Possible zombie debt collection?(Don't answer unless you know how credit scores work)?

Question

I have been dillegently rebuilding credit after failed relationships/ a period of heavy drug use...(insert sob story here)...but I thought I had it until I got acollections notice today from '03. I have read that actually paying it off might hurt my credit score that I have seen rising. The difference between the settlement amount and the actual amount is quite negligible with my finances as they are now. I could easilly pay it. I have contacted them (bank itself & collections agency). The bank is willing to mark my credit report paid in full, the agency will mark paid as settled, niether is willing to delete the account upon repayment. Should I repay this debt or will it negatively impact my credit score. Trying to do the right thing is not as important to me as improving my credit score.

Answer 1

You have to pay the debt or it will never go away and make your credit worse. But there is something you can do to eventually get it erased faster than 7 years from now...

Step 1:
Pay off your debt in one lump sum.

Step 2:
About 2 months later go to the Experian website and request a fraud alert. This won't hurt you at all and is just a precaution if you think someone may be trying to use your identity. It lasts 3 months, and all it does is makes it so that creditors have to call you and verify your identity if you are trying to get a new credit card.
Once you have placed your fraud alert you will be granted a free credit report to work with.

Step 3:
Analyze everything on your credit report and note anything that looks bad.

Step 4:
Dispute everything that you don't like, even though you are responsible for it. There is a dispute section on the experian website.

Step 5:
The burden of proof is now on the company. They must prove that you are responsible for the debt, late payment, etc. within 1 month, or the debt automatically gets erased. So keep checking your credit every month or two to see if it has gone away. And keep on disputing!

Step 6: The companies will get sick of proving your debts and most won't even bother in the first place(what advantage is it to them to waste their time with this?).

Step 7:
You should have great credit like me!
I fixed a couple stupid little things this way and have a 720 credit score.

Good Luck!

Answer 2

Geez, there are so many bad answers and inaccurate information in these answers I don't even know where to begin. Lets just ignore them and start over.

Need more info...what state do you live in? How old is this debt?

The only thing you need to know is this: There are only two ways to get a report deleted from your credit history.

1) The creditor deletes it
2) The creditor fails to respond to a dispute investigation from the credit bureau.

And as you found out, many creditors are not interested in helping you out, even when you pay them off.

Having an account marked "paid" does NOT remove negative information about it being in collections or having late payments.

So my suggestion is to send these guys another letter. Demand full validation of the debt, and offer to pay off the debt ONLY if they delete the report, or change it to say "paid in full as agreed" and remove any negative information.

If they refuse, ignore them. You will simply have to wait for the account to fall off after 7 years. BE SURE that you have the correct reporting date. The time period starts on the day you became delinquent, NOT the last transaction date, NOT the charge off date, NOT the reporting date. Make them PROVE what they date is as part of the validation process.

DO NOT pay off this debt, either in full or in payments. It will hurt your credit and (if payments are being made) restart the Statute of Limitations.

The only risk you are taking is them suing you. If the amount is small ($500) or if the collection agency is out of state, you are fairly safe from being sued.

In the meantime, there are ways to at can improve your score. Check out http://www.creditboards.com for hints on what you can do, and other good advice.

Answer 3

There is a great site on this I read a few months ago.
http://articles.moneycentral.msn.com/SavingandDebt/ManageDebt/ZombieDebtCollectorsDigUpYourOldMistakes.aspx

and

http://moneycentral.msn.com/content/Banking/Yourcreditrating/P121551.asp

There is a box in the middle of the second link titled "Related news and commentary on MSN Money". There are good links there too. I thought I knew a lot about credit until I went here. Did you know that your credit can suffer from a Library fine? I mean...GET REAL! Also when they say that after 7 years it is erased? Well, we have things that are over 10 years and they are still on there and they have been paid off. It's up to the Credit Bureau to get rid of it and they don't always do it.

Answer 4

How long ago did the debt go bad and how badly do these people want to pursue it? It can hurt your credit to pay them because the debt payment stays on your credit report until 7 yrs after you paid it, which could be years after the original debt drops off. So, anybody who looks at your report if still seeing evidence of the bad debt. If you think they're going to keep coming after you (these days, most do) then just pay them. If its only been a couple of years since this went bad, pay them.

Answer 5

if you don't need apply for any credit for the next 2-3 mth- you can pay this debt and be over with. in the future this bill will hunt you anyway and in most instances if you will apply for mortgage- this need to be paid. right after you will pay this debt- your credit scoring will drop ( nobody knows how many points), but it will be temporary and it will benefit you in the long run. the software credit agencies use if you paid your old collections or charge off- they read this like new activity on negative accounts and that is why credit score drop. if you will not apply for any credit in the next 3 years -if you wish, don't pay them and wait for the statue of limitation law to take care of this.

Answer 6

I had the same thing with a collection that was on my credit report. I paid the debt and they marked it paid in full; credit score went up 20 points. Woohoo!!

Answer 7

After 5+ years you'll be less likely to deal with collections since it's basically a charge off and things fall off the books. But still check your report annually, but you may have to pay to go back to '03 to check what's on your history since most places will give you a free copy, but anything more detailed you will have to pay a fee for.

Answer 8

If you don't pay it you run the risk of a CCJ (court judgement) this will not only lower your score but deter lenders altogether, and It will stay on your report for up to 10 years AFTER judgement date-pay it and add a note to your credit file, a credit referencing agency will do this for you free of charge once you have gotten your credit report from them

Answer 9

If you pay it, you open the account back up. Which means it will create a payment history. Your best bet, dont pay it . =) Regardless if you pay it off or not or even just make a payment, it will still be on your credit report. I would personally just wait until it falls off your credit report.

Answer 10

For some reason I like to read things when it states for "***** only" or your case credit scores. Well I must comment on the last sentance. IT MADE ME LAUGH! HAHAHAHAH trying to do the right thing I could care less. LOL I love it makes me laugh good job.