It seems every few days I get a call or an email question from a consumer about the FICO score impact of paying off or paying down a collection account. The prevailing opinion is that paying a collection somehow makes it look like a new collection and thus lowers your scores. This is a current myth based on a past truth. There was a time when paying a collection would lower your scores, but not any longer.
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Last year, a friend called me asking for advice. Her coaching and consulting firm was stiffed for a couple grand by another business. The firm that didn’t pay her for her services was located across the country, so there was a good chance that any money she spent trying to collect would be a matter of throwing good money after bad.
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