Paying Off Collection Accounts

[dac90]

I have been working on my credit for a couple years now and was finally starting to make some progress.  Two questions-

1.  I have two credit card debts ($6K and $9K) that were charged off by the original creditors and have been moving from collection agency to collection agency.  They are 5 years old.  Is it worth trying to settle these collections?  Everytime it changes hands, it looks like a new debt.  If a collection agency tries to sue, will that show on my credit, or is it only judgments that show up?

2. I had some pretty major medical expenses last year.  I now have multiple new collection accounts from the hospital's collection agency and my score has plummeted.  If I pay them, will they come off my credit report?  Can I ask for them to be removed(upon payment)?  What is the best approach for these new debts?

Thanks for your help!

[Anonymous]

1) You'll probably be playing whack-a-mole with collection agencies for a while. Whether or not they can sue depends on your state and its applicable statute of limitations. (This gets fairly complicated if you've changed states since the account charged off.) Be sure to look up what your state's statute of limitations are and avoid getting a judgment on yourself any way possible (in many states they are renewable and therefore will appear on your credit a lot longer than the original debt could).

Suits don't show up on credit reports; judgments do.

Also, given the amount and the age of these tradelines, does the original creditor still own them or have they been sold to a distressed debt purchaser (sometimes called a "junk debt buyer" or "JDB" )?

2) In the reporting guidelines set forth by the Consumer Data Industry Association, paid collections (and paid chargeoffs) aren't supposed to be removed. Some collection agencies might tell you it's illegal to remove collection tradelines, which isn't true. However, some people have had success paying them, then disputing them once they reported as paid.

Possibly the best process for dealing with medical collections has been formulated by WhyChat over on CreditBoards.

Message Edited by Skiffy on 03-23-2007 11:51 PM

[dlm0820]

Good advice Skiffy.  Be warned about creditboards.com.  It is VERY addictive...LOL

[dac90]

Thanks for the information!  The original creditors have charged off the debt, so it is just in the hands of the collection agencies now.  They aren't very willing to work with me on anything, so I just stopped trying.  The statute of limitations on a contract in my state is 10 years, but since I am only a couple years from having it come off my credit report, I'm tempted to just wait to see if they will get agressive in trying to collect.  I need to figure out now how the "last activity" is determined, so I will know when it is supposed to come off my credit.

The medical collections are my biggest problem now.  I have four collections from one hospital, which I'm sure caused my score to drop 100 points in a month!  I plan on just paying them off this month.  I know it won't affect my score, but at least it will show a zero balance.