In a previous blog post, we outlined some key things to NOT do to avoid negatively impacting your credit. One of those important activities to avoid was to be sure you don't jump the gun and start paying off any/all collections on your credit report without a strategic game plan in place. It's very important to understand the rules of the credit algorithm 'game' if you're going to get on the field to 'play ball.'
Just saying out loud to 'not pay off your collections' seems to go against what feels like common sense. As rational human beings, one might think that simply reducing the amount owed on collections will lift your credit score. Unforunately, that just isn't how it works. What must be understood is that the credit algorithm is not set up to reward you for paying those collections off.
For starters, once an item goes to collection status, the dollar amount itself really no longer matters. There are really only two variables that are heavily factored in:
- Date of last activity
- MOP rating
At the end of the day, you certainly do not want to update an old item and refresh its 'date of last activity' (DLA) to the day you pay off or pay down that collection. Beyond that, even after it may be paid off, that line item could still be carrying the heaviest rating on the MOP index; the dreaded nine rating.
One tip if you're attempting to fix this yourself, go back to the creditor and strive to negotiate a 'pay-for-deletion' as an agreed upon result for both parties. Often times, you will be running in to a brick wall, but you'll never know if you don't ask in a professional and firm manner. As the saying goes, "you can't win if you don't play."
If you need My Credit Guy's help with your own situation and would like to receive a non-obligatory, free review of your credit, don't hesitate to contact us today! One of our expert team members will be in touch to discuss feedback, recommendations, and possible next steps to get you back on track.