Changes in Credit Score when Collection DLA gets updated...

There has been conflicting issues about what happens when a consumer pays off a collection and how after they pay it off their FICO score goes down. Common sense would say if you pay a bad debt off, that this is a good thing.

With my clients I've seen on several occasions where someone pays an old collection account and then (all other things being relatively equal) their score goes down because the (DLA) date of last activity gets updated. 

So what really happens when you pay off a collection?

For years the collection issues has been a big deal. People would pay off the collection and the account would update a recent paid collection and the problem being that the last activity on this account was the day you paid it off. Let me explain further. Whenever you have a late pay any other derogatory account the FICO scoring model hits you the hardest right when it happens. As time goes by your credit will heal itself, like an open cut heals and makes a scab. But when this collection is paid off, the scoring system sees it as a fresh wound to your credit.

FICO has been working with the (CRAs) credit reporting agencies to make sure that the dates that were being updated were not the same dates used to date a collection.

The CRA’s still cannot catch the mishap in the wrongful changing of the collection because collection agencies are not that concerned about the consumer after they’ve paid them.

So, to solve the problem, you will have to either a professional credit coaching company like ours StrategicCreditCoach.com or you can do it yourself by disputing the inaccurate data on your credit report. The Fair Credit Reporting Act says you have the right to have your credit to be reported with 100% accuracy, so make sure to take action on improving your credit because the credit bureaus and collection agency aren’t going to be proactive.

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