Real Estate

‘Should I Pay Down A Collection?’ How To Answer Clients

In a world where credit impacts so much of our day-to-day life, a common question that we should all know the answer to is: To pay or not to pay? Because let’s face it — life happens. If you’re one of the many, many Americans who’s had a collection hit your credit report, you need to know what action to take so you can move forward and upward.

So, should you pay a collection? Even though agents should always advise clients to check in with their lenders, it’s good to be armed with the right information needed to protect your clients.

Tune in as Rick Guerrero sits down with Micah Curtis, regional director at Home Loans Assist to explain why it’s most likely not advantageous to pay a collection. Here are a few of the key takeaways:

  • “When I teach credit, I tell people: Take common sense and throw it out the window because common sense does not apply,” Curtis said.
  • On a credit report, there’s an acronym consumers need to know about — and that’s DLA. DLA stands for the Date of Last Activity.
  • If you have a years-old collection, Curtis said, it’ll do less damage the older it gets. However, once you satisfy the collection and bring it down to a zero-dollar balance, the misconception is that the collection goes away. In reality, it doesn’t.
  • When you pay a collection, this updates the DLA so it looks current on the credit report. “Now you’ve satisfied a collection that’s going to stay on the report another seven years from the date of satisfaction,” she said.
  • There are some occasions where it is advantageous to pay it off, like a credit card that has defaulted and has become a charge-off.

Rick Guerrero is the Director of Branch Sales and Strategic Partnerships at US Mortgage Corp. You can follow him on Facebook or connect with him on LinkedIn.

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