Question: If I have a few bad debts on my credit report scheduled to fall off in the next year or so, should I leave them be or try to make payments until that time. They are from 2005 and before. Thank you for your time.
Answer: At this point, your best strategy would be to let sleeping dogs lie. What happens when you begin to pay an old debt or even dispute an old debt, the date of last activity is updated on your credit reports.
What this means is that negative information can appear to be more recent. While the date of last activity is updated, it still does not change the time when the debt is due to drop off, but it does make negative activity appear more recent.
The only time you should consider paying debt that old is if you are able to arrange a pay for deletion. In other words, in exchange for payment, the creditor or debt collector agrees to delete the debt from your credit reports.
But keep in mind, when negotiating a pay for deletion, your best chances of securing an agreement is if you have a lump sum of cash to offer.
Unless your conscious is adversely affecting you because you have unpaid debt, I strongly urge you leave it be. Besides, once a negative debt reaches 48 months or older, it has little to no impact on your credit scores. Therefore, paying an old debt may do more to hurt your credit score than to actually help it.
What you can do to help your credit score now
Pay bills on time. If you want to take action now to improve your credit score I suggest you pay all your credit obligations on time. Payment history makes up 35% of your credit score — that’s a huge chunk. If you have any recent late payments begin making payments on time and your credit score will improve in several months.
Maintain low credit account balances. Any credit card accounts you may currently have should reflect low account balances in comparison to the credit limit. What you want to do is create as much space between your account balance and your credit limit. A good place to start would be to lower your credit account balances to 30% of your credit limits. For example: You have a credit card with a $3000 limit; then your account balance should be no more than $900.
In fact, FICO credit score just released 5 traits of consumers with excellent credit scores, and they said consumers who use no more than 7% of their available credit limits have the highest credit scores.
New Credit. Another strategy you can take is to get a few new credit card accounts and make monthly payments on time. If you do not have current credit accounts reporting monthly to the credit bureaus, it would be a good idea to get some positive information in your credit files. In order to improve your credit scores there needs to be current positive information reporting at the major credit bureaus.
Never open new accounts if you cannot make at least the minimum monthly payment; however, since you have the extra cash to possibly pay off that old debt; I would use that extra cash towards a few new accounts. Opening a few new accounts would help raise your credit scores and balance out those outstanding debts which are due to drop off your credit report.
By the time the negative accounts drop off you will have 12 months of positively managing new credit accounts and your credit scores will increase. If you are unsure whether you will get approved for new credit; try a secured credit card or easy to get credit cards. The best of luck to you.
