh, and paying off accounts with a settlement agreement.  Should I even go there? That makes me want to scream!  If you pay off an alleged debt with a settled, less than full payment, you know what you get for that moral decision?  You get a new DLA on your credit report and you get a form 1099-C to pay taxes on cancelled debt. Yes, taxes on the magic money that the creditors already got a tax break and big fat insurance bonus on. And you get a lower credit score because you didn't pay in full, as agreed. And, since it was probably already a bad debt, now you have a paid bad debt.

Do you see why I don't like the idea of paying off these old alleged debts?  Judgments, sometimes you just don't have a choice because they put liens and garnishments on you. The best thing to do before you get a judgment, is to set yourself up with some asset protection to block them from getting anything from you.  Then, in 10 years, most likely they are not going to renew the judgment and you're good to go. If you've already had a judgment put against you and your wages have been garnished or you've paid it already, make sure you get that notice of satisfaction and make sure they record that with the courts or they will be screwing you over on your credit for many years to come.

If your credit has these negative trade lines, bad credit, derogatory credit entries and you are ready to fight but need some help, please email or call me.  If you don't fight back and if you don't try to repair your credit reports, they will just stay bad.  Collectors, creditors and the bureaus will not go out of their way to remove old bad credit on their own most of the time. It is up to you to make them do it. I would love to help you get your credit back to when it was looking much prettier.  My contact information is up at the top on the right. Please call me or email me so I can help you get started.


  1. Good work…unique site and interesting too… keep it up…looking forward for more Collection of judgmenti was really impressed by your blog please keep on sharing such blog.

  2. How do you go about disputing charge offs when the original creditor is still showing and they havent sold the account to a collector? The original creditor doesnt get the same debt validation letter as the third party does. right? Is there a different dispute process for the original creditor? There is one on my credit report and I dont know where to start.

    1. Hi Caramel,

      Thanks for the question. I know we talked about this privately now, but I thought it would be a good topic to do a new post as well. I just posted an article based on your question. Thanks for the inspiration and keep up the good work and dedication on your credit repair.

  3. fully appreciate the value you are providing here.
    thanks for posting this blog. its really very helpful for us.
    debt collection

  4. fully appreciate the value you are providing here.
    thanks for posting this blog. its really very helpful for us.
    debt collection


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