I recently received this question from a reader (paraphrased):
Q: My husband has a $10 collection on two of his credit reports. His FICO scores on those credit reports are over 100 points lower than his FICO score on the one credit report that is not reporting the collection. We’re trying to get a mortgage and I paid the collection agency their $10. Will his scores improve and will he get those 100 points back?
A: I wish I had better news but that answer is no, your husband’s scores will not improve much, if at all. The reason his FICO score is lower is because of the collection, not the balance of the collection. The incident is what’s damaging. And, by paying it off you won’t cause it to be removed.
There are some who believe you can strong arm the collection agency and have them remove it from your credit reports in exchange for payment. And there are some who would suggest that collection agencies will willingly remove collections in exchange for payment. I’m quite certain these things are true in some instances but, they are atypical and not the norm.
The credit reporting agencies have also made it abundantly clear that they do NOT want collection agencies to offer “pay for delete” deals to debtors. There is language in their reporting guidelines that say as much. And, their contracts stipulate if they catch collection agencies removing paid and accurate collections they can cut off the collection agency’s service.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.