Hi all (this may be long), I decided to be helpful and assist my fiance with cleaning up the multitude of bad accounts in his credit files. One MC acct. was opened in 1995 and charged off for $570 in 1997. Sometime in early 2000 (I think--that would coincide with the end of the SOL) he received a letter offering to settle the account for around $400. Not knowing any better, he gladly sent the money to pay, thinking he was doing the right thing. On his reports, it shows as a chargeoff but makes no mention of the payment that was made. Now we're disputing it, thinking it would just be deleted since it hasn't been updated since 1997, right? Wrong. Experian finished their investigation and updated the account to show that it was paid in settlement. This did cause the account to move to "Accounts in Good Standing", but what bugs me is that it was due to fall off his reports in 9/2003 and now it's been updated to stay on, albeit as a positive account, till 1/2009! Maybe this is a dumb question, but should we just leave it alone? The change from neg to pos didn't affect his score--it held steady at 618. Any thoughts from the experts?
If there are absolutely NO negative notations on the account I would leave it alone. BUT, if it mentions 'settled for less than full balance', 'closed by credit grantor', or shows late pays, I would work on getting rid of those. Hope that helps. Wish you the best
It is a common mis-conception that a paid negative account is BETTER than an unpaid one. The truth is EXACTLY what you have seen...It has very little effect on your score, and in fact extends the time the item will remain on your report by re-starting the date of last activity (some argue that date of delinquency is the date to go by legally, but I have never seen the CRA's actually abide by this). The good part is now you know better now for future settlements...accept nothing less than deletion of the negative mark from your reports when negotiating payment on older debts. Do this BEFORE you pay a dime. About all you can do now is dispute it with the CRA's and hope that, now that it is paid, the CA/Creditor will be less likely to respond to a validation request. Dispute over and over until it gets removed. You might call the CA/Creditor, explain your situation (make up a hard luck story if you must), and ask them not to respond to the validation...but you have lost your upper hand by paying and chances are slim that you will get anything from them. Good Luck! -Peace, Dave
Thanks for the replies. *Now* we know that one should always arrange for payment for deletion before mailing a check, but we didn't know that at the time this was taking place. It shows as "paid in settlement", so I'm not sure how to go about redisputing--? I'm pretty sure the account was disputed as "incorrect amount owed" or something, so I don't think "not mine" would work. This bank obviously keeps good records. I did find the section in the FCRA that pertains to the 7 year reporting period (I printed it from the FTC website). Should I send a letter to Experian with this section enclosed and highlighted now, or when the real 7 year clock is up next fall? It's not a big deal, but we're thinking about getting a mortgage in the next year or two and would like to have all the bad stuff on my fiance's reports taken care of.
Dave, I must respectfully disagree with you regarding extending the 7 year period by making a payment after the acct. has been charged off. Here is the FTC staff opinion letter on that. There are different rules for determining when the 7 years starts. Dear Ms. Amason: This responds to your letter concerning the time limitations imposed by the Fair Credit Reporting Act ("FCRA") on the reporting of chargeoff accounts by a consumer reporting agency ("CRA," usually a credit bureau). We list your inquiries on this topic below in italics, with our replies immediately following each item. 1. What reporting limits does the FCRA provide with respect to chargeoffs, and how long have they been in effect? Section 605(a)(4), which has been in effect since the FCRA became effective in April 1971, has always prohibited CRAs from reporting chargeoffs that are more than seven years old.(1) Section 623(a)(5), which became law in September 1997, requires a creditor that reports a chargeoff to a CRA to notify the agency (within 90 days of reporting the account) of "the month and year of the commencement of the delinquency that immediately preceded" the chargeoff. Section 605(c)(1) provides that the seven year period begins 180 days from that date. Both provisions were part of the major revision to the FCRA that were enacted in 1996.(2) 2. Is the reporting period extended if (A) the original creditor sells or transfers the account to another creditor, (B) the consumer responds to post-chargeoff collection efforts by making a payment on the debt, or (C) the consumer disputes the account with a CRA? Does it matter whether the 7-year period has expired when any of these events occurs? No. In enacting the new provisions discussed above, Congress intended to establish a date certain -- 180 days after the start of the delinquency that led to the chargeoff -- to begin the obsolescence period. It did so to correct the often lengthy extension of the period that resulted from later events under the original FCRA. Enclosed are two staff opinion letters (Kosmerl, 06/04/99; Johnson, 08/31/98) that discuss the impact of these provisions, and the legislative history relating to their enactment, in more detail. Because the commencement of the seven year period is now described with some precision by the statute, it is our opinion that none of the subsequent events you listed -- sale of the charged off account by the creditor, or a payment on or dispute about the account by the consumer -- changes the allowable period for a CRA to report a chargeoff. 3. Since Sections 623(a)(5) and 605(c)(1) provide new rules for calculating the 7-year period that became effective in 1997, do chargeoff accounts now have different obsolescence periods depending on when the chargeoff occurred? Yes. Section 605(c)(2) states that the section "shall apply only to items of information added to the (CRA) file of a consumer on or after" 455 days after enactment, or December 29, 1997. Therefore, a chargeoff reported to a CRA on or after that date is subject to the new commencement-of-the-delinquency method of calculating the obsolescence period set forth in Sections 623(a)(5) and 605(c)(1). On the other hand, a chargeoff reported to a CRA before December 29, 1997, is not covered by the new provisions, as discussed in one of the enclosed letters (Kosmerl, 06/04/99). If a credit account was reported as a chargeoff before that date, the Commission's view has been that it can be reported for seven years from the date the creditor actually charged it off.(3) The opinions set forth in this informal staff letter are not binding on the Commission. Sincerely yours, Clarke W. Brinckerhoff
Thanks for posting this, LKH--it's very helpful! The way I read that is, if the account charged off around Jan. 1, 1997, then the 7 year clock would begin then and cannot be reset by a CRA updating it. Correct me if I'm wrong, someone?
That is correct, Beaker. I was in a bit of a catch-22 with a couple chargeoffs recently...2 cc companies charged off crads on me and reported it, but the CA's did not, leaving me NOBODY to deal with in terms of deletion for payment. In turn, I simply settled the chargeoffs with the CA's, they reported it to the cc companies (who updated my accounts as "settled for less than full"), and the accounts NEVER re-aged. I'm now beginning the dispute process in order to get the derogs removed, but at least I'm out of debt and can work on more positive tradelines knowing that the derogs will fall off sooner or later. I'll keep you posted.
