Recently we had a potential customer come to us frustrated.  They took the advice of their realtor to pay off an old collection account.  To their surprise, the result was a drop in their credit score.  How can this be?  They did the responsible thing and paid off a debt collector and it hurt their credit?

The answer is in the age of the debt.  Upon receiving the account, the debt collector reported the collection attempt to the credit reporting agency.  That was the last time they mentioned it, which happened to be three years ago.  In order to report the payment, the account had to be updated- basically turning the old account into a new account.  Since the account was not deleted, the net effect to the score was a decline.

If you are looking to pay off a debt, make sure to take into consideration the age of the account and the pattern of it being updated on your report.  Also, you want to look into the opportunity of having the item removed from the credit report upon payment PRIOR to making the payment.

Make the Choice.  Make the Change.  Delta.