Did I make a mistake by paying an old bill?

Anonymous · ‎10-18-2014

Hey all!

Sorry in advance for the longer post. Just feeling a lot of stress from a decision to pay an old bill and am looking at expertise on how to handle it.

I'm in the process of rebuilding my credit and it's been going well. Most of my credit problems happened 5-7 years ago, so I've seen a number of items drop off my reports this year. My FICO # for the 3 bureaus is around 650 at each (give or take 20).

Anyway, 5 years ago I had a car reposession. It appears on two of my reports (EQ and EX, but not TU). On EQ it shows as a charge off with a 0 balance, and on EX it shows as "Closed" with a note that it was an unpaid balance reported as a loss, with ~$4500 written off. Neither report notes anything about a reposession. The 1st delinquency was Oct 2008, so my understanding is that this item should drop off the report in Oct 2015. Other than a letter I received in 2009 I've never heard anything about this situation since then, and the "Status date" for the item on the reports is June 2009 in both cases. On my reports GMAC is showing as the creditor.

A few days ago I got a letter from a collection agency (Synergetic Communication) showing that I still owed a $4500 balance. In a moment of my probably being an idiot, I called them. They said they were working with a collection company called Allied. I arranged a settlement for $1100 in exchange for this being paid off. I live in a state with a 15 year statute of limitations so was a bit worried about a lawsuit. The agent said they couldn't take this off the credit report, but would not that it is paid in full. I paid it over the phone and am waiting for a confirmation letter from them.

After I've done this I'm now very worried that something could change on my credit report so this shows as a new debt, or recent activity. My immediate concern is that it drops my credit score, which the second concern that it restarts the clock on the item appearing on the report. Also, because I wasn't dealing with GMAC, is it possible that the item will show up as a new paid collection item (even on TU, where nothing about this debt even shows up)?

My concern stems from the fact that I will be moving into a new apartment soon, and all of the companies locally require a 600 on EQ (I have a 661 now). I am also considering purchasing a new car in the spring and my report is getting in good shape. I've improved my financial situation significantly over the last few years. I have no debt from revolving credit, and my only debt is about $15k in student loans which are all current.

Advice on how I can prevent this from hurting my credit? I've paid the bill so I'm stuck there. In hindsight I should have asked this question BEFORE calling that collection company!

Jay

RobertEG · ‎10-18-2014

It is never a "mistake" to pay a legitimate, old debt.

Even after credit report exclusion and/or expiration of your state SOL, you would still have an old, delinquenct debt that coutd, if a creditor became aware of it, affect your ability to obtain new credit.

As for credit report exclusion, both the charge-off reported by the original creditor and the collection reported by the debt collector have the same CR exclusion date, which are both based solely on the same DOFD.

A DOFD of 10/2008 would have a maximum CR exclusion date of no later than 4/2016 (7 years plus 180 days from DOFD), however CRAs will often exclude approx six months earlier.

After that time, the collection will be gone, as will any negative reporting under the OC account.

Anonymous · ‎10-18-2014

@Anonymous wrote:
Hey all!

Sorry in advance for the longer post. Just feeling a lot of stress from a decision to pay an old bill and am looking at expertise on how to handle it.

I'm in the process of rebuilding my credit and it's been going well. Most of my credit problems happened 5-7 years ago, so I've seen a number of items drop off my reports this year. My FICO # for the 3 bureaus is around 650 at each (give or take 20).

Anyway, 5 years ago I had a car reposession. It appears on two of my reports (EQ and EX, but not TU). On EQ it shows as a charge off with a 0 balance, and on EX it shows as "Closed" with a note that it was an unpaid balance reported as a loss, with ~$4500 written off. Neither report notes anything about a reposession. The 1st delinquency was Oct 2008, so my understanding is that this item should drop off the report in Oct 2015. Other than a letter I received in 2009 I've never heard anything about this situation since then, and the "Status date" for the item on the reports is June 2009 in both cases. On my reports GMAC is showing as the creditor.

A few days ago I got a letter from a collection agency (Synergetic Communication) showing that I still owed a $4500 balance. In a moment of my probably being an idiot, I called them. They said they were working with a collection company called Allied. I arranged a settlement for $1100 in exchange for this being paid off. I live in a state with a 15 year statute of limitations so was a bit worried about a lawsuit. The agent said they couldn't take this off the credit report, but would not that it is paid in full. I paid it over the phone and am waiting for a confirmation letter from them.

