 Paying
old debts to improve credit
|  Dear
Dr. Don,
If I choose to pay off my delinquent accounts without
an agency, will my closed or charged-off accounts vanish from my credit
report once they are paid? -- Melissa Marsh
 Dear
Melissa,
Creditors can sell their charged-off accounts
to a collection agency that pays pennies on the dollar with the
hope that they can collect on the account. If a creditor has sold
your loan to a collection agency, then you won't be able to deal
with the original lender.
Regardless of whether the account is now with a collections
agency or still is held by the lender, paying off the outstanding
balance doesn't remove the credit history from your credit report.
In general, negative credit information stays on your credit report
for seven years, except for a Chapter 7 bankruptcy filing, which
remains on the credit report for 10 years.
Ideally, you'd want all of your credit accounts to
reflect "paid as agreed" status. That means you've met
the terms of the credit agreement. A payment history of late and
missed payments or charge-offs won't disappear just because you
were able to repay the debt. They remain part of your credit history.
When you pay off an account, your credit report will reflect that
there is no longer an outstanding balance.
Don't fall into the snares of a debt negotiation firm
that advertises that they can help you erase a poor credit history.
It's more likely to further damage your credit than to improve it.
The FTC pamphlet, "Knee
Deep in Debt," discusses the risk involved in using debt
negotiation to try and improve your credit history.
Your credit will improve with time as you stay
current on payments. You won't have to wait until the existing black
marks fall off your credit report before you qualify for credit
as you rebuild your credit history.
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