Improving Your Credit Score – Should You Pay Old Debts?

June 30, 2009 by  Filed under: Credit 

If you are on the road to recovering your credit score, you might be faced with the option of paying old debts that you defaulted on. There are many things to consider and others to avoid. Also, there are potential risks paying these old debts that could get you into trouble.

First, you must realize that you do owe this money. It might not be listed in your accounts on your credit report because it is so old, but it could be present in other forms. The most common would be a record of collections for the account. These types of entries will make it impossible to get approved for things like a home loan.

Second, paying these old debts could open yourself up to liability and the possibility of being sued. That is right a payment to these accounts in many ways an acknowledgment of the debt and this might spark the account pursuing you for it in a legal manner. You will want to check your states statute of limitation of debt and also it is a good idea to consult a lawyer.

Third, you will want to consider negotiating these debts and attempt to have them removed from your credit report. This is no easy step and will test your negotiation skills. You will want some agreement in writing that states the item will be stricken if the debt is paid. You can even attempt to do this at a lesser amount than the debt owed.

Many times the debt holder is not the original account that you had. This happens as the debt if sold to other agencies who buy it for a lesser amount and then try to collect. These agencies can be very difficult to deal with and you must realize that all they care about is getting paid. Be very careful and never agree to anything you are unsure of. This again is the point you should seek legal advice also you will want all agreements in writing to further protect yourself.

Like stated above, have these old debts will prevent you from getting approved on things such as a home loan. And if you are on the road to financial well being, you should fell some obligation to paying these old debts.

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