If you have a lot of store creditcards like gap ect- you should pay them off and then close the account. You should keep one major credit card and if you can- pay off the balance off every month. You should not open any more credit cards- just keep the major one. Your credit will be affected for a short time- 3 months to a year- however the more outstanding credit that you have -the least likely you will get approved for a mortgage. Also note that when you close the accts. it will show up on your credit report that it was closed per your request- that is a good thing!Debts never "drop off". Basically, if you leave the balances unpaid, it is going to show that you do not pay your bills. If you pay them off, you will have a 0 balance, and proof that you paid your debts.

What the credit people are trying unsuccessfully to explain is .. if you have a current credit cards all with zero balances, you are not showing you know how to manage credit. Over a period of time, this doesn't reflect poorly, but it it doesn't reflect positively either. If you can maintain a low balance on several cards and pay them on time month after month, this will prove a good "credit history". The longer the relationship you have with one particular credit company in good standing, the more positively this will reflect on your credit.The charge offs will stay on your credit report for 7 1/2 years, however after them reaching 2 years old they lost most of their ability to negatively impact your credit.

If you pay off the old collections you will not improve your credit history, in fact paying off old debts will lower your credit score because it brings the account current. The counselor is correct.

Paying them off or not is a moral issue that only you can decide.Your credit counselor is well educated, and probably attended one of the FICO seminars that explains the secret methods used to calculate your credit scores.

It works like this. Part of the score is calculate on how recent a negative item is. As time goes by it loses it's "importance" and your credit score will begin to recover. Not much, but a little. After about 5 years it's recovered about 60% of it's original score.

Now comes the dirty collection agent secret. When you pay that old debt, they are only required to report that the debt is "paid" with a "zero balance". However, all of the other negative information is still being reported about it being charged off and in collections. It will still be a negative report on your credit.

Now the bad part. When they reported this, they have now changed this item to "recent", which in turn triggers your credit score to drop again. The scoring formula doesn't give a hoot that you paid the debt…it just knows that a recent negative report has just been added.

For this reason, many knowledgeable mortgage officers instruct their clients that yes, they must pay the debt to get the loan. But don't pay it until they very last minute. If the score drops before the close it will cost you a lot of money when your interest rate jumps up on your loan.

Now, here is where your counselor messed up. He should have instructed you to negotiate with the creditor to DELETE the item once you have paid the debt off. Simply put, why would you pay off a debt if it's not going to help your score?

And one more important point….each state has a Statute of Limitations, where the creditor has a certain amount of time to collect a debt before they lose the right to sue you for it. The average is 4-6 years. So you may be rapidly approaching this date. If it has passed, you can use that fact to negotiate with the creditor.

Hope this answered your question…the other responses sort of fell short.You need to email me and let me tell you about a program I used…it actually raised my credit score 75 points… I dont want to add personal info on here..

my email is oliviaj@skybest.com

Thanks

Olivia

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