Question about my Credit

[Bo Hurley]

I called the credit agency and they said I had $200 from 5 years ago that was now on something called a "Collection Account". I guess it means the collectors were after it and reported it when they couldn't collect. Can somebody please let me know how bad this will screw up my credit? If I pay off this $200 now will that clear up my record? Or is it because the $200 was on there for like 5 years that will still screw up my credit even if I pay it now?

---

Members don't see this ad.

 

[subtle1epiphany]

I called the credit agency and they said I had $200 from 5 years ago that was now on something called a "Collection Account". I guess it means the collectors were after it and reported it when they couldn't collect. Can somebody please let me know how bad this will screw up my credit? If I pay off this $200 now will that clear up my record? Or is it because the $200 was on there for like 5 years that will still screw up my credit even if I pay it now?

Well, it's weird that you called them and they talked to you about your credit history, but if you say so.
I had something similar happen to me, called identity theft.
Paying it makes no difference, the fact that it's been there for 5 years is what's impt. Mine was ID theft, if yours is also, then you need to make sure to report it to the credit record corps: transfax, equifax, and experian. if you notify one of the three they all know, and call the local police to file a report. follow up on all the paperwork and do all you can to get the clear.
if it's due to your own self, then for shame!

best of luck!

 

[tlew12778]

If you owe it, pay it now. I can't believe they waited 5 years to send it to collections. Are you sure it's not already in collections? If you manage to pay if before it gets to collections, that's better. You will only appear "late 90+ days" as opposed to "in collections". Both affect your credit score, but both will disappear over time (7 years).

 

[OSUdoc08]

I called the credit agency and they said I had $200 from 5 years ago that was now on something called a "Collection Account". I guess it means the collectors were after it and reported it when they couldn't collect. Can somebody please let me know how bad this will screw up my credit? If I pay off this $200 now will that clear up my record? Or is it because the $200 was on there for like 5 years that will still screw up my credit even if I pay it now?

All I can say is that it would be way better off if you paid that sucker.

 

[GATORade]

I actually just completed the process of removing such an account from my credit report. I recently ordered a credit report for the school that I will be matriculating at in the fall. To my surprise, the report contained an account that was labeled as “charge off”, which is a collection that has been paid off. It turns out that the account was from a department store credit card that I used when I was an undergrad. I never received a final statement for a $53 charge made back in 2000. I was contacted by a collections agency in 2002 and I immediately paid the bill, which was up to $200 after interest. I was told by the collections agency that if the bill was immediately paid, the account would be labeled as a “charge off” on my credit report and wouldn't affect my credit. Like an idiot, I took her word for it any never followed up by ordering a credit report until recently. So when I received an e-mail from the school stating that there was “adverse information” on my credit report I totally freaked out. I called the department store's financial department and after about a week of phone tag I finally spoke with the gentleman in charge of my account. I explained to him how I never received the statement and that I honestly forgot about the charge. I also explained to him how having this information on my credit report will affect my financial aid for medical school. It turns out that this guy graduated from my Alma Mater and was in the process of applying to law school. He told me that he recently submitted his credit report to prospective colleges and was familiar with the process. I wound up talking to this guy for around 15 minutes about all sorts of things related to professional school applications. At the end of our conversation he said that he will send a letter to the three major credit agencies informing them to remove the account from my credit report and that I should follow up with a formal dispute claim that could be done on-line for the three major credit bureaus. I had to first order a credit report from each bureau prior to making the dispute, but the $30 it cost me to do so was obviously worth it. Once the dispute was concluded (about 30 days later) I received an updated version of my credit report from each of the three credit bureaus. The account was removed from all three. So I suggest you first contact the company and attempt to dispute the account with them directly first. After that order a report from each of the three major bureaus and file three individual disputed on-line. By the way, the “charge off” on my report brought my credit worthiness from “fair” to “excellent”, so it would obviously benefit you to pay the account and attempt to remove it from your report. I hope this helps.

 

[Bo Hurley]

Hey thanks for the reply guys.

Yeah I checked again and the account is in collection. I guess that is what they meant by "Collection Account". The reason I never paid it off was because this was the first time I learned about my credit report.

