Paying off

You should get hold of a copy of your credit report and check out the creditors to whom you owe money. Once you know the names of the creditors, you can start paying them off one by one. If there is a creditor, to whom you owe a large sum of money, you should try paying off that creditor before paying off others. Paying off the dues will have a positive affect on your credit report and will improve your credit score.

To add to the above advice, you should scrutinize those reports before ever paying anyone. Dealing with the original creditors is pretty straight-forward, but dealing with junk debt buyers and collection agencies is a completely different ballgame. From those you want validation of the accounts to make sure they are the correct ones collecting and that they are collecting the correct amount.

Keep in mind that if you are doing this for improving your credit report, that paid collections are just as bad an ones not paid and if you pay off old accounts, that will bring them current and will drop your scores like a stone. You will want to try and negotiate for a pay for delete..basically it is an agreement that you will pay X amount if they remove the tradelines from the credit reports.

As a general rule of thumb, the older a debt is, the easier it is to negotiate or settle for less.

Okay, now I'm confused. I know that paid collections are just as bad as ones that are not paid but how does paying the old ones off (if the company won't agree to a PFD) make your score go down? I'm trying to bring my score up so I can purchase a house next year and I have several charged-off accounts that I was going to pay in to improve my score. Most of these negative tradelines will not come off my report until 2013-2016. So in my case, what should I do?

Paying an old account will make that account recent, which hurts your score more than an old account with no activity for a while.

For home buying, having paids isn't as bad as having non-paid listings on your report. But as I said before, score wise it is worse.

Your best bet is pay for delete, failing that a paid account will initially drop your score, but your score will rise eventually.

You can also go aggressive and really nitpick your credit report, make sure it is listing exactly right and if anything at all is off, you dispute it.