3 Reasons Why You Should Not Pay Your Debt
Channel: 911creditpros
Date: 2011-06-21

Paying off an old collection or charge off will increase your credit score.  
This is a huge MYTH!

Effects of Paying
When you pay an older collection account or charge-off account, your credit score most likely will suffer.  
Think twice before paying off an old collection or charge off.  By paying your debt, it renews the date of last activity.  The collection company or creditors can now report the account for another 7 years.

Everyone knows debt collections are bad for your credit score.  Any past due accounts including debt collections have negative effects.  These accounts report on your credit report for up to7 years.  As accounts age, they have less and less impact on your credit score.

Many consumers believe by paying off collections or charge-off accounts, that it will raise their credit scores.  It certainly seems logical; however it is far from the truth.  If you are concerned about your credit score, paying off debts prior to obtaining any other type of loan or mortgage can greatly hurt your credit score.  
Ultimately, if it is an older account when paid off (or payments are made on the account), by doing so can be devastating to ones credit score.  The recent activity of any derogatory item has a big impact on how it effects your overall credit score.

Is the Debt Still Valid?
After a certain period of inactivity on an account, a debt becomes time-barred and debt collectors can no longer sue you for it.  This period is known as "the statute of limitations on debt" and varies by state.  If the statute of limitations has passed, it is illegal for a debt collector or creditor to sue you.  

You need to be careful in communicating with a debt collector because the debt statute of limitations can easily be restarted by acknowledging that you owe the debt, making a payment, entering a payment plan, making an agreement to pay or making a charge on the account.

After 7 Years
Collection and charge-off accounts should only remain on your credit report for 7 years.  It is important to check your credit reports as the credit bureaus often continue reporting these derogatory accounts over the 7 year limit.  

If you have any questions regarding collection accounts on your credit reports, call our office today for your complimentary credit consultation.  We look forward to hearing from you. 480-502-5554


LEGAL DISCLAIMER:  The advice provided is for informational purposes only.  It is not to be construed as Legal Counsel or Legal Advice.