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Paying off collections is a good thing. Right?
 
 

Paying off collections is a good thing.  Right?
Yes, and No.  Paying off bills that have gone into collection is always a good thing.  However, if you are looking to get a mortgage loan, you might want to wait until after you get your loan to pay the collections.  Here’s what happens:  let’s say you decide you want to purchase a home.  The first step is to check your credit and make sure you don’t have any surprises on your credit report.  So, being a responsible consumer, you order your free credit report from AnnualCreditReport.com.  After reviewing it, you see there is a medical collection on there from your college days – almost 5 years ago!  Embarrassing, right?  So, the logical thing to do is pay it off and take care of it BEFORE the mortgage company sees it, right?
WRONG!  When you pay off an old collection like that (one that has been inactive for more than one year) you actually reactivate the collection and this causes your credit score to GO DOWN!  A lower credit score can result in paying higher interest rates or even worse, a loan rejection.  Many consumers feel they must have everything ... more

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