Yes, It Improves Your Credit Score
Paying off accounts that have gone into collection does improve your credit score as of 2008, according to Bills.com. Previously, paying off collections hurt your scores because a payment would make the debt look like it recently become delinquent.
It Could Hurt Your Score
According to Liz Weston of MSN Money Central, some unscrupulous collection agencies can hurt your credit score by making charged-off debt look newer than it really is, even though changes to the FICO score formula mostly curtailed this phenomenon. Negotiating debt for less than the original amount owed can also cause a recent negative entry that lowers your score.
Bottom Line
Paying your past due debts usually benefits your score, except in certain situations and the manner in which the lender handles reporting to the credit reporting agencies, according to Bills.com. Regardless of your score, paying off past-due accounts looks good in the eyes of lenders because it shows a commitment to paying off debt.
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