DON’T Pay that Bill!
When I read this article, “When Paying Bills can Hurt Your Credit,” I knew I had to share it with everyone. I never knew that you could do yourself more harm than good by paying off your old debts.
When paying bills can hurt your credit
Now that you’ve decided to clean up your act, use caution: Settling some old debts can harm your credit score. Here’s how to do the right thing the right way.
By Liz Pulliam Weston
Borrowers who try to pay off old delinquencies, charge-offs and collection accounts often learn the hard way: Sometimes, doing the right thing does the wrong thing to your credit.
Thanks to the sometimes bizarre quirks of credit scoring, state statutes of limitations and the federal Fair Credit Reporting Act, consumers can’t necessarily assume that paying off old debts will improve their financial situation or make them a better risk in lenders’ eyes. Add in the tactics of some unethical collection agencies, and you have a real quagmire.
“It seems so easy, but it’s not,” sighs Steve Rhode, a private money counselor and co-founder of the Rockville, Md., credit-crisis counseling firm MyVesta.org.
Here are just some of the problems that can arise:
If a creditor has already charged off an account and sent it to collections, paying may not help your credit score and might hurt it.
Arranging a payment plan or even inquiring about an old debt can restart the statute of limitations in some states, allowing creditors to sue you.
Simply contacting a creditor about a past-due account can revive its interest in trying to collect, leading to harassment and hardball tactics.
Unethical collection agencies may promise to upgrade how your debt appears on your credit report in exchange for payment — then not follow through or make matters worse by making the debt seem more recent than it is.
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