Another FREE credit tip! 12/7/09

Submitted by Doc on Mon, 12/07/2009 - 23:03

Did you know...

That paying a collection account off DOES NOT impact your credit score..?

The balance is inconsequential..!

Consider THAT as you make your decisions about paying off collections!

Thanks Doc,

Unfortunately, I have learned this the hard way, paid off four old, outdated account one year, thought paying them off would be a start to cleaning up my credit report.

It did absolutely nothing except move them to settled, paid in full, did nothing for my score.

Mon, 12/07/2009 - 23:14 Permalink

Hi Doc,

Yeah right. Paying off collection accounts does not influence score in the short run. The listing stays on the report for 7 years as "paid as agreed" or "settled". But this does not impact the score. However, I think in the long run it will be counted as we paid off our debts. That will increase the score.

Wed, 12/09/2009 - 05:51 Permalink

No... The debt can only stay on the credit for seven years from the date of the first delinquency WITH THE ORIGINAL CREDITOR. The date you pay a thrid-party debt collector has ABSOLUTELY NOTHING TO DO WITH the age of the account, or how long it can stay on the report...

Again, the balance on a collection account is IN NO WAY calculated in the score. That information comes from FICO... The people who WRITE the scoring formulas.

Wed, 12/09/2009 - 16:37 Permalink

So, I co-signed for two cars, one for my daughter and one for my nephew. Both have stopped making payments and their creditors are calling me for the payments, which I cannot afford to make, but if I would come up with the money somehow to pay them off, you're saying it still wouldn't help my crdit score. And will it stay on my credit for seven years or longer? Then what happens to it? Will the creditors write it off as a loss or what? When will it be removed? I have always had excellent credit before this.

Wed, 12/09/2009 - 17:08 Permalink

If the accounts are charged off, no, the balances don't matter. If the companies sell the debts to collection agencies, you're likely to add new derogatory items to your credit, and THAT will have a negative impact on your score...

You can ask the companies to stop calling you, but unless you do so in writing, they won't.

Seven years from the date of first delinquency that led to the account(s) being charged off... No matter WHO buys the debt later, or when, and regardless of any payment arrangement made with the third-party.

Wed, 12/09/2009 - 17:17 Permalink

Gosh.....what great advice!! Let me try and get SOME of this straight...LOL Ok....the account with the OC can stay on CR's for 7 (or so) years. What about the CA's that try to collect for them? Did I 'miss' that part?

Thu, 12/10/2009 - 18:32 Permalink

No matter who, or how many companies buy it or collect on it, they are subject to the same date to determine the age of the account...

That said, they can still collect after the obsolescence (7 yr) period, subject to the statute of limitations in your state.

Thu, 12/10/2009 - 18:38 Permalink

Mmm.......I think I'm a bit confused. If the debt is only suppose to stay on your Credit for that 7 years (and so many months), then how can the CA's STILL collect on it, after that?

Thu, 12/10/2009 - 18:45 Permalink

If the statute of limitations is 10 years in a given state, then theoretically, a collection agency could still pursue written collection, calls, etc., after the 7 year obsolescence period.

(Unless of course, the debtor has asked them in writing to cease either.)

Thu, 12/10/2009 - 20:01 Permalink

OHH!! i get it now. Thanks for the clarification. In the state of PA (where I live) the SOL is 4 years. Your information is really valueable!! Thanks, again, DOC.

Fri, 12/11/2009 - 00:19 Permalink

Well Doc I have a question for you. Someone told me that if you get a credit card in the mail and there is no collateral on credit cards, they really can't do much to collect. That is not much more than some scare tactic or threats of taking you to court. Is this true? And if you refuse to talk with them that eventually they will stop calling you. And if they sell it to collection, just don't sign any new agreement to pay on it, because this will start the SOL all over again.

Fri, 12/11/2009 - 01:31 Permalink

Well.I would think you would need 'collatral' on Secured CC's. You have to put a Deposit on them to active them.

Fri, 12/11/2009 - 01:36 Permalink

Simple truth, Doc by far would be more able to answer this question but I would think that paperwork would come a long with that credit card received in the mail. Also once you use it it may be just like signing a contract. I do believe they can come back after you for the debt, especially if they can prove it is yours. Either way I would not take the chance.

Fri, 12/11/2009 - 01:54 Permalink

YEP, FIREYONE!!! Your right!! DOC is the expert!! I was just posting my 'personal experience' with a CC. I didn't even think of the 'contract thing'. That's do have some kind of contract to open a CC account...Secured or not.

Fri, 12/11/2009 - 02:00 Permalink

When you apply for a card, whether online or on a paper application, you have already signed their contract. Collateral is not necessary.

In terms of the credit cards' collection activity, you must ask them to stop calling or contacting you in writing to get that handled, but be aware that doing so heightens the likelihood of a civil action (suit) against you.