If I don't pay off this $200 now will it continue to absorb interest so that it will be a whole lot more later...like thousands of dollars???!!! Thanks for the help.

 

[tlew12778]

I actually don't know if collections accounts accrue interest but I am sure they accrue fees. In any case, the damage that it will cause to your credit score will result in you paying higher interest everywhere else (bc you will be seen as a credit risk) so just pay if off now. Borrow the money if you don't have it. $200 is not worth 7-10 years of being considered "risky". The longer you leave the account in collections, the longer those 7-10 years will drag out.

 

[tRmedic21]

www.creditboards.com

There's lots of info, and some of what you're getting here isn't going to help you one iota in the long run....

 

[GuyLaroche]

If you owe it, pay it now. I can't believe they waited 5 years to send it to collections. Are you sure it's not already in collections? If you manage to pay if before it gets to collections, that's better. You will only appear "late 90+ days" as opposed to "in collections". Both affect your credit score, but both will disappear over time (7 years).

ABSOLUTELY NOT!!!!!!

You must NEVER pay a collection that has been posted to your account 5 years or more ago. This is the WORST advice. The damage that such a collection has done to your FICO score has been done, and there is nothing you can do about it. When you pay this sum that is in collection, it will not raise your score so you do not have to pay it - especially for a paltry $200. Don't believe me, ask any savvy financial advisor.

 

[edmadison]

ABSOLUTELY NOT!!!!!!

You must NEVER pay a collection that has been posted to your account 5 years or more ago. This is the WORST advice. The damage that such a collection has done to your FICO score has been done, and there is nothing you can do about it. When you pay this sum that is in collection, it will not raise your score so you do not have to pay it - especially for a paltry $200. Don't believe me, ask any savvy financial advisor.

Uh, unless you actually owe the money. Then not paying it is just stealing.

Ed

 

[GuyLaroche]

Uh, unless you actually owe the money. Then not paying it is just stealing.

Ed

Stealing or no, paying the money 5 years after isn't going to help your credit. You could pay it if you want but you're just suffering twice. They damage to your credit has already been done. And paying collections so that they instantaneously affect your FICO score will absolutely do nothing to help it.

 

[mshheaddoc]

Stealing or no, paying the money 5 years after isn't going to help your credit. You could pay it if you want but you're just suffering twice. They damage to your credit has already been done. And paying collections so that they instantaneously affect your FICO score will absolutely do nothing to help it.

UH ....are you a financial advisor? I hope not because I feel bad for your clients if you were. I suggest you learn a little more about credit before you spout out advice.

To the OP - yes you need to pay off that collection because HELLO - guess what people, its NOT going to go away ... and it WILL effect your future credit rating. When you go to apply for a mortgage, they will either deny you BASED on that collection or they will make you pay it off ... so either way. Get it taken care of. This will CONTINUE to effect your credit report because your score is based on delinquent accounts that are outstanding.

If you don't know what the charge is then call the agency to get the collection information and find out if its yours. If its NOT yours, then follow the procedure Gatorade suggested. If it is, pay it off because it WILL collect interest and WILL continue to hurt your report ... any other specific questions let me know. You can often work out a payment plan with the collection agency if you work with them to pay it off

 

[Arista.MD]

It's up to you if you want to pay it or not. As it has been said here the damage to your score is done. If you do not want to pay, don't. Either way, it will show up on your credit report for only another 2 years. After that they are not allowed to report any more. There could be another catch here. I don't remember exactly, you have to check with someone that knows the law very well, and don't talk anything to the collection agency before that. They are allowed to report the charge 7 years after you made the last payment on it. So if it is 7 years from when you pay it off, it is bad, if it is 7 years from when they gave you to collection it is another story.

And do whatever is right for you. There are companies who file for bankruptcy for millions and millions of dollars. I would not worry about $200. If you feel bad about it, give the money to a good cause, like the homeless guy at the street corner or something. Credit card companies are like sharks, they never forgive you if you are 1 day late, and they charge $30. Don't feel bad about not paying the charge if you don't have.

