| Credit scores, new homes, and NOT getting ANY clear ANSWERS! |
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joy2dance
New Poster
Cash: $ 0.45
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Joined: 16 Oct 2007
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| Credit scores, new homes, and NOT getting ANY clear ANSWERS! |
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PLEASE, maybe someone here can shed some light on the subject.
Finally, after about 7 years, I am now in the position to pay off all my old bad debts completely (various kinds EXCEPT credit cards and loans) including auto repo, bad checks, and hospital bills, all within a matter of months. After much research, I am discovering that paying the old debts can actually hurt my credit score by making the activity look recent, and not improve the score for years. Also, if the original creditor had transferred the account to a collection agency, and the original creditor's balance on the account is zero, then this will do nothing for my score as well.
I also found out that bad marks must drop off your credit report after 7 1/2 years. Does this mean that one no longer needs to pay off the 7 1/2+ old debt because it has disappeared? Could I let the older debts drop and pay off the rest without it hurting me?
I don't want to pay off all my old debts completely only to find out that it has hindered my credit. I am looking to own a new home within the next 2-3 years. Could this be a disadvantage to me if I buy a home soon. Or, if I decide to build my home, would my credit have any effect on that? Thanks in advance.
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Tue Oct 16, 2007 9:04 pm |
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pf101
Senior Member
Cash: $ 62.25
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Joined: 12 Sep 2007
Location: Portland, OR
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This is a hard question because not only do you have to consider the legal implications but the moral ones. Morally, you owe the money and should probably pay it. Legally, odds are very good the debts are out of statute of limitations and can no longer be collected upon. You also have to take into account that odds are very good that the original creditor wrote off these debts years ago and anyone you pay now only paid pennies on the dollar to get your debts.
You heard right that paying off old debts can work against you in that they "reset" the debt clock. Technically they're not supposed to do that, but there are a lot of things that happen that technically aren't supposed to.
Have you pulled your credit reports (all three) lately? If not, pull all of them from annualcreditreport.com. The reports are free but you won't get a score. Don't worry about the score at this point as it's the shape of your credit that matters most.
Before I can really help I need a bit more info. Please provide the following:
State that you live in.
Dates of last activity for each debt.
Balance for each debt.
If you don't want to provide that detail publicly feel free to PM me.
You are correct that debts are supposed to drop off after 7.5 years so, depending on the info you provide I'd be inclined to recommend that you not pay the debts. I know there's that whole moral issue but realistically you've probably been paying extra because of your bad credit for years and to pay now would only prolong that. Add to that the fact that you'd probably be paying collectors instead of OCs (original creditors) and it doesn't make much sense to pay. That, of course, partially depends on the answers to the above questions.
If you pay these debts, they will probably remain on your credit for another 7.5 years....
Good luck!
Personal Finance 101
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Wed Oct 17, 2007 2:35 am |
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Apollo
Senior Member
Cash: $ 73.85
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Joined: 10 Sep 2007
Location: New York
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| Re: Credit scores, new homes, and NOT getting ANY clear ANSW |
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In most states any bad debt will drop off your creit report after 7 1/2 years and can't be collected any more.
Most likely the debt has been writen-off by the company as a loss, they most liekly recoverd portion of the debt through various other channels and they usually bundlethe bad debt into packages and resell them into the secondary market.
None of the money that you will pay will go to the OC.
The moral issue is another one but most likely you're better off not to pay any debt after it drops of your credit report as it will reset the 'clock'.
Most liekly you have been punished over the past years by higher interest rates on various other lines of credits and you have learned your lesson.
Take it as a chance to restart and avoid taking on credit that you don't need or can't pay for.
It is not smart to play it safe but it is safe to play it smart.
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Sat Oct 20, 2007 1:15 pm |
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joy2dance
New Poster
Cash: $ 0.45
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Joined: 16 Oct 2007
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| Thanks for replying |
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Thank you both for replying. Your info has helped me more understand the situation. I just received my latest credit report. I can handle everything on it, except there is one that I'd like more clarity on and to know what my options are for it. This was a vehicle that was repoed and a loan from the bank for it for more than $10,000. Dollar amounts are approximate, not exact. Here it is (all personal info changed except dates):
ABC123 BANK Account #987654321
123 Main Street
Smalltown, USA
555-555-5555
Loan Type: Unsecured
Remark: >Profit and loss writeoff<
Estimated date that this item will be removed: 11/2008
Balance: $10,000
Date Updated: 10/2007
High Balance: $20,000
Past Due: $0
Terms: $600 for 70 months
Pay Status: >Charged Off as Bad Debt<
Account Type: Installment Account
Responsibility: Co-Signor on Account
Date Opened: 03/2000
Date Closed: 08/2007
This is my biggest concern. Everything else is small potatoes. Thanks for any help anyone can give.
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Sat Oct 20, 2007 8:52 pm |
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