Can it really hurt your credit to pay off things in collections?

It will not hurt your score to pay off your debt. It will allow your score to start healing as you plug the holes in your report.

What is CRUCIAL is how you pay off the debt. Make sure you get, in writing, that paying $X amount will fully satisfy the debt and will close the matter as in Pay-To-Delete. If you try to do a settlement, this is very important.

Also, the moral brigade will not like my answer, but if you are close to seven years out on your debts, you might as well not pay them since they will fall off of your report after 7 years. If you pay any part of the debt however, it will often reset the clock on those 7 years, so tread carefully.

The blurb from the law site is accurate. I'm not going to say any other info from them is or isn't accurate though as I have not read their site at all.

If you check the public resources from Fair Issac directly you will get similar wording to that of the law firm:

Presence of adverse public records (bankruptcy, judgements, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)

Once the items are on your report they will weigh the score down (though less over time).

Also, paying the accounts off, other than a successful Pay For Delete (PFD), can have a negative impact on your score. By paying the account off you'll trigger a status change that will allow the account record to stick around for up to 7 more years (10 for medical debts). Which is why it is a better idea to let accounts fall off than it is to pay them once they are over a certain age.

Be aware that paying off a collection account on which you previously missed a payment, will not remove it from your credit report. Your FICO score will still consider this information, because it reflects your past credit pattern.

Source: Fair Issac: Understanding your FICO Score [PDF]

Paying an account off and getting it marked "Paid in Full" or "Settled" or anything else really won't help you at all. The adverse account record drags on your score just for being there.

First things first, its always good to set the records straight. When you are trying to clear your debt do them one by one and ask the collection agent that you would pay in full only if the records would be deleted from your credit history and most of the collection agencies are happy to take it off your credit report as they are getting the money. This would work generally only when you pay the full amount. I can guarantee you this because I have tried it myself after hearing about it from my friends.

If you have already paid whole amount already then records of your payments generally will not be available after 2 years with any banks even the big ones like Bank of America or Wells Fargo. That means if they don't have the records no body else would because its a burden as your payment is written off. You can file a dispute to credit bureaus for your payment history and if they couldn't provide you the history they have to take your record off your history even they know that you have delinquent history because they don't have enough proof to confirm that. And when you file a dispute its always good to file it by paper as they have to write back and you can ask hard copies of the proofs which are very difficult to get. One more thing if you want to dispute it might take couple of months atleast and you need to have patience because you already might have known how important credit history is.

You should not pay down the debt in collections until you have a reasonable amount of money to offer as a settlement. The exception is the traffic fines -- you may have legal liability for not paying them.

Get it in writing from the debt collector first that there will be a pay for deletion. This is the most fail safe way that I know to get a collections debt completely removed from a credit report, and also without the chance of it being put back on the report by another agency.

In California at least a little known secret is you don't have to pay traffic fines older than three years. I had my DL suspended for three years from 3thousand in bad tickets. I went to pay after I saved enough, and the nice lady said "the law says you don't have to pay the fines over three years old and we can't legally hold your license and we legally can't report it to credit agencies or the DMV" She got her gold star that day!!

She said no one will tell you, but being nice sometimes gets you a long way. I'm sure most people take out their frustrations on her.

So I paid about 1300$ and walked out a happy licenced man. Thanks to that lady!!

I have read the majority of the responses. A few of them I don't agree with. However, here's what I've learned from some of the credentials advice that I've researched which may help you improve your credit score.

You can do one of two things. The first suggestion is a very slow and long waiting process. The second suggestion is much faster.

1. Suggestion ~ If your debt is old for example 4 to 5 years old and if you are not planning on purchasing a car/home in the near future, let the credit stand and run its course for 7 years. It will be removed from your credit report.

2. Suggestion ~ You must not only pay off the debt in collections, but you must also have it removed from the report altogether. This shall help you gain 20 pts. (Paying off the debt in collection alone will not improve your credit score)

To have it removed write a letter of appeal to the collection agency requesting that they expedite the removal of the credit off of your report. Eventually, it will be removed in 7 years, however, who's trying to wait 7 years if you're trying to buy a car, house, etc.

When you are writing a letter of appeal, it is very helpful to add a brief summary as to the reason why you defaulted on the credit item, note that you are currently practicing a debt reduction plan, and state your goals. Also, state your request that it is removed from all 3 credit bureaus.

This should help. Good Luck!