You should definetly try the credit boards. There is also a site about credit that is run by a non profit law firm, they know the law and they give you good advice on what affects credit score and stuff. Don't ask advice on this board, because none of us are obviously financial advisors, and some of us are talking about stuff from our own experience or from the experience of our friends, and others are just giving advice on what people should do in a perfect world. But since there is no such thing as the perfect world you should definetly try the credit boards and the credit lawyers and see what they say. Good luck!

 

[GuyLaroche]

UH ....are you a financial advisor? I hope not because I feel bad for your clients if you were. I suggest you learn a little more about credit before you spout out advice.

To the OP - yes you need to pay off that collection because HELLO - guess what people, its NOT going to go away ... and it WILL effect your future credit rating. When you go to apply for a mortgage, they will either deny you BASED on that collection or they will make you pay it off ... so either way. Get it taken care of. This will CONTINUE to effect your credit report because your score is based on delinquent accounts that are outstanding.

If you don't know what the charge is then call the agency to get the collection information and find out if its yours. If its NOT yours, then follow the procedure Gatorade suggested. If it is, pay it off because it WILL collect interest and WILL continue to hurt your report ... any other specific questions let me know. You can often work out a payment plan with the collection agency if you work with them to pay it off

I think it is you who should learn a bit about credit before suggesting I should. While I am not a financial advisor, I do know quite a bit about credit, and I know for a FACT that collections will adversely affect your credit whether you pay them or not but do so only for a specific length of time. If you pay it, the damage will not be corrected. So, there! You go learn about credit and stop speaking as if you know the slightest thing about it - as it is clear that you do not!!!!!!


And what on earth are you talking about? Collect interest? Um, yeah, you don't know what you're talking about. If you read the OP's posting, he said it is a 5-yr old collection. Trust me, there is nothing he can do at this point, and his FICO score most likely does not factor this collection into it. Go to the Suzy Orman website. Learn.

 

[tlew12778]

GuyLaroche - I'm an advisor on a Debt board. So I know what I'm talking about.

To the OP, here is a link to the Fair Credit Reporting Act. It's long and wordy with lots of legal-ese so I doubt you'll want to read it, but that's the actual law regarding your credit report.

The 7 years starts from when they last contacted you, not from when you made the charge or were late with your payment. This is something you will want to keep in mind. I got this off of bankrate.com:

13 Things you never knew about your credit
12. Bad news comes off in seven years.
Some of it does. Chapter 13 (reorganization of debt) disappears seven years from the filing date. But if you filed Chapter 7 bankruptcy (exoneration of all debt), the window is 10 years from the filing date.

On the good news side, accounts in bankruptcy can be deleted seven years after the date of your first missed payment, so those individual pieces may disappear before the word "bankruptcy" on your report. And if you pay off or close an account that had no delinquencies or problems, it, too, remains on the record for 10 years rather than the previous seven, say Experian experts. Again, this means positive information hangs around longer, as a consumer benefit.

But beware unpaid bills. The creditor has the right to slap the issue on your report three times, for a total of 21 years, says Luther Gatling, president and founder of Budget and Credit Counseling Services in New York. Whenever you pay up, even if that's year 21, the record gains new life for an additional seven years. That's why he tells clients to insist credit-reporting agencies mark such situations "satisfied in full" in the notations.

Furthermore, there is a trend now for creditors to pull your report and if they see a negative mark, they will jack up your rate. I believe MBNA does this (for example). So even if you don't want to settle this account (even though, IMO, you should), know that it can affect all your other accounts. Here's an article about that.

Finally, to play devil's advocate with myself, here is a link from an article from MSN money entitled When Paying Bills Can Hurt Your Credit.

I for one believe that all debts that you incur should be paid, but I know not everyone feels this way.

 

[mshheaddoc]

I think it is you who should learn a bit about credit before suggesting I should. While I am not a financial advisor, I do know quite a bit about credit, and I know for a FACT that collections will adversely affect your credit whether you pay them or not but do so only for a specific length of time. If you pay it, the damage will not be corrected. So, there! You go learn about credit and stop speaking as if you know the slightest thing about it - as it is clear that you do not!!!!!!


