Didn't realize paying off a closed account was hurting my score

Took me 3 years and a lender telling me 'stop paying old collections' before I figured out that settling a $400 utility bill from 2018 actually reset the clock and made my score drop 50 points instead of helping.

2 comments

2 Comments

reed.eva6d ago

Settling that old bill probably flagged it as a recent "new" activity on your report, which is dumb but that's how the models work. FICO's system sees any payment or update as a sign the debt is still current, not that you're cleaning up. Paused paying a medical collection once and my score jumped 30 points just from the account aging out with no new updates. Credit scoring penalizes effort over accuracy sometimes.

skyler_white6d ago

That's one way to look at it, but paying off old debt isn't supposed to be a punishment. If someone settled a bill from three years ago, FICO should see the zero balance and updated date as a positive sign, not a mark against them. The whole system is supposed to reward you for cleaning up your mess, not slap you for finally doing it. Creditors looking at your report would rather see a paid collection than an unpaid one, even if it dinged your score temporarily.