Would paying 2 year old debts help my score?

[Anonymous]

Hi.

About 2 years ago all my bills were up to date until I left my ex.  I took my mom's advice and closed 6 of my paid credit cards that I had never been late on.  I had $5000 in savings and had to choose between paying my bills or giving a lawyer my $5000 savings as a retainer.  I paid the lawyer the $5000.

Then my 2 cars were repossessed, I defaulted on 8 credit cards, had 2 cell phones and my long distance bill go to collections, and I had one late payment on my college loan before I could get a deferrment.

It has been 2 years and I have been in court, representing myself as of 1 year ago, and unable to repay any of my debt.  I was told by one of those "credit repair" folks that since my debt is 2 years old it would stop affecting my credit score and I should open 3 lines of new credit and pay them on time for my score to improve.  I now have 3 new credit cards that have been open for 5 months and two older credit cards that I missed closing (thank you for small miracles) but my score is still in the 500s.  Im not aiming for an 800 score, but a score over 620 would be nice.

I checked my credit report and it says that I have a revolving credit balance of $8000 but I only have 3 cards with limits totalling $800.  The charged off accounts are added into my open revolving credit.  Should I pay off these old, closed and charged off balances to improve my score?  Or will they stop having any effect on my score in July when they officially become over 2 years old like this credit repair person said?

I have one repossession that says "paid, never late" with a balance of $4516.  Would paying this off help?

I have 10 accounts currently past due but they have been past due for almost 2 years now.  Would paying these off/down help?

Thanks 

[Anonymous]

Yes, paying them off would help.  However, you should consider calling up the companies and offer to settle the debt.  Most companies would rather get something rather then nothing.  However, I removed a bunch of negative accounts from my credit by contesting the validity of the account. 

[Anonymous]

Most companies would rather get something rather then nothing. However, I removed a bunch of negative accounts from my credit by contesting the validity of the account. How did you go about contesting the validity of your negative accounts? A guy I met once said that he wrote letters to the individual companies and asked them to prove that he had opened the account in the first place? Is this what you did?

[jaadain]

NO NO NO, ITS STILL A  COLLECTION!!  Pay it only if they IN WRITTING agree to delete it.  I would dispute it first.  make sure you send it certified mail and get a RETURN receipt.

[Anonymous]

From experience, I paid off three old collections that I forgot to include in BK and my score increased not one iota.  The upside is that they are no longer actively reporting but the date of last activity has been updated so many times that they still look new

[Anonymous]

Here's the deal... anytime you pay ANYTHING on an account, it resets the 7 year clock for being included on your report.  It's 7 years from the date of LAST ACTIVITY.

So... I don't know where the 2 year "limit" comes into play... but I do know this.  Don't pay a DIME on those collection accounts unless you get an agreement in writing from them that they will delete the account from all reporting agencies and not report it again.  Otherwise, you will pay these collection accounts off, and be stuck with accounts that show "Was Late, Paid In Collection, Closed by Credit Grantor", and these accounts will be there for SEVEN MORE YEARS.

Keep any OPEN accounts open, bring them current, and pay at least the minimum ON TIME, EVERY TIME.  If you do this and only this, and just wait 5 more years, your collection accounts will fall off, and you will have 5 years of good payment history.  That alone will raise your scores significantly.

You can try to challenge the validity of the collection accounts, but that probably won't work very well, and the reporting agencies will most likely start calling your challenges "frivolous" after the first 2 or 3 (unless you can prove identity theft, fraud, or negligence on the part of the creditors).

Your best bet is to pay the OPEN accounts on time, and get deletion letters for the collection accounts.  If that is successful, you can raise your scores significantly over the next 24 months.

[Anonymous]

B richardson.  It does not reset the seven year clock.  That seven years is from the date of last delenquecny and all the debts I paid off are still scheduled to fall off early next year.  The only thing, on some scoring models, it will make it look like a new collection if it hasn't reported in a long time.  In other words the score stops looking at it as active if it hasn't reported in several months but when you pay if of it reports piad so it has a new date of last activity.  But it does not reset the date of last delinquecy which is what the seven years is based on.  Can a FICO guru chime in here?

Message Edited by Brammy on 03-13-2007 07:50 AM

[Barry]

OK, I'll chime in here as requested on the subject of paying a collection balance either partially or in full....

First, Brammy is correct in saying that the collection or other negative reference will fall off 7 years from the date of the last delinquency and not from the date of last activity.

An important thing to be aware of when looking at how paying a debt affects the scoring of that debt is that in some cases there's a difference between how the scoring forumula treats: #1) a delinquent account still residing with the original creditor that's anywhere from 30 days late to charge off; and #2) a debt that's been sold by the original creditor to a 3rd party collection agency after all collection efforts have failed for the original creditor.

For #1 above, about the only time the score can be negatively impacted when paying on a delinquent account is when a number of years have elapsed since the account balance was last reported to the credit bureau.  After a recent partial payment has been made on such an account, the subsequent updating of the balance at the credit bureau also updates the reporting date for that account, which can negatively affect the score.  This only happens when a partial payment is made on an old charged-off balance, however, and does not occur for payments made in full.  If the account is paid in full, there's no negative impact to the score.

For #2 above, there is no impact to the score either way by paying the balance either partially or in full.

Hope that helps....

Barry

[Anonymous]

Barry,   I recently had a Corporate debt that I charged on my husbands account and forgot about it.  They attacked my Personal credit.   After talking to at least five different "negotiaters", they agreed to reduce the amount by removing interest and penalities which I beleived was fair and they also agreed to DELETE the negative statements on my credit report.    After the agreement was made, the big mistake I made was allowing a check transfer for the agreed upon amount.   The first negotiator called me back, yelling, screaming and threatening me (I guess he didn't his money) that he was going to leave the difference on my credit as a "Charge off" and it would utterly destroy my credit.    

He did just that!!    I have written letters to everyone to no avail.  THey are insisting that I fully knew it was going to be a "charge off" and have denied agreeing to remove it off my credit report.

LESSON LEARNED:   Barry is correct, get it in writing and send a check but let me add this:  My attorney advised me to write the agreement on the back of the check and sign below the agreement.  It makes it a full LEGAL CONTRACT.     I did this with the other errors and minor disputes and everything was INSTANTLY removed.       Barry, is there hope to get this off my credit report?  I filed a formal company with the FTC too.   

[Anonymous]

Oops................I filed a formal Complaint with the FTC.......