Today is the 1 year anniversary of when I started this blog.
Congratulations to me!

I originally started this blog telling about my inappropriate use
of credit years ago when I was a young college student.

I have covered many different topics since that first day.
I’m now coming full-circle and will start talking about credit once again.

Question:

I fell behind on some bills more than 7 years ago.
They were charged off by the lenders. I have now been contacted
by a collection agency that has put the debt on my credit report.

Can they still collect on it after 7 years, even if it was charged off?
Can I have it removed from my credit report because it is more than
7 years old?

How will this affect my credit score?

If I pay it off, will it be removed and improve my credit score?
And one last question - How will it affect my credit if I settle with them
for less than the full amount. Any advise would be greatly appreciated.

Answer:

Here are the answers to your questions and some facts about collection
accounts and credit reports. A collection account is a negative as far as
your credit is concerned. You are smart to investigate how long it can be
reported and what you can do about it.

Just ignoring it doesn’t make it go away.

Usually, when you fall far behind on a credit account, the lender will charge it off
which is called a “charge off‘'’. That means they must treat it as a bad debt
for accounting purposes, but it does not mean you are off the hook for payment.

Usually the debt will be turned over to a collection agency which will probably
charge you additional fees and interest.

As far as your credit reports are concerned, collection or charge-off accounts
can be reported for up to 7 years and 180 days from date you first fell behind
on the account leading up to it being charged off.

This is true whether the debt is paid off or not.

Here is an example:

• May 1, 2000: You miss a payment and keep falling further behind.
• October 1, 2000: The account is charged off by the lender.
• April 1, 2001: The account is picked up by a collection agency.
• October 19, 2007: Collection account and charge offs
  must be removed from your credit reports.

The account can be reported for seven years and 180 days
from May 1, 2000 – which would happen on October 29, 2007.

It doesn’t matter when the collection agency bought the account.
It doesn’t matter what date of last activity is listed on your credit report.

Under federal law, (the Fair Credit Reporting Act), the collection agency
is required by law to let the credit reporting agencies know the original date
the debtor fell behind (in this example, May 1, 2000).

The credit reporting agencies must report that information.

However, if you’ve followed this blog from the beginning and read about
my tale of w(owes), you know from my personal experience, that many times
the collection agencies don’t report the original date, and the negative item
doesn’t show up on your credit report until years later, and then stays on
for 7 years and 180 days after that.

In your case, it sounds like perhaps the collection agency is not reporting
the original date you fell behind. It sounds like your debts may be too old
to be reported. If so, you can dispute the account with the credit reporting agencies.

Monitor your credit report and make sure it is removed and is not reported again.
You can also file a complaint with the FTC (Federal Trade Commission).
They are supposed to enforce the federal credit laws.

About your question about whether paying the collection account will help your
credit rating, the answer is absolutely not. Paid or unpaid, a collection account
is a negative item. The same is true if you settle it for less than the full balance.

However, if you do not pay a collection account, you may be sued.
And if you lose the lawsuit, a judgment will appear on your credit report
and will hurt your credit for another seven years.

This brings up another issue to consider… whether or not the collection agency
can still successfully sue you to collect the debts. Every state has what is called a
“statutes of limitations” for debts.

The statute of limitations that applies to your debts could last for two years –
or twenty years – depending on the type of debt and the state law.

As an example, let’s say in your case the statute of limitations for these debts
are four years. The collection agency can still try to collect after four years.

But, if it takes you to court, and you can show that the debts are outside the
statute of limitations, the agencies will not likely succeed in winning their
case against you.

When it comes to this collection accounts, make sure you understand your rights.
It would be a good idea to get legal advice. Contact a local consumer law attorney.
The cost of living is sooo expensive. It’s easy to get into credit trouble.
The solution is to Earn More!

TAGS: bad debt, charge off, collection accounts, collection agency, credit rating, Credit Report, credit score, Fair Credit Reporting Act, Federal Trade Commission, FTC, judgment, statutes of limitations

This entry was posted on Tuesday, October 9th, 2007 at 5:24 pm and is filed under Credit Reports, Credit Card Debt. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.