Paying off collections is a good thing. Right?



Owensboro, KY real estate

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  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 perfect before they talk with the lender, however, it is best to meet with the lender before you pay anything off!   The lender will help you build a strategy to improve your credit score and advise you which debts must be paid immediately, and which debts can wait.  Meeting with the lender first could mean the difference in getting your new house right away or waiting another year.  I have a couple of local lenders who would be happy to meet with you at no cost and advise you on the best course of action to take.  Call me and I will be happy to arrange a confidential meeting with them and get you on your way to owning an Owensboro, KY home!  Call or text me at 270-903-2167

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Text or Phone:  270-903-2167

Owensboro, Kentucky 42301

Comment balloon 1 commentKaren Pannell • January 22 2014 01:20PM


Interesting information Karen.  I didn't know that about collections. Thanks for sharing.

Posted by Jim Patton, Realtor - Stanislaus ,Merced, San Joaquin Counties ( Aspire Home Real Estate 209-404-0816) over 6 years ago