Old debts January damage your credit score. Many cardholders think repaying the old debts can improve their credit score. They are wrong. Paying off an old debt does more harm than good.
In this article, I discuss how old debts hurt the credit score, why it’s not a good idea to repay them, and how a consumer can get rid of those debts. Read on with all your attention if you have old debts and want to wipe your credit report clean of them.
Damage when fresh
An unpaid debt affects your score when it is fresh. As the debt gets old, its impact on your credit score becomes weaker and weaker. If you have more than one debt, and pay off other debts in time, then the unpaid debt won’t hurt that much. However, if you have a line of debts, then that’s a problem. There’s no definitive timeline as to how long a debt takes to become an old debt.
Records that stay
Old debts stay on your credit report and hurt your credit score. If the lender hired a collection agency to get the money from you, than that record would also be found on your credit report. Seeing such records on your report, future creditors might think you won’t be able to pay off their debts.
How old is it?
It’s not always easy to mark a particular day as the delinquency date. That’s chiefly because the regulatory language it bears is often complicated. Some regard bankruptcy, and similar court action filing days as delinquency date.
However, some don’t agree with this method. According to them, the last delinquency date (assuming there are more than one) is the final delinquency date. As there’s a dispute, you can take advantage of it to write off the debt. Nevertheless, you need the help from an expert.
Get all three copies
Get your credit report from all three credit bureaus, and then tally them. Sometimes, one bureau registers an old debt, but another one doesn’t. If it happens with you, you can dispute the entry.
Let’s say your Equifax report shows a six year old debt, but your TransUnion report doesn’t show any such entry. In that case, you have a ground to dispute the old debt. Creditors send the report to bureaus, and bureaus then prepare the credit report based on the reports. The possibility of human errors or technical glitches is always there. You can take advantage of that.
Write to bureaus
A similar situation January arise if you write to the bureaus. If the debt is too old, then there’s a chance that the creditor doesn’t have the records. Many lending agencies fully digitized their works only recently, and some have lost data during the transition.
If you are lucky, then they don’t have any record of your loan. When you write to the bureaus, and the bureaus contact the lender, the lender won’t be able to show any record that could confirm the debt. And your debt will be written off.
The onus of confirming the date comes on your shoulder then. Have all your papers ready. The copies of bankruptcy filing can play a crucial role in establishing the delinquency date. When mailing to the credit bureaus, attach all these papers with your letter.
Try this only if you see all other doors for help are closed. Collection agencies, especially banks have a federal regulator. Regulators are government agencies and many a times, they are willing to help out the borrowers.
As I said, do this only if you get no response from the bureaus, or if they flatly tell you that they won’t be able to help you. That’s when you should look for help from regulators. Print out the complaint form, fill it out and send it to the regulating agency.
No, you don’t have to file a lawsuit. All you need to do is write a letter to the creditors mentioning you might take the legal route if they don’t review the records. Creditors often review records but don’t admit that because if they do, then the old debts would come off of the borrower’s credit report.
Attorneys can give you the best suggestions to deal with situations like this. Sometimes, creditors review the old debts after getting letters from borrowers, but not always. Lawyers, who are specialized in consumer rights know how to influence creditors, so that they remove old debts from the report.
What do you think of the article? Do you have an old debt that you want to remove? Would you follow the strategies discussed here? Let us know in the comment section.
Tina Roth is a personal finance blogger. In addition to being owner and solo-editor at ProFinance Blog, you can find her work on many other online financial journals. Follow Tina in Facebook, Twitter, Google+.