Discovered paying off a collections account made my score drop 40 points

I had an old medical bill from 2019 that showed up on my credit report, so I paid it off last month thinking it would help my score. Instead my score dropped 40 points on Credit Karma. Apparently paying a collection agency resets the activity date on the account, making it look newer to the scoring models. Has anyone else run into this frustrating situation where doing the right thing backfired?

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walker.robert2mo ago

That 40 point drop is rough, but I actually think paying it off was still the right call. I had a similar situation with a $300 cell phone bill from 2018 that went to collections. My score dipped about 35 points after I paid it, but six months later it recovered and went up 50 points higher than before. The scoring models are weird, they penalize you for having an active unpaid collection more than a paid one long term. Plus lenders can still see it was from 2019 originally, not a fresh debt. I'd rather take a short hit now than have that thing sitting there unpaid for another four years.

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garcia.quinn2mo ago

Medical debts from 2019 used to be something I'd pay off too but not anymore after seeing stories like this.

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