After I've done this I'm now very worried that something could change on my credit report so this shows as a new debt, or recent activity. My immediate concern is that it drops my credit score, which the second concern that it restarts the clock on the item appearing on the report. Also, because I wasn't dealing with GMAC, is it possible that the item will show up as a new paid collection item (even on TU, where nothing about this debt even shows up)?

My concern stems from the fact that I will be moving into a new apartment soon, and all of the companies locally require a 600 on EQ (I have a 661 now). I am also considering purchasing a new car in the spring and my report is getting in good shape. I've improved my financial situation significantly over the last few years. I have no debt from revolving credit, and my only debt is about $15k in student loans which are all current.

Advice on how I can prevent this from hurting my credit? I've paid the bill so I'm stuck there. In hindsight I should have asked this question BEFORE calling that collection company!

Jay

I didn't read the entire thread yet, but why would you wait until AFTER the fact to ask the board?

Anonymous · ‎10-20-2014

Thanks for the reply! I paid it because 1) it was a legitimate debt that I owed, even if it was 6 years old and 2) I was excited because I saw a way to eliminate the debt at a much lower price. The debt was large enough that I saw potential for a lawsuit and wanted to avoid that like the plague!

Is it possible/likely that this will pop up in my CR as a new paid collection? Right now it just shows on 2 CRs as a charged-off debt with a last update of 5 years ago. I know that in a year the OC item and the new collection item (if it appears) will disappear, but within the next 3 months I intend on getting a new apartment and possibly buying a new car, both of which will be impacted if this shows up on the report. I am considering calling the collection agency back and asking them not to update the item on my CR at all. Right now it is not causing too much harm on there and I'd hate for my score to drop because I paid a bill.

0REDSOX7 · ‎10-20-2014

It will update as paid in full. You may see a slight decrease in score, but, it would be minimal.

There is a slight chance that the collection agency could sell the balance from what you negotiated to what the outstanding balance was to someone else, but, if they say it is settled and paid in full, then, you probably won't have to worry about that.

Good job on paying this off. Even if your score drops for a little bit, it will be worth it to know you won't have to worry about it.

BK Discharge 2/11/14

Currently in the garden.

Anonymous · ‎10-20-2014

I appreciate the reply. I don't mind if the score drops a little bit. My EQ score is 661 now. I just need it to stay above 600 for the next 10 weeks, as the apartments I'm looking at all pull EQ and require at least a 600.

I'm looking at purchasing a new car (Honda Accord) and financing 20-25k on it. I can certainly wait a year to do that (my car is in great shape, and my desire for a new one is purely a 'want' and not a 'need' at all). I could also purchase a ~35k car with cash from savings, but my goal is to finance and use that loan to help continue fixing my credit.

superdad · ‎10-20-2014

@0REDSOX7 wrote:
It will update as paid in full. You may see a slight decrease in score, but, it would be minimal.

There is a slight chance that the collection agency could sell the balance from what you negotiated to what the outstanding balance was to someone else, but, if they say it is settled and paid in full, then, you probably won't have to worry about that.

Good job on paying this off. Even if your score drops for a little bit, it will be worth it to know you won't have to worry about it.

It sounds like to me that since you settled on a lesser amount they will update the CR to state "settled for lesser amount" which is worse then paid in full. I would contact them and make sure it updates as paid in full. You do not want it to report at "Settled for lesser amount".

Anonymous · ‎10-20-2014

Will do. Over the phone I confirmed 3 or 4 times that it would say "paid in full" and they confirmed it each time. I did not get written confirmation of that from them though.

0REDSOX7 · ‎10-20-2014

Just wait for your credit report to update and see what it says and go from there.

BK Discharge 2/11/14

Currently in the garden.

Anonymous · ‎10-20-2014

@Anonymous wrote:
I appreciate the reply. I don't mind if the score drops a little bit. My EQ score is 661 now. I just need it to stay above 600 for the next 10 weeks, as the apartments I'm looking at all pull EQ and require at least a 600.

I'm looking at purchasing a new car (Honda Accord) and financing 20-25k on it. I can certainly wait a year to do that (my car is in great shape, and my desire for a new one is purely a 'want' and not a 'need' at all). I could also purchase a ~35k car with cash from savings, but my goal is to finance and use that loan to help continue fixing my credit.

You should be good... I don't see your score dropping 60 points for a paid collection.