Inquiry regarding closed accounts

Discussion in 'Credit Talk' started by Descartes8, Dec 1, 2011.

  1. Descartes8

    Descartes8 New Member

    Hello,

    I have just checked my credit score and I need help comprehending it.

    I have an account, on which I owe money, which says in comments "Closed - Account Closed at Credit Grantor's Request "
    Is this bad? Does the debt still need to be paid off?


    Another account, in a similar predicament, simply says "Closed" in the comments section. Under status it says "Merchandise was taken back by credit grantor; there may be "
    Same questions; is it good or bad that it's closed and does the debt still need to be paid off?


    The seriousness of my predicament is intensified by the fact that both of these accounts had nothing to do with me and were "operated" by family members that screwed my score all the way to the "Very weak" status. I have no intention of paying their debt off, as the sums are substantial, but I need to know whether it's over or not, and if not, how important is it to pay the debt in a lump or on monthly basis over the years? How would either affect my score?


    I'm sorry if these are foolish questions, my expertise in terms of credit is nonexistent as I personally despise all debt/credit and used to be determined not to borrow any money ever from anyone. Now, however, circumstances require me to have a decent credit score, which I understand at this point is impossible, but at least I'm trying to understand what to do as to not make it any worse.


    Thank you in advance for any suggestions.
     
  2. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Welcome to Creditnet! You've come to the right place for answers to your credit questions...no need to apologize. No question is a foolish one.

    Now, on to your questions.

    1.) A closed account with a balance still needs to be paid off. Just because an account is closed or charged off, doesn't mean the debt goes away.

    2.) Is there any balance shown on the account that says "Closed - merchandise taken back by creditor"? My initial reaction is that this certainly isn't helping your FICO scores. If there is a balance shown, it needs to be taken care of.

    3.) While I can certainly understand your frustration with family members that screwed you, if these accounts show you as the primary account holder then you'll unfortunatley find yourself on the hook for the debt associated with them. Apart from filing charges against your family members and taking them to court, your best option is to work something out with them to settle the debts before they grow even larger. Paying in a lump sum, if possible, is always a better idea when dealing with collection agencies.
     
  3. Descartes8

    Descartes8 New Member

    Thank you so much for your answer. I really appreciate it.

    Yes, there is a substantial balance of nearly $10,000 on the account that says "Closed - merchandise taken back by creditor." To be honest, I don't even know what this was, despite that everything was done in my name.

    At this point, do I understand this correctly, that every month, even despite them making minimal payments on the account, my score is dropping, because the account has a negative status and there's still debt? So, if it takes 2 years of minimal monthly payments to pay off the debt, my score is going to be consistently dropping for this duration?
     
  4. Andrew_V

    Andrew_V New Member

    You are correct that as long as the account is in negative standing it will have a negative impact on your credit score. However, it shouldn't fluctuate; once the negative item appears on your credit report it will be factored into the formula that determines your credit score. This means that, generally, it should have a one-time change on your credit score (sometimes an item will have a lesser impact the longer it remains on your credit report, but this is not always the case).

    All that to say; it has a negative impact because it is a negative item. But it won't lower your score every month, unless NEW negative items are showing up.

    Also, a negative item can only stay on your credit report for 7.5 years. After that, it should automatically disappear from your report.
     
  5. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Your credit scores will actually improve as the age of the negative item gets older. Eventually, it should even drop off your credit reports. What will continue to grow and get worse is the balance the longer it's ignored. Is this debt still with the OC, or has it been sold/transferred to a CA?
     
  6. Descartes8

    Descartes8 New Member

    Thank for the great answers.

    Is the age of a negative account determined by when it was initially reported or "Date Last Reported" because I know one account is around 7 years old, but date last reported is April of this year. I believe this has to do with the fact, that the relative of mine that generated this debt and problem for me, sent some kind of letter that he assured me could eliminate the debt altogether. I am, however, very skeptical of anything this person does. Since the older the "date" the less impact it has, does it mean that this action (letter) could have bumped up "Date last reported" and made my credit worse? Also, since it was supposed to cease having impact after 7.5 years, does the new date last reported mean that it's going to take an additional 7.5 years to take effect?

    As to the ownership of the debt, I do not know how to determine that. If it is determined by observing the name under "Institution" then one debt remains in original ownership and another has been sold to something called ER SOLUTIONS. Which reminds me of another problem, this particular debt, the one that has been sold, is (according to my relative) a mistake, it was paid for in timely manner, but something happened (it was transferred?) and essentially someone pocketed the payment while the debt went reported for collection. Is this realistic? If so, is there a chance to contest it? This person refuses to pay the debt off because "it can be contested" and "it'll be gone" from my record in entirety. My question is, essentially, should I just pay this debt off myself (it's not a huge amount) or wait till he tries to contest it? (which may be awhile from now)

    I appreciate the help!
     
  7. Descartes8

    Descartes8 New Member

    Another question, since the score is partially based on the amount of available credit, should I just accept every single credit card offer that comes to my house to improve it? I'm hearing mixed opinions about this: if I accept new credit cards it looks bad, as if I am living beyond my means and if I don't accept them, then my available credit is extremely low ($300) which is bad too, even though the account is in good standing. Either way, every single action I may take sounds like it will have or already has negative impact on me.
     
  8. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    It's the DOFD (Date of First Delinquency) that really matters. Don't get too hung up on the DOLA. The DOFD should never change, even if the debt is transferred/sold from one creditor to another.

    Also, if the debt was paid and is reported incorrectly, dispute it directly through the CRAs. What size of debt are we talking about here? anyway

    Finally, don't just apply for every pre-approved credit card offer you receive. Space new credit cards out every 6 months or so as you work to rebuild your credit history. While you'll take a small ding every time you apply for a new card, your scores will then improve greatly as you decrease your credit utilization ratio and build positive payment history.
     

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