Taking Care of Old Debts

Patricia has some nasty items on her credit report and wants to know how to handle it. Dave says there are three things to watch out for on a credit report.

QUESTION: Patricia in Houston has some nasty items on her credit report and wants to know how to handle it. Dave says there are three things to watch out for on a credit report and helps Patricia determine the best way to take care of her particular issues.

ANSWER: There are three types of nasty items on your credit report. There are errors, which shouldn’t be there at all because it’s a mistake. There are old payments that you paid late, which are actually just a report of history, and then there are debts that have gone bad and you’ve never gone back and made them good. If these items you’re talking about are bad debts, you’ll have to go back and clean them up. You have to pay them and/or settle with them.

Just finding who to pay is going to be your biggest problem. Start with the latest entry on each of the debts on your credit bureau report. Contact them and begin to see what you’ve run into. If $1,700 in debt is what the credit bureau shows, it’s very possible that many of those companies, when you get a hold of them, are collections companies, and they’ll try to double that amount for collections fees. That means you’ll have to negotiate with them for a settlement to pay a more reasonable amount closer to what is actually owed, because they’ll try to hit you hard.

It’s going to be more hassle than money, in other words. Even if the debts have a date where they are supposed to fall off the credit report, I would still go ahead and pay them. Because if they fall off the credit report, it doesn’t mean they won’t chase you later or even pop it back on the report and act like there was activity on there. They aren’t supposed to do that, but they do just about the time you try to get a mortgage. They’ll hit you at exactly the wrong time.

What I would do is get with them and get these cleaned up. It may start the seven-year clock over because now it will show a bad debt that’s been settled, and the last activity was that you settled it, and from the date of last activity it will be seven years later before it drops off completely.

But I still think it will help your credit for one. For two, it will help your quality of life because they are going to pop up at exactly the worst possible time. And three, it’s your debt and you’re morally obligated to pay it.

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