And what on earth are you talking about? Collect interest? Um, yeah, you don't know what you're talking about. If you read the OP's posting, he said it is a 5-yr old collection. Trust me, there is nothing he can do at this point, and his FICO score most likely does not factor this collection into it. Go to the Suzy Orman website. Learn.

I'm not even going to respond to this because I've been in the credit business for 4 years ... If that is all you're getting from suzy ... I suggest you read a little more. I'm a lender and if there is a collection, guess what ... you have to pay it off or you're not getting a loan with me. And FYI, I work for one of the top mortgage companies in the nation.

 

[GuyLaroche]

I'm not even going to respond to this because I've been in the credit business for 4 years ... If that is all you're getting from suzy ... I suggest you read a little more. I'm a lender and if there is a collection, guess what ... you have to pay it off or you're not getting a loan with me. And FYI, I work for one of the top mortgage companies in the nation.

Having purchased my own home, I know "lenders" don't always know what they are talking about. This is yet another evidence of that.

 

[mshheaddoc]

Having purchased my own home, I know "lenders" don't always know what they are talking about. This is yet another evidence of that.

Believe what you like. I have no further comment to ignorance.

edit: please refer to tlew12778's post for confirmation of my statements above.

 

[GuyLaroche]

Believe what you like. I have no further comment to ignorance.

edit: please refer to tlew12778's post for confirmation of my statements above.

"Ignorance". Really? That is perhaps the greatest ill in this country. The mentality of resorting to name-calling when one isn't agreed with is just baffling to me. Well, I maintain my stance and I certainly don't think you're ignorant. I'm just certain you aren't well versed in collections and how they affect your FICO score. It doesn't make you "ignorant". The fact that you work for a "top mortgage company in the nation" doesn't make you anymore enlightened either. Forget learning about credit. How about the art and grace of debate?

 

[MoosePilot]

"Ignorance". Really? That is perhaps the greatest ill in this country. The mentality of resorting to name-calling when one isn't agreed with is just baffling to me. Well, I maintain my stance and I certainly don't think you're ignorant. I'm just certain you aren't well versed in collections and how they affect your FICO score. It doesn't make you "ignorant". The fact that you work for a "top mortgage company in the nation" doesn't make you anymore enlightened either. Forget learning about credit. How about the art and grace of debate?

I bought a house, too. Does that make me qualified to debate? I want in, I want in!!

I saw a doctor once and then paid my doctor bill. I'm going to see if that'll let me bypass med school. I heard on a website that it might.

 

[GuyLaroche]

I bought a house, too. Does that make me qualified to debate? I want in, I want in!!

I saw a doctor once and then paid my doctor bill. I'm going to see if that'll let me bypass med school. I heard on a website that it might.

I'm sure you're trying to make a point in a funny way, but I don't quite get it. If you purchased a house, and did so wisely, you'd have done your research quite well. That said, you should be qualified to certainly debate with any lender. Similarly, if you seek medical care, you should also do your homework quite soundly. Certainly, you should be able to debate with your doctor about your own health and healthcare. What is your point?

 

[MoosePilot]

I'm sure you're trying to make a point in a funny way, but I don't quite get it. If you purchased a house, and did so wisely, you'd have done your research quite well. That said, you should be qualified to certainly debate with any lender. Similarly, if you seek medical care, you should also do your homework quite soundly. Certainly, you should be able to debate with your doctor about your own health and healthcare. What is your point?

My point, which I tried to make humorously versus just plainly stating it, is that you do appear ignorant. Research is great, but I research many things in the course of my life to gain a deeper understanding. I still don't mistake that for the kind of in-depth knowledge I would gain if that was my career field. I simply don't understand that level of cockiness, maybe you can explain it to me.

Further, pointing out someone's ignorance isn't an insult, it's an observation. Calling you stupid would be another matter. Ignorance can be remedied if you recognize it, admit it, and rectify it. Stupidity is another matter.

