Hi,

It is ok to pay off your credit card debt since you cannot charge on that account anyway. Even though you will pay it off, it does not mean that you still cannot improve your credit scores. If you have any other accounts that are active, you will have to use those and/or by your mortgage payments. As long as you make payments on time and don't miss any, as well as keep all your other credit card balances under 30% of the available credit (when you get above that, credit bureaus see that as a negative and will cause your credit rating to go down a bit). Doing this will help your score. Hope this helps!

Yes, you need to pay off the loan, even though you will no longer be able to make charges. If it has gone to collections, then your Capital One account has been closed, and more then likely, sold to a collections agency for pennies on the dollar. Although you will no longer be dealing with Capital One, your best bet is to pay the balance off in full, even if they offer you a deal to settle. This will look much better on your credit report, and besides, you spent the money, so you should pay what you borrowed. Your credit should improve, by how much is hard to say. But, lenders in the future will take the fact it was paid in full into consideration for future loans and lines of credit.