I believed for a long time that paying an account in collections would improve your credit report score until I was hit with a reality check. Believe it or not paying a collection account doesn’t improve your credit score one bit. It doesn’t even improve the integrity of your credit report file.
Why?
A collection account, as we all know, is bad! Let’s look at a collection account from a lenders point of view. Let’s say as an owner of a small car lot, you have a client that is looking to finance a car, you pull their report and you see 9 collection accounts. But at second glance, you notice that 4 of them are paid!
As a lender how would you think if would affect your decision on an active collection vs. a paid collection when extending a loan of 25 thousand dollars to your potential client.
The ugly truth is, a collection is a collection. If you are looking to loan 25 thousand dollars (or more) to someone that has 9 collection accounts, you may request a higher down payment at a higher interest rate. Or, you may not even be able to approve the loan.
Do not get discouraged, there is help.
Empower – Educate – Take Action
H & I Credit Solutions
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