 

[GuyLaroche]

My point, which I tried to make humorously versus just plainly stating it, is that you do appear ignorant. Research is great, but I research many things in the course of my life to gain a deeper understanding. I still don't mistake that for the kind of in-depth knowledge I would gain if that was my career field. I simply don't understand that level of cockiness, maybe you can explain it to me.

Further, pointing out someone's ignorance isn't an insult, it's an observation. Calling you stupid would be another matter. Ignorance can be remedied if you recognize it, admit it, and rectify it. Stupidity is another matter.

You have made very bad arguments that betray the fact that you really haven't a clue on the discussions that preceded your ill-formed post. "Ignorant" is really a tired word, and those that use it the most are most guilty of it. I believe your implicit reference to me as "stupid" is a TOS violation, and I will draw the attention of the moderators to it.

 

[MoosePilot]

You have made very bad arguments that betray the fact that you really haven't a clue on the discussions that preceded your ill-formed post. "Ignorant" is really a tired word, and those that use it the most are most guilty of it. I believe your implicit reference to me as "stupid" is a TOS violation, and I will draw the attention of the moderators to it.

I've made bad arguments? My argument was all opinion and I presented my opinion pretty clearly. You appear to me to be ignorant about the topic you are choosing to address. I believe you also appeared this way to another poster. When she commented, you claimed she insulted you.

If you want to tell the mods I implied you're stupid, that's definitely up to you. I was merely trying to point out the difference between a comment on your knowledge of finance and your personal intelligence. I think you get the difference, because when you're called ignorant you just whine, but when you think you're being called stupid you also become a tattle-tale

Oops, I called you a tattle-tale, too.

 

[GuyLaroche]

I've made bad arguments? My argument was all opinion and I presented my opinion pretty clearly. You appear to me to be ignorant about the topic you are choosing to address. I believe you also appeared this way to another poster. When she commented, you claimed she insulted you.

If you want to tell the mods I implied you're stupid, that's definitely up to you. I was merely trying to point out the difference between a comment on your knowledge of finance and your personal intelligence. I think you get the difference, because when you're called ignorant you just whine, but when you think you're being called stupid you also become a tattle-tale

Oops, I called you a tattle-tale, too.

I'm reading this post, and I can't even find the substance on which any response from me would hinge. Your posts are really just filled with - for lack of a better word - silliness. I have tried addressing you in private and I have also reported you to the moderators. Your participation in the OP's thread has resulted in no constructive input. Nothing is ever gained by insulting others.

To continue responding to you would do little to answer the OP's concerns. I do hope you learn to be civil.

 

[MoosePilot]

I'm reading this post, and I can't even find the substance on which any response from me would hinge. Your posts are really just filled with - for lack of a better word - silliness. I have tried addressing you in private and I have also reported you to the moderators. Your participation in the OP's thread has resulted in no constructive input. Nothing is ever gained by insulting others.

To continue responding to you would do little to answer the OP's concerns. I do hope you learn to be civil.

What did I lend to the OP? One more opinion that you're mistaken and not to listen to you. Maybe that's helpful if he wasn't certain.

To continue to respond to me would do little to answer the OP's concerns and yet you do it anyway... because it's conflict and you don't want to lose? Well it's not. I simply stated that I think you're wrong and you stated something that is incorrect with way too much confidence, which could easily lead the OP down the wrong path. You think you're right. Fine, is there really anything else to be said? If you think there is, I'd suggest citing some factual data to back yourself up. Cite some independent source of information to confirm what you've said. You've got the opportunity to make me look silly... go ahead.

 

[GuyLaroche]

I am probably just restating what Arista.MD so eloquently wrote. Paying a collection will absolutely not affect your FICO score. The damage has been done and for seven years, you will pay the consequences by having a low score. (No one actually knows how this score is calculated). If you don't believe me - as it appears many don't - see below:

http://www.yourbestlo.com/best1/ficoo.htm
Pay your bills on time. Delinquent payments and collections can have a major negative impact on your score.
If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your score.
Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years.
If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. This won't improve your score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.

