What Can I Do About Old Debt Showing On My Credit Report?
Trying to buy a car but your credit report shows old debt? There are things you can do to improve your credit report in order to become more credit worthy. But first, you must decide how to deal with your old debt. What do we mean by the term "old debt"? Typically, debt that has been charged off by the original lender and is now in the hands of a collection agency, attorney or it has simply been written off is old debt. The good news is that there is a statute of limitations in which creditors are given a certain amount of time (in years) to collect on a debt through legal recourse. Depending on whether your debt is secured or unsecured, collectors of debt have several options in which to proceed to collect. Here's the breakdown:
The Original Lender (Creditor)
The original lender can pretty much do what they deem necessary to collect. They can call you numerous times a day. They can send your debt to a debt collection agency. They can hire an attorney to file a judgment in order to collect a debt by garnishment of wages, freezing bank accounts or putting a lien on your home. There are no protection laws for debtors that cover the original lender in their process.
Collection agencies
If the original lender hires someone to collect your debt, those actions do fall under the protection of the Fair Debt Collection Practices Act. A debt collection agency or attorney acting as a debt collector must follow the guidelines found in this law. Click the link above to obtain more information.
Time barred debts
Once you go beyond that statute of limitation (this varies in each state) a debt becomes time barred. You still owe the debt but there are rules and regulations which collection agencies must abide by. Collection agencies can continue their process to collect the debt however, a lawsuit cannot stand over a time barred debt. As long as you are able to prove the debt has reached the statute of limitations, the agency will not be able to garnish wages, repossess items of value such as a automobile, freeze your checking account or put a lien on your home in order to collect the debt.
Options: To Pay or Not to Pay?
1. If the debt is still under the statute of limitations, you can either ignore it or pay it. If the balance is small, a creditor may not go to the extreme to collect it. However, remember that creditors place different fees on unpaid debt; late fees, over the credit limit fees and increased interest fees. Your low balance debt can quickly balloon to a much larger balance especially if attorney fees are added. Not paying on a debt for several years may put you in a position of not having enough financial resources to repay the debt in the future.
2. If the debt is past the statute of limitations you can dispute it with the credit bureaus as old debt and not be reflective of your current financial situation. Old debt can be removed from your credit report after 7 years (except bankruptcy). You still owe the debt however. If at anytime you promise to repay the debt or make a partial payment, you have restarted the clock and the statute of limitations starts all over again.
If you decide to repay the debt, make sure you know where your debt really lies. Collection agencies are notorious for trying to collect on a debt they no longer have the contract for. Paying a collection agency may not get your balance paid in full. They may never send the payment to the owner of the debt… the original lender. It is best to call the original lender. They can tell you where the debt is and if it was sold. Once the debt is sold, the new buyer becomes the original lender. Tracing the owner of the debt can be time consuming but it is important to make sure money goes to the proper place. Also be sure to keep any documentation of payment. If it doesn't shows up on the credit report correctly, you will be able to show that proof to the bureaus and have the credit report updated to reflect the correct information.
If you have question concerning old debt you may contact us at 800-553-8621, Monday – Friday 9:00AM to 5:30PM. Family Life Resources is a non profit agency that can educate you concerning your debt issues. Whether you want to become more credit worthy, settle old debt or just get an overall picture of your finances, we are here to help. Like us on Facebook and follow us on Twitter for updates.