Contrary to what you may have heard, paying off old delinquent accounts may not improve your credit score. Although your score is unlikely to drop if you do retire the debts, whether your credit standing improves depends on various circumstances.
Considerations
According to Money Central, settling delinquent debt may not help your credit at all, and you may hurt yourself if you need the money to address other payments. You cannot improve your credit score much by paying off a trade balance that is already charged off. However, your credit score will not worsen if you leave the account unpaid. So it comes down to priorities. You may be better off using any spare cash to pay for current purchases in full to keep yourself from falling further into debt.
Other Considerations
If you choose to retire the debt, you might wait until you can pay the full amount. As Ted Ossenfort of Creditcards.com has written, "If you go ahead and pay what is due on your charge-offs, it will not increase your credit score a great deal, but...lenders view making full payment, even if it is late, in a much better light than not paying what is owed." Once you pay off the debt, ask your creditor to reset your balance to zero. If you negotiate to settle an account for less than you owe, request that the outcome appear as "Paid in Full," rather than "Settled."
Misconceptions
It seems logical that paying off an the account will enhance your credit score, but that is not always the case. While demonstrating financial integrity and responsibility will impress your creditors, you can't know how much, if at all, paying off the debt will improve your credit score. The outcome of each case depends on the subjective judgment of the reviewers and the flexibility of their policies and practices.
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