pay off old debts to increase credit score? Yes or no?

Public Comments

1. Yes
2. i guess it depends on how much you owe.
3. absolutely, I had about 3 outstanding debts, and tried to get a loan, the loan officer told me she couldn't do it, but gave me the phone numbers to settle these debts, I paid them all and within a month, I had those outstanding debts off my record, and got the loan. Best thing i could have done for myself financially.
4. First you need to find out the "statue of limitations" in the state that you live in. For example, if the statue of limitations is '6' years, and the last time you have paid on that debt is 7 years ago, then you are no longer obligated to pay that debt. (and should therfore be taken off credit report) But if it is a new debt, then I would try to make some type of agreement with the company, for if they take out a judgement on you, you're basically screwed for the next 10 years witrh that on your credit report. I would def. try to pay off the debts since it will increase your score.
5. Yes, if these debt old debts are on your credit reports. You are entitled to one free credit report per year from each of the 3 major Credit Reporting Agencies. Order your copies from www.annualcreditreport.com 35% of your FICO credit score is payment history. You'll improve your score if you show you're careful with your balances and pay them down every month, on time, every time. You need to pay at least the minimum due. 30% of your score is credit utilization: how much of your credit limit are you using up as current balance? If your balance is more than 30% of your credit limit, you are hurting your credit score. Example: your credit limit is $7,000. To stop the damage to your FICO credit score, you need to pay down the balance below $2,100, which is 30% of $7,000. If your debts have already gone to the Collection Agent (CA), a credit report trade line that says Paid in Full, balance $0 is the best. If it says that you settled, that's not so good, but a zero balance is your goal. Beware: you owe income tax on the savings you achieved by settling. Example: if your original bill was $1,600 and you settled for $1,100, you owe federal and state income tax on the $500 savings ($1,600 - 1,100). The CA must report the savings to the IRS, and if you don't pay the estimated taxes, you can get hit for tax, penalties and interest in about 3 years. Please vote: Did this help?
6. yes
7. Everyone who said yes to your question is wrong! Paying of an old debt does not raise your FICO score, it kills it! Go to creditboards.com and read up on how FICO scores are calculated. The information on that site will prove the point that paying of an old debt does not raise your credit score. An unpaid debt is just as bad as a paid debt. There's more than a few posts on creditboards.com from consumers who paid off old debts thinking it would raise their score, only to find out too late that doing so lowers it. Don't just take my word for it, do a search on paying off old debts and how it affects your credit score and see what information you find before you decide to pay off your old debts. Tread carefully.
8. Well marcus, what you have presented is a complex question. On the surface it sounds easy enough, but really it could go either way. It has been my experience is if you owe, pay it. If you pay it off, it shows up as a zero on your credit report, however, the older the debt the less impact it has on your credit report unless it is a judgement of sorts or tax lien. Believe it or not, if you have a debt say 4 or 5 years old it really wont make that big a difference on your credit score. When I look at a credit report and I do everyday, thats my job, Im a mortgage broker, I look at the story behind it first. I then look at what has the borrower been doing since. What kind of effort has the borrower made in terms of correcting his situation if any. If I see several debts being paid off no matter how old I can see that individual cares about his credit and that he/she has a goal of improving his credit ratings. The next thing at look at is how can we improve the credit score. Sometimes it isnt that easy. If you pay a, b, or c off that means your credit score will go up X amount, and that isnt necessarily true. However, if you are buying a home and trying to get a mortgage loan, it could have an impact no matter how old the debt is. Certain programs call for certain things on the credit report. Some want no bad debts, some will allow some but not all, but allow them all. You just dont know for sure. One thing is certain however. Keep your credit cards up to date with a balance of at least 50% of the high amount allowed, that will be highly recommended. Keep all mortgage loans current as well as car notes etc. Pay off all judgments and tax liens on your report. These items carry a big impact on your score. If they are marked paid it wont have any impact at all on your score. Always remember, no matter what, always carry some credit on your report, because it is easier to get credit when you have it, rather than getting credit when you dont have any. Your score goes no where if you have no credit reporting believe it or not. If for no other reason the main reason you pay off debt is because you rightfully owe it whether it affects your score or not, that way, it wont make a difference either way.