Hello, new poster here... I have a question about a small charge off ($113) affecting my credit report that is several years old. Despite the small balance, I have a limited credit history and it's the most significant negative impact on my credit report. Should I pay it? Let it fall of the report? Dispute it? I would be happy to pay it in full ASAP, but my fear is that I will revive something negative that will soon disappear from my credit report anyway. Any advice? Here are the details: Original Balance: $113 Current Balance: $113 Status: Unpaid Date assigned (to collection agency): Sept. 1, 2003 Date reported: Dec. 1, 2003 Date last active: Nov. 1, 2002 Date paid: Not reported Date closed: Not reported
You're getting points from it because it lengthens your history. You're losing points because its a derog. Disputing it off would probably actually lower your FICO score (but would remove a stumbling block to new, higher-quality credit). You won't gain those points back by paying, however if it shows a paid status that removes it as a stumbling block (some higher-quality creditors simply won't approve you with an unpaid baddie). Paying should not extend its life on your reports, however if the DOLA is (improperly) updated when you pay then you would need to fight to get that corrected because it then would stay on another 7 years. It will fall off in Nov '09. Items that fall off will continue to appear on a "full factual" report should one be pulled for any of the 3 circumstances where a full factual is permitted. If you're in law school, check the disclosures that you must make with respect to the bar of any state you expect to apply to. You will need to be scrupulously forthcoming about bad debts in your past, and you may be called on to make those debts right as a condition of being admitted. Dodging a debt on the basis of the statute of limitations won't cut it. Negotiating those debts now rather than in a situation where the creditor knows you're over a barrel may be the better choice. The bar won't care what you've paid or why or when or how you paid it, only that it's paid. YMMV
Thank you for the reply... Just a couple of questions: 1. Regarding Disputing: Disputing an existing UNPAID collection lowers your FICO score? Would a dispute be successful anyway where it's a legitimate debt? 2. Regarding Paying: The idea of just paying off this minor debt really sounds more appealing to me than trying to dispute it (provided that I am not shooting myself in the foot by doing so, which is precisely my concern). If I were to pay the CA, would my negative credit recover more quickly than if I just waited until November 2009 for it to fall off? Though I am not sure when it becomes effective, I have also heard that there is new credit legislation that prevents penalizing debtors for paying old debts(?), so I'm wary of advice in older posts. Maybe a little context on my objective would help clarify: I'm basically just trying to clean up my credit enough to buy a car in the next 6 months or so and a eventually a home mortgage, though I don't expect that to be for another year or two. My credit isn't that bad it's just weak, and I'm targeting this collection as the biggest tangible blemish on my report. So am I better off taking this FICO hit and removing the "stumbling block" or will the stumbling block itself be gone before it ever becomes a serious problem (i.e. mortgage)? Yes, I am sitting for the La. Bar exam in about a month and I have already sent my character and fitness evaluation to La. Bar Admissions. I don't really anticipate any issues there.
All it takes for a dispute to be successful in knocking a debt off is for the creditor to fail to reply to it. Sometimes that can be a pyrrhic victory if scores are the key goal and that was your oldest account, derog or not. Paying won't help scores, but if it shows paid, there's the "stumbling block removal" effect, unless the creditor is entirely score-driven. Many mortgage programs won't make you pay an older collection or two (others are less lenient, especially lately). Problem is that lurking JDBs violate the FDCPA by waiting until you apply for a mortgage, then they slap moldy oldy acconts on there with fraudulent fresh dates and ambush you on your way through the gates of homeownership. Want the house? Pay the debt. How many people's spouses will let them lose the house deal and chase the creditor for damages? This was CAMCO's specialty until the FTC shut 'em down, but others do it too. If you put the debt on your application, I guarantee it will be an issue. If you didn't put the debt on your application, it will be a bigger issue. Unless the state of Racehorse Haynes really is the big easy...
I am not disputing the practice that flacoorps refers to, but for a creditor to do this is illegal under the FCRA. The FCRA was amended to make it clear that any actions taken by a creditor to update a DOLA does not change the statutory 7 year date at which they may no longer report delinquencies. This date runs from the original date of the delinquency that led to any CO or CA actions It is illegal to continue to make any report to a CRA once the date from delinquency has expired.
Also know that if a long ago derog is still in your CR, and you apply for a mortgage of over $150,000 or a life insurance policy with a payout of over $150,000, the 7 year restrictiions on their access to the old derog is an exemption, and can still be legally reported.
If you have the money it would be best to call the collection agency and let them know that you want to settle a debt with them, but only on the condition that they delete it off of the credit report. Ask them to send that to you in writing. Some may agree verbally but not written. I had one do that, they said they would ignore a dispute from the credit reporting agency. So I disputed with the credit reporting agency and true to their word they ignored and allowed item to be deleted. It is possible, but for the most part try to get it in writing. Better to get deleted then to let it expire cause it can still show up on a credit report for loans over 150,000 like the others have pointed out.
