Get Wise About Your Credit Matters

Dear Credit Lady:

I’m in the process of purchasing a home, and I’m thinking about paying off some collection accounts and closing down a few accounts to increase my score. My mother told me that this would decrease my score. Will my score actually go down by paying off my old collection accounts and closing out a few accounts?
Melissa Jones

This is true; your score will decrease if you pay off old collection accounts. If you have a four-year-old collection account and pay it off today your score will drop because it will show up on your credit report as a current paid collection. Anytime you have current negative information on your credit report it will lower your score. Once your loan application has been submitted, don’t pay off collections unless the lender specifically asks you to in order to secure the loan, and then have it paid off in Escrow.
If you close a credit card account, it can affect your ratio of debt to available credit, which has a 30% impact on your credit score. If you really want to close an account, do it after you close your mortgage loan.
You should not do anything that will have an adverse effect on your credit score while your loan is in process. I know it’s tempting…If you’re moving into a new home, you might be thinking about purchasing new appliances or furniture, but this is really not the right time to go shopping with your credit cards. You’ll want to remain in a stable position until the loan closes.

Please forward your questions to
Call (800) 896-2261 for Certified Credit Specialist Svonne Underwood, The Credit Lady or visit