Setting up a payment arrangement with a collection company does not establish a new date of first delinquency, and as such, does not change how long it can be reported, or collected upon. HOWEVER, an agreement with a collection agency to pay is now a new agreement for which you could potentially be sued if the terms are not complied with.

I've seen collection agencies set up payment by check or draft, and establish the dollar amount in such a fashion as to make any breach of the agreement a 'theft by check' criminal offense. That way, any stopped/interrupted payment can be used to impose criminal charges, thus increasing their leverage against you.

Fri, 12/11/2009 - 13:18 Permalink

Wow. Theft by check, I never heard of that one. I really appreciate the knowledgable advice you give here at the forum. It sure does set a few things straight.
Here is a question that I never got a straight answer to. When does the SOL clock truly start ticking? Some will say it is the date of the first missed payment, others say it is six months after, and lastly I have heard that it is from the date the credit card company charges off the debt. What is the real answer to this?

Fri, 12/11/2009 - 13:29 Permalink

WOW!! I didn't know all of that! Yep..I can see how that can be a crime. But,..what if you DON'T agree to the terms that THEY set up. Can they STILL pull 'drafts' from your bank account?

Sat, 12/12/2009 - 00:13 Permalink

The date of first delinquency, that led to the current charged-off/collection status is what starts the clock. Nothing else even matters......

Sat, 12/12/2009 - 15:07 Permalink

That's helpful information, DOC. So...all of the CA's that are collecting on old debts, that appear on my CR, I REALLY don't have to worry about? I THINK that's what you're saying.

Sat, 12/12/2009 - 15:17 Permalink

Sd, You are here in PA like me. The SOL is 4 years. You have to make sure that your date of first delinquency is over four years. I myself am glad just to have that cleared up. I kept getting different answers.
Now lets get an answer to another about the responsibility of an authorized user? Some say you are responsible and others say no. What is it? (yes this is still over that other account that I have not heard anything thankfully)

Sun, 12/13/2009 - 00:52 Permalink

Usually on accounts you MAY have an 'Authorized User', but, you would have to have a 'primary' person, on that account, as well, to ADD the 'Authorized user'. For EX: I have a CC. I can (but I wouldn't....not now, anyway!!LOL) put my son on it as a 'Authorized User'. However..I'm the 'primary' person who is still responsible for the bill.

Sun, 12/13/2009 - 11:36 Permalink

Wow, you are taking a bit of a chance on putting your son on your card. How old is he? Just remember to keep an eye on your statements and never give complete access to the card. I am not saying your son would charge the card to the limit. I am just saying be careful. How many times I read on here that a scenario like this happened when the parent least expected it.With close monitoring everything should be fine.

Mon, 12/14/2009 - 11:29 Permalink

Well in the end you will be the one that is responsible for all the charges, he won't. He is only an authorized user, so he can charge it up and feel no reprecussions if the bill is not paid.

I hope that he is responsible enought to know that having a credit card is a privilidge and not a right.

Wed, 12/16/2009 - 01:33 Permalink's almost like C-Singing for something, for your family. If they don't pay for it, you have to. if YOU don't, 'they' will come after YOU......and then, possibly damage your Credit.

Wed, 12/16/2009 - 18:46 Permalink

yes that is true, by paying off accounts in collection does not help the credit score immediately, but it does have an impact on the overall credit standing after a considerable amount of time. The reason for this is because the source of the money needs to investigated, and whether this is a consistent income, by which it has been paid, or it a loan taken to pay it off. So in a way not really paid off , only changed hands. And hence companies that give credit take this factor very seriously.
So it's good you've paid them off, but now you need patiance for the results to show on the score!

Wed, 02/10/2010 - 12:50 Permalink

So what you are saying is that it is not a waste of money, I was disappointed when I paid off four old debts in one year and it did not impact my score at all. Still today, when I apply for credit I am questioned about those accountts, even though they reflect paid in full, they are still in the negative colum of my report, so they will continue to haunt me until they age out and fall off which is sometime in the next two years.

Mon, 02/15/2010 - 01:15 Permalink

Again... Paying off collections has NO IMPACT on credit score... NONE. Nada! Zip. Zero. Zilch!!!!!!!!!

Thu, 04/08/2010 - 12:53 Permalink
Liz (not verified)

I live in the state of NY, I had a car that was totalled in an accident. This was about 13 years ago. everything was paid off or so I thought. They keep selling the account and I have to keep clearing it. Now after several years they sent me to a collection agency trying to get money. I know I don't owe but can't prove because it was so long ago. what is the stature of limitations to collections.

Thu, 04/07/2011 - 23:06 Permalink

I guess the SOL in NY is 6 years. See, there are some CAs that purchase junk debts for pennies on the dollar and then try hard to achieve something out of it. Now, if they succeed in forcing a single payment out of you when the debt is already past SOL, then they win and your SOL clock is reset.

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