The Four Considerations Before Paying Off Old Debts

By Author: Elliot Spalding
Total Articles: 14
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Being in the process of rebuilding your credit score, you will have the choice of paying off your old delinquent accounts. These are accounts you have maybe defaulted on and now that you are in better financial health, you need to make the decision whether to pay these off. There are several considerations you must make.

First, paying these old accounts could hurt your credit score. This is because it the act of paying them will make the debt seem more recent, but in fact they are still old. This is the case with many of the older scoring models. New models like the FICO score take this into account and prevent this from happening. It really depends on the scoring model you are using.

Second, a payment to these old debts is almost an admission of guilt. If you were unaware you can be sued for your unpaid debts. There is also a statue of limitations to which this can happen to you. This depends on the state. Paying these debts can extend the statute of limitations and expose you to being sued. So the best idea is often to consult a lawyer before paying them.

Third, the person you are paying might ...
... not be the original collector. This is because the debt is often sold to a collection agency. Dealing with these agencies can be difficult and you need to protect yourself. Some of these will do just about anything to get payment from you like lying and other scary practices. So if you can contact the old creditor and attempt to deal with them first. This will be a much safer practice.

Fourth, how will the account be reconciled? If you want to pay these accounts you need to have a strategy to what you want to accomplish. The ideal situation is to make an agreement with the account as to if you pay they will report the account as paid as agreed. You want to avoid them reporting the account as settled. When trying to get this done it is best to have a lump sum you are willing to pay them. This will make it easier to negotiate.

This is just a short list, but these are the main areas you need to consider. Most people think that if the debt is old enough it will just go away. The truth is you owe the money to you either pay or it is wiped out by bankruptcy. Also, it is almost impossible to get a mortgage when you have old unpaid accounts on your credit report. So paying them is an obligation you need to realize. Also, it is the final piece in rebuilding your credit.
To read more about how to raise a credit score, visit Elliot's website. There you will find out what is considered a good FICO score