To pay or not to pay, that is the ?

dont pay and dont give up I owed 7 grand now I owe nothing sure it took 13 months but i never gave up

 

Take care of your responsibilities as a responsible person, if the account is yours as you stated already, you agreed to pay the balance years ago and quit for whatever reason.

 

Paying them isn't going to help your credit in any meaningful way. In fact, it will probably hurt your credit more than it will help because although you will gain a bit because your overall indebtedness will have dropped if they even report it to the credit bureaus but your report will also show recent collection activity so that won't be good for your report either.

What you may have to worry about more than anything is the possibility that you will find a house you really want and the lender comes up at the last minute demanding that you pay the debt before he will loan the money. If you can't pay the money immediately plus all the other costs of buying a home you will probably just have to either look for another lender or wait for it to drop off of old age. Paying it isn't going to help your credit.

That isn't going to help your credit all that much either. You can have a pocket full of credit cards, use them a lot and always pay on time and your score won't increase much either. Maybe not at all. Having a few credit cards, using them wisely and always having a low balance on the cards helps as much as anything it seems.

Length of your credit history also means a lot. Having a few cards, maybe 3 or 4 credit cards and some instore cards that you keep low balances on over several years probably means as much or more than anything.

I'll warn you that others may have better or more meaningful comments than mine because I really don't know anything about fixing credit reports. I do know that one of the best ways to fix your credit ratings is to find errors on your credit reports such as illegal reaging of the debt and sue the credit bureaus and or the debt collectors in federal court.

If you are right and can prove it you won't have to worry about actually going into a full blown court trial because they don't want to go there if they know they can't win.

If you are right and can prove your case they will soon be asking you what it will take to go away and leave them alone.

 

Is there any correlation between what the collector wants to satisfy the debt and the original amount? Or is it a junk debt buyer who has unethically jacked up the amounts?

You understand that many of these collection companies pay literally pennies on the dollar for your account?

 

What is paid for the debt has no bearing on the amount owed. It's not the CA fault the debtor racked up a huge bill, knowing the interest rate, and signed for it, and quit paying. It's the not the CA fault after 4 years of not paying and the interest has accumulated thousands of dollars on the debt. Too bad, get over it, should have paid it years ago and they wouldn't be in the situation.

 

Or is it a junk debt buyer who has unethically jacked up the amounts?

How is that possible? Aside adding any ''collection fees'' the interest rate of default was set by the OC not the CA. So letting it grow over 3-4 years of not paying is unethical? But it's ok the debtor hasn't paid in 3-4 years, that's totally acceptable and ethical right?

 

Let's take this from a perspective of your needs for credit, and a long term approach to managing credit.

First, regarding this collection account, the legal aspect is that the debt is most likely past SOL (Statutes of Limitation) for collections recourse through leagl action (taking you to court and getting a judgement). Based upon your posted dates, the tradeline should fall off sometime in 2008. Paying the debt, or not paying, will have no difference in your credit score, it will have a difference to a potential lender. Then, there is the emotional factor, how do you feel about "not paying"? This is solely your decision.

Your decision is can you wait until this falls off (as it it reported now) until you apply for a mortgage? Also, do you want to run the risk of it being reported in the future (yes, it would be reported in error) by a new buyer of the debt? You may have to go through the entire dispute process again. As I stated, it will be in error, but YOU will have to deal with the real world aspect of it being there (in error). Also, keep in mind that just because the debt is past SOL, this does not mean that the CA might not ATTEMPT to pursue legal action. You must raise the defense of debt being past SOL. So, do you want to risk these types of issues versus paying off the debt?

And one more point, most mortgage amounts now are in excess of the amount where a credit report request can show more than the seven year history. So, leaving it unpaid could still show up to a potential lender even after it has "dropped off" your report.

As for the new CC to show credit history, this is a good longer term strategy. Be aware that the intiail effect will be to drop your credit score, but paying it on time, and building history, will raise your score in the longer term.

In summary, my recommendation is to pay the debt and request a "Pay For Deletion" in exchange (you pay the full amount owed, the CA agrees to remove the negative tradeline, or....agrees to not "verify" if disputed).

I recommend that you also take out a credit card, and manage it wisely. If you can build up a year's history before applying for a mortgage, it will be helpful. But do not open a CC, and then apply for a mortgage 2-3 months later, the negative effect on you credit score will hurt you in the mortgage process.

I hope this helps, and these are only my opinions for your consideration.

 

In the best of all possible worlds, consumers would not take on debt beyond what they could pay, lenders would not loan to consumers who were bad risks, and usury laws would limit interest to reasonable levels, while allowing the lender a fair return on their principal. This would leave some consumers with limited access to credit, in line with their payment record and ability to pay, and would also leave the most predatory lenders with a less profitable business model.

In the real world we live in, consumers often take on debt beyond what they can afford, lenders often lend it to them anyway, in some cases even deceptively steering them into it, but knowing the actual risk, they build in a higher return for the cases that default but are eventually collected upon, to cover the losses from the cases that default and are never collected. Rates can reach 35% APR, late and over limit fees can ratchet it higher, and consumers that might have maintained payments at 18% quickly reach the point that they cannot make any progress against their debt and simply stop paying.

Payday lenders make even the above terms appear generous.

Some lenders thought the higher returns from the sub-prime borrower justified the risk, and was a solid base to build a rapidly growing business empire, just as in past times, some investors thought the same of junk bonds, inflated real estate, and other oversold investments. There are no shortages of people wanting to turn lead into gold.

You can argue that the consumers were stupid, or maybe even intending to defraud, but the lenders went into the transaction with their eyes open, even expecting some level of defaults, as evidenced by the contract terms allowing the rates to be jacked to make the debt more saleable even with a higher chance of uncollectability. Even short of bankruptcy, the consumer would be better off financially with a judgement, paying a statutory rate around 10%, and the JDBs buying these debts appear to know that, often waiting until just before SOL expires to sue.

The lender is apparently both willing and able to bear the losses from some defaults, for the higher profits on the portion of loans that perform. Other lenders who don't want to market to sub-prime consumers may chose to do so, using the credit reporting system to assist in their decisions. If all parties went into their deals with full expectations of various levels of defaults, building into their terms higher rates they expected to compensate for the risk, then what room is left for the ethics of debt repayment, on what may become in fact, if not by contract, a non-recourse loan?

We do not live in the best of all possible worlds.