Myth # 1 - When I pay off a past-due account, such as a charge off or a collection account, it will show “paid” and no longer be negative.
It is difficult to fully restore your credit without paying your outstanding debts, however we have been doing it for years. Paying off a debt can actually hurt your credit. Negative items on your credit report are allowed to stay on your credit report for a maximum of seven (7) years, except for bankruptcy that can stay for up to ten (10) years. This 7 or 10-year clock begins ticking at the date of last activity. Making a payment represents new activity and restarts the clock.
When paying an outstanding debt, you will change the account status to paid collection, paid charge off, satisfied judgment, or paid ‘was xxx days late”. This is still considered very negative and appears as though you had to be strong-armed by the credit bureau to pay the account.
It is almost always prudent to have a professional help so as to not further damage your credit by trying to do the right thing.
One of the options we use is the “Pay for Delete” letter. Many times the creditor will delete the item if you pay them off. But you have to be very, very careful and do it the right way.
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