If I pay off a past-due account, such as a charge off or
a collection account, will that repair my credit?
It is quite difficult to repair your credit without somehow satisfying your outstanding debts. However, the act of paying off a debt will not improve your credit rating much, if at all. Negative credit is allowed to stay on the credit report for a maximum of seven and one half years, except for bankruptcy which may remain on the credit report for ten years. Under the old Fair Credit Reporting Act (FCRA), the seven year clock began ticking on "the date of last activity" or, in other words, when the last action took place on the account. Under the revised FCRA, the credit bureaus must start the seven year clock on the first payment that you missed that led to the collection or charge off status. Now, creditors and collection agencies aren't allowed to extend the reporting period by passing the account back and forth between agencies.
However, by paying an outstanding, delinquent debt you will change the account status to "paid collection," "paid was late," or "paid was charged off" - which will still stand out as a very negative listing. When you have outstanding debt, it is almost always prudent to seek professional help so that you may settle your debts without further damaging your credit. In some cases, it is even possible to negotiate the deletion of negative credit as part of the payoff.
Lexington Law - Legal and Effective Credit Report Repair. Learn more
More credit repair FAQs here.
It is quite difficult to repair your credit without somehow satisfying your outstanding debts. However, the act of paying off a debt will not improve your credit rating much, if at all. Negative credit is allowed to stay on the credit report for a maximum of seven and one half years, except for bankruptcy which may remain on the credit report for ten years. Under the old Fair Credit Reporting Act (FCRA), the seven year clock began ticking on "the date of last activity" or, in other words, when the last action took place on the account. Under the revised FCRA, the credit bureaus must start the seven year clock on the first payment that you missed that led to the collection or charge off status. Now, creditors and collection agencies aren't allowed to extend the reporting period by passing the account back and forth between agencies.
However, by paying an outstanding, delinquent debt you will change the account status to "paid collection," "paid was late," or "paid was charged off" - which will still stand out as a very negative listing. When you have outstanding debt, it is almost always prudent to seek professional help so that you may settle your debts without further damaging your credit. In some cases, it is even possible to negotiate the deletion of negative credit as part of the payoff.
Lexington Law - Legal and Effective Credit Report Repair. Learn more
More credit repair FAQs here.