Saturday, January 24 2015
Recently I received a call from a prospect that was wondering if he should pay off a 4 year old collection in order to get it removed from the credit report. He owed less than three hundred dollars and was wondering if he should pay that off? He was confused because his neighbor told me that the only way you could get it removed was by paying it!
My advice to him was that he should NOT Paying that collection. Why is that? You see if he were to pay off that four year old collection, he will wind up with a paid collection as a today, rather than unpaid collection from four years ago.
When you are thinking about paying off old collection you have to consider the date reported. The older the reporting date (regardless of payment status) the better. If he were to pay off that collection he would be changing the date reported to today. The result of that action will tank his credit score at least in the short term. He would actually reset the clock for that activity (Date Reported) which could then keep that collection on his credit report for another seven years from that point.
A four-year-old collection with a small amount like that you should just ignore that and let the collection just run its course. Now the good news is that did check the state statute of limitations in his state (although the Fair Credit Reporting Act is a national law). He told me that his State law was seven years, so three more years the collection will fall off. Just remember that if you do have a collection account and it is less than a few hundred dollars, and three or four years old, don’t worry about it, focus on other things on your credit report.