To Pay or not to Pay

[Anonymous]

I'm new to the forums. So forgive me if I'm not doing this correctly?

I have a question about a different topic.

I have a collection, listed as Charged Off, from 12/2008 (DOLA). According to the simulator if I pay this off in payments it will increase my score. However, I've been told that once you start paying on it or pay it off, it will actually damage your score again, because it is updated and it affects the score like a new collection. Atleast that's how I understand it.

The main problem with my credit is, that I don't have along credit history (9 1/2 years) and I have a poor payment history due to medical bills from an emergency surgery that kept me out of work for 3 months back in May of 08. . I'm currently un employed. I don't have a car payment a mortgage or anything else except a small payday loan that is about paid. I dn't have any need for a good credit score for about 2 1/2-3 years. The stain on my finances to pay this bill off or in payments would be very difficult.

I'd like some opinions on this situation. Pay it or just let it go.

I've been told it's affect on my score will decrease after 24 months and 48 months. Which is it?

And is it true that when you pay off a lien (tax from 1996) that it will stay on your credit 7 years from the paid date?

Thanks

CJ 

[Anonymous]

Try negotiating a PFD. Paying will damage your score if it is not deleted.

[RobertEG]

My advice is a bit different.

You have a charge off, which  is not a collection.  It is a separate posting to your CR by the OC.

The FICO simulator has no provisions for modeling the affect of payment against COs.  It only models the payment of existing balances on active OC accounts.

Paying, or not paying, a CO or CA has no affect on FICO scoring.  It is the posting of the CO or CA that scores, not any payments against either.

To offer advice to pay or not to pay a legit debt  is against this site's terms of agreement, so I wont offer advice on that level.

What I can offer is the impact of paying or not paying.

Dont look at any DOLA, date of CO, or any date of payment of anything.  The FCRA was amended back in 1998 to set one, and only one, date-certain that any CO or CA can remain in your CR.  That is 7 1/2 years from your date of first default (DOFD) on the OC account.  No DOLA or CA reporting dates can ever resets this date.

Payment, or lack thereof, against any prior reported CO of CA, has zero impact on FICO scoring.

Know your DOFD, and your state SOL.

PFD offers may be rejected by the creditor.  They are totally conditional.  It is a gamble.

Yes, tax liens drop from your CR, under FCRA 605(a)(3), after 7 years from date paid.

[Anonymous]

Thank you for the information. It was very helpful.

I have another question about the liens. Today I went to My FICO account and requested a dispute letter. When I pulled up the information on my Equifax report, under the Lien section, the three liens that had been paid and released were highlighted in yellow, with a comment saying I should have them removed due to their age and accoring to the Federal Credit Reporting Act. (I think that' what it was) Anyway, if they have to remain on there 7 years from date paid, why does it keep giving me message?

[Jazzzy]

Hi, and welcome to the forums.

When were these tax liens paid?

Also, you talk about medical collections. You might want to Google to learn about removing medical collections via the HIPPA process. This isn't a process we can teach about here at myFICO, but you should search it out and learn about it.

What affects your scores the most are the newest charge-offs and collections. You may want to pick the newest one and give us more details and let the folks here give you more specific advice after they know the details.

You are to be commended that you are choosing to deal with all of these things. It's not fun, but you will be so glad in the end. Doing this repair work can be humbling (my husband and I know that), but it pays off big time.

[Anonymous]

Thank you so much for the information.

Let's me explain alittle about the tax liens. They are from Tax Year 1996 & 1998. I tried for years to get someone to help me as the major one 1996 was from my exhusband's business. But I kept being told I was as liable as he was because I was considered the Secretary of the Corporation (noit married at that time) and had the authority to pay bills. But in reality I was only the bookkeeper and sent the checks to whom it told me too. Anyway, This last August I recieved a ltter from a collection agency regarding the 1998 debt. I called them and the lady actually told me how to get it taken care of, especially since it was so old. So I contacted the Tax Department and made an offer of judgment. The debt went from $8591 to $149 total. Finally, someone to help. I paid the 1998 lien was released in September of 09. And the 1996 lien was released in January of this year.

I get back to everyone on the medical collections with the necessary information, so I can get informed information from everyone.

Another quick question, the other judgment I had was filed on July 09 and canccelled on January 25th, 2010.  How much will my score increase because of this? Does anyone know?

Thanks again for all information given. It is really helping with my quest to get my credit to a decent score once and for all.

CJ