Don't make a partial payment on an old debt unless…

Part 14: As part of series of articles (blogs) regarding Credit and Credit Score, here we go:

Disclaimer:

Every effort has been made to make these articles as complete and as accurate as possible, but no warranty or fitness is implied.
The information provided is on an “as is” basis. The author shall have neither liability nor responsibility to any person or entity with respect to any loss or damages arising from the information contained in this book.

The author is not engaged in professional services. If professional advice or other expert assistance is required, the services of a competent professional person should be sought.

Don't make a partial payment on an old debt unless…
Partial payments can restart the time period for when you can be sued and also restart the time period for how long the negative information continues to stay on your credit report.

Example: Let’s say you had a debt in June 2010 for the amount of $1800 and you could not pay it. After several attempts, finally the creditor sold and assigned your account to collection agency “A”. Collection Agency "A" tried for several months, but could not get hold of you. They sold their accounts to collection agency “B”. Now (in July of 2013) collection agency “B” is calling you every day and leaving you messages. You are tired and wondering if you should talk to the collection agency and resolve the issue.

Scenario 1: You ignore them, don’t talk or communicate with them and don’t send them any money at all.

Consequences: That negative information stays in your file until June of 2017 (7 years after your last activity). However, since the account is more than two years old, it has less of a negative impact on your credit score than a newer debt, regardless of the amount.

Scenario 2: You are tired of the calls and you talk to the collection agency and come up with a payment plan, e.g., $100/month.  You paid the first $100 in July 2013, but do not pay after that time.

Consequences: Now you have restarted the time period for how long the negative information continues on your credit report (e.g., 7 years). The new date for this account to fall off from your credit report is now July of 2020, (7 years after your last activity which was July of 2013). You penalize yourself and add an additional three years and one month to your debt.

Scenario 3: You would like to take care of your debt, but don’t have enough money. You want to make payment arrangements and pay each month until you pay off or settle your account. You also want to make sure this action shows some positive information on your credit report and when you finish all your agreed payments the collection agency reports the account as “paid in full”, “paid as agreed”, or removes that item from your credit report all together. Consult an attorney to find out the best way to handle this situation.

Consequences: Since the attorney determines the best way to handle this situation for you, you should be protected.

HOW to overcome the problems with your credit history and credit score?
Knowledge, education, awareness, practice and discipline are the essential keys to being successful on any subject. The book, "Credit Score Tips and Tricks", provides you information, tools, techniques to educate yourself and manage your credit report & credit score, and therefore manage your finances effectively at no additional cost.

I have decided to bring and share with you, chapters or sections of my book, Credit Score Tips and Tricks, as series of articles here. This is the number 14 of such a series.

I also created and manage a GROUP in ActiveRain, Credit Reports and Credit Scores, Please feel free to join and share your thoughts and experiences.

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