A worried woman holds a phone showing a declining graph labeled "collections." Background has cash, coins, and a red X. Text questions paying old debt.

“Should I pay off this collection from 2020?”

Whew—if I had a dollar for every time someone asked me that! It’s one of the most common credit questions I get, and for good reason—it’s confusing!.

So let’s break it down. When does paying off a collection help your score, and when could it actually hurt?

First things first—what is a collection?

A collection happens when you’ve fallen behind on a debt (usually 120+ days) and the original creditor sends it to a collection agency. Think: medical bills, credit card debt, past-due utilities, even unpaid apartment balances.

And quick side note—collections and charge-offs are not the same thing. 

So… should you pay a collection?

Here’s where it gets a little nuanced. Not all payments have the same impact. Let’s walk through the most common situations:

Medical Collections:

Thanks to the Medical Debt Relief Act of 2021, paying or settling a medical collection means it can be removed from your credit report (yes, removed!). And while mortgage lenders don’t usually count medical collections in your debt-to-income ratio, getting them deleted can still give your credit score a nice little boost.

Pay-for-Delete Offers:

Some collection agencies (NOT original creditors) will agree to remove the collection from your report if you pay or settle the debt—this is called a “pay-for-delete.” These are rare, but definitely worth asking about before you pay. No deletion? It may be smarter to hold off.

Government Collections:

If you have a government debt (like student loans in collections, unpaid child support, or IRS debt), paying it probably won’t move your credit score much. But here’s the kicker: if you’re planning to get a mortgage, these debts usually need to be resolved before you can get approved. So they’re still super important to take care of.

When Paying Can Hurt:

Yep, you read that right—sometimes paying a collection can actually hurt your score. Here’s why:

When you make a payment, the agency often updates the balance and the Date of Last Activity (DLA). That update makes the account look newer to the credit scoring system, which can drag your score down. Plus, paying can sometimes restart the 7-year clock that collections typically stay on your report.

So—before you rush to pay, take a breath. This stuff isn’t always black and white.

Need help navigating it all?

You don’t have to figure it out alone! If this sounds like something you—or someone you care about—is dealing with, reach out. I’ve got resources, answers, and support ready to go.

Lynn Marie Oates
Mortgage Loan Officer NMLS #1495433
(248) 875-1029
lynnoates@goforwardmortgage.com

As an experienced Mortgage Loan Officer, Lynn Marie Oates knows how overwhelming securing a mortgage can be and is committed to guiding you every step of the way. With a personalized approach, she provides comprehensive support and goes the extra mile to help you present your strongest offer on your dream home. Lynn’s passion is to help you achieve your homeownership goals!

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