If you still are unsure, see below:


http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/28/BU170831.DTL&type=business
Even if the collection agencies had notified Equifax of Knight's eventual debt repayment, it probably would not have improved his credit score by much, if at all.
Craig Watts, a spokesman for Fair, Isaac, says credit scores attempt to predict whether someone will repay their debts, and past defaults or delinquencies are given more weight than ultimate repayments.

But as Arista.MD pointed out - and in the most respectful of ways, I might add - there is the human factor. This was certainly the point mshheaddoc, a mortgage broker, was trying to make. According to her, if you do not pay the collection, she will not loan out the money. Fine. That's the way they do things in her company. Therefore, while the FICO score will not improve upon repayment, an individual broker or lender may look at the collection and consider you a risk. However, I'd like to see a lender who wants to have a successful, competitve business deny a person with a score of 790 but some measely collection of $200 a loan. It just will not be a wise business decision for that lender. For a discussion of these ideas, see:

http://community.lawyers.com/messageboards/message.asp?channelId=26&subId=&mId=501234&mbId=82Yes, you are right it does not make a difference on the FICO score, but it will make a difference to the person who is going to decide whether to risk giving you the money or not.

Finally, my posts were meant to aid the OP and not to advance any high perceptions that nameless, faceless people behind the screen might have of me. I am only trying to help as countless other people have helped me on this website. That said, I suggest you refrain from angry tantrums, ill-formed arguments peppered with foul and offensive retoric. Civility will only enhance the debate. It is through good debate that the truth is often revealed. I reserve the right to be wrong.

Anecdotally, to this day, I have a $130 collection on my account and I have a score of 792. I have yet been turned down for a loan. This is why I feel very strongly on the subject.

 

[GuyLaroche]

I suppose your silence is the loudest declaration of defeat!

 

[MoosePilot]

I suppose your silence is the loudest declaration of defeat!

Sure. This is a proof you see this as conflict to be won. I had my say and I think our fellow readers know the difference between advice that says not to pay a legitimate debt and advice that says to live up to your obligations. Incidentally, in your first post you said five years...

ABSOLUTELY NOT!!!!!!

You must NEVER pay a collection that has been posted to your account 5 years or more ago. This is the WORST advice. The damage that such a collection has done to your FICO score has been done, and there is nothing you can do about it. When you pay this sum that is in collection, it will not raise your score so you do not have to pay it - especially for a paltry $200. Don't believe me, ask any savvy financial advisor.

So now when you post seven years and just ignore the discrepancy, I'm supposed to act like you're a genius for doing your research and posting it?

Anyway, have fun with your expertise. I've said what I intend to.

 

[GuyLaroche]

So now when you post seven years and just ignore the discrepancy, I'm supposed to act like you're a genius for doing your research and posting it?

Dude, you are not reading these statements properly. My God! Are you in medical school? The OP said the original sum is $200 and has been in collection for 5 years. The 5-yr mention by me is in relation to the OP's comments. Get it right!

And now the dead horse is twice dead!

 

[MoosePilot]

Dude, you are not reading these statements properly. My God! Are you in medical school? The OP said the original sum is $200 and has been in collection for 5 years. The 5-yr mention by me is in relation to the OP's comments. Get it right!

And now the dead horse is twice dead!

Dead horse is twice dead, huh? Whose fault is that? I never want to hear something about attacking out of you again, when you bumped the thread just for the joy of hearing yourself yammer.

Five years was the time mentioned by the OP. That means it's still on his credit report and it shows not paid. If there is a mortgage or loan officer that will give him a loan in that scenario, despite whatever score he might still have due to other positives, I haven't met them. When you bought your house did you still have the outstanding debt you mentioned on your credit report?

 

[GuyLaroche]

Dead horse is twice dead, huh? Whose fault is that? I never want to hear something about attacking out of you again, when you bumped the thread just for the joy of hearing yourself yammer.

You are right. I must confess, I like a good fight. Perhaps I should have been a lawyer. No hard feelings. (Just admit it, damn it! Just tell me I am right!)

When I purchased my house, I still had the collection posted to my account. I believe it was some dental plan I thought I had canceled but didn't. Anyhow, it was mentioned to me but never in the sense that it would prevent me from getting a loan.