The Hidden Accounts You Should NEVER Pay to Increase Credit!

If you're like most people, you have a collection account or maybe a charge-off, what should you do? Should you pay them off now before you apply to maybe buy that first car, maybe that first house? Or should you just wait and maybe consult that professional that you're looking at or with to help you get the financing? So that's what we're gonna really talk about today. So we're gonna take a deep dive in, should you pay off those collections and charge-offs or should you not? And the answer might surprise you. So let's get over to it. Here's actually what a credit report looks like. And we actually use Advantage Credit. So that's why I pulled this up. It's a test case. So you're seeing in this one, it is Samuel test case and his wife, Caroline. So let's take a deep dive into what your credit looks like. And then I'm gonna break down what we really need to focus in on to decide, should we pay off those accounts before we apply or while we apply, or maybe we never pay them off. Let's dive into it. So the first thing we're gonna look at right through here is the credit report. What does it show us? What does it tell us? And as a lender, what do we really look at? So in this case, we're seeing through here, we have Caroline test case and her husband, Samuel. This is really breaking down Samuel's information. So if you see through here, his credit scores are broken down in this second section right through here. So his Equifax credit score is a 700. His TransUnion credit score is a 725 and his Experian credit score is a 697. So now we're gonna go down into the guts of the information to really give us the creditors information. So in that, we go drop down to this section to the open accounts, okay? So in this portion, we see right through here, the creditor, the date reported, and a whole bunch of information. We're gonna go through each one of these cells. So the first one we're gonna see here is the creditor. Who's the creditor in this case? Well, it's GMAC Mortgage. Here's their account number and it's a second mortgage. We go over to the next cell over, date reported. So in this one, this is, what is it? January, February, March, April of 2018. Well, I know this video is taken in 2023, but let's for purposes of this, let's just say it's April of 2018, okay? The next piece of this is gonna tell us when that account was opened. So in this case, it was opened December of 2017. And the DLA, that means date of last activity, and that is something we're gonna highlight, okay? And I'm gonna explain that to you in just a minute. So the date of last activity was also for April of 2018, the same as the date reported date, okay? So we go to the cell over next, high credit limits, right through here, and account type. So in this case, the account limit was 25,000. They had a second loan, or second mortgage. It was for 25,000, and the account type is a mortgage. The balance, current balance as of April of 2018 is 24,910, with the terms of 300 months at $201 a month. Then we start going over to here and giving us the ratings. So in this case, this tells us, are they past due at all? In this case, it's no, because there's a zero dollar balance in here. This MORev is month reviewed. How many months has this account been reviewed? Well, they've made five payments. Any of those payments late? Well, it goes through here. It's 30 days, 60 days, and 90 days late, none of them. But what I want you to understand too is how these lates work. So basically, 30 days plus late, okay? To become a 30-day late, a lot of people think, okay, if my car payments due on the 1st, I get a late fee on the 15th. Well, am I really late? Well, you're not really late, because you're not late until you go over 30 days late, meaning you don't pay in that month. So let's say, for example, this is in April. If you didn't make a payment in April and made that payment in May, you would have went late one time because you didn't make that April payment on time. Okay, hope that makes a little bit of sense to you. And then we're gonna start seeing over here. This is the status of that account is as agreed. And then the sources we got the information from, Experian, TransUnion, and Equifax. So what we wanna highlight in this is right here, the status and the date of last activity. Why we don't care about the balance is it's irrelevant. It doesn't matter if you owe $1 or $500 or $10,000, it's irrelevant. And so we really wanna pay attention to the status and the date of last activity. So in this case, let's say, for example, this was a collection account. So this would say the status would be in collections. There would be a bunch of information in here because they obviously then went 30 days, 60 days, and 90 days late to get into collection mode. So it would say collection mode, there would be a bunch of numbers in through here. And then it would say, give us a report right here. We wanna pay attention to when was it last active? So let's say hypothetically in this case, this was an old account because to go into collections, you probably were in that account for a year or two or three. So let's say, for example, this account opened December of 2012. Okay, so December of 2012. So this account went into collection, hypothetically, we wanna see when it went into collection. This one, if the date of last activity stays current with this, the reporting date, that means every month this creditor is reporting you to the collection agencies saying you're in collections. However, in most cases, the date of last activities is years ago. So in this case, it might've been 2015. So we really wanna pay attention to the date of the last activity because if this date of last activity is at least over a year or two old, don't do anything with it because the only thing that's gonna transpire if you pay this account off or pay it current is it's still gonna show that you're in collection status. All this data is still gonna remain the same. All it's gonna do is update this date of last activity from an old active account to a brand new active account. So basically, you just shot yourself in the foot by paying off that collection. Okay, hopefully that makes sense to you. The next piece of this puzzle we wanna talk about is charge-offs. What do you do if an account's charged off? Well, you don't do anything because if a bank or a lender charged your account off, that means legally they can no longer collect on it. They basically said, this is an uncollectible account. We're gonna write it off on our taxes as uncollectible debt, and we can't collect on it anymore. So as a lender, we don't require you do anything with it because it's been charged off. We're not gonna hit you for it. We're not gonna hit you for any payments. You don't have to pay it off. You don't have to do anything. We're just gonna ignore it. It's already built into your score whenever that charge-off occurred. So your credit score's already been affected, but you're not having to pay that account off. So in a nutshell, what we wanna do is if you have a collection account, we wanna see when it was created, when was the last active date, because if that last active date is over at least a year or two old, we're not gonna do anything with it. Yes, you might have to pay it off, but how we would do that is we would pay it off at the time you close on buying your first home. So how do you find out more about credit scores and where can you get your credit scores? I actually created a website. My first video I did was several years ago, and it was basically on this same topic. So I actually created a website. It's called creditscoresandmore.com, and here it is. You can find a whole bunch of information in here, but the one thing I would highly suggest you do is if you're not using a credit monitoring system right now, I don't know where you've been. You've been under a rock, because mostly everybody have. But if you haven't, just click this free credit score system right here, sign up for it. Don't apply for any of the bells and whistles. You don't need to pay for any portions of the paid services through this account, because the paid services or the free services are just fine. But if you really wanna find out what your credit score is and what your lenders are seeing, click here, your true credit scores. What you're gonna do is it's gonna launch you to your FICO credit report. So you're gonna see that right through here in a second. Why I referenced my FICO's credit score is your FICO credit score is what lenders use when they're granting you credit. When you're applying for a mortgage, we use your FICO score. When you're applying for a car loan, they use your FICO score. You're applying for a credit card, they use your FICO score. So right there is where you can find your FICO score. And if you use this link, you'll get a 20% discount. So hopefully you found value in now. Should I pay off those collections or charge-offs or shouldn't I? Now you know the answer. But thanks so much for watching, guys. God bless. Have a fantastic day. See you next time. Bye-bye.