Paying off collections does not typically improve your FICO score immediately under older scoring models. Under the traditional FICO 8 model (still widely used by lenders), paid and unpaid collections affect your score similarly, as the model primarily focuses on the fact that the account went to collections rather than its current payment status.
However, newer scoring models handle paid collections differently:
- FICO 9 and FICO 10 ignore paid collections entirely, potentially providing an immediate score boost after payoff
- VantageScore 3.0 and 4.0 also give less weight to paid collections compared to unpaid ones
- Some specialized scoring models used for mortgage applications (like FICO mortgage scores) may respond more positively to paid collections
The actual impact of paying off collections depends on several factors:
- The age of the collection (older collections have less impact)
- The scoring model being used by the lender
- Your overall credit profile and other factors affecting your score
- Whether you negotiated a “pay-for-delete” agreement with the collection agency
For maximum FICO score improvement, request a “pay-for-delete” agreement in writing before making payment. This agreement stipulates that the collection agency will remove the account from your credit reports entirely after receiving payment, rather than just marking it paid.