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Dear Dr. Don,
While I was separated from my ex-husband, the credit cards went unpaid. My credit score has decreased as a result and the amounts have been charged off or placed with a collection agency.
Do I pay the balances due? How do I re-establish my credit and increase my score? I am only using a bank debit card for purchases.
-- Dana Debtor
 Dear
Dana,
When an account is charged off, it means that the creditor considers it a nonperforming loan in its loan portfolio. It doesn't mean that you no longer owe the money. However, if the statute of limitations on the loan contract has expired, you may no longer owe the money.
The Bankrate feature, "State
statutes of limitations for old debts" isn't
a substitute for legal advice, but it does allow
you to review your state's statutes.
Except for a Chapter 7 bankruptcy filing, most negative information stays on your credit report for seven years. You didn't say how long you've had this problem on your credit report, but if you're outside the statute of limitations, you may be pretty close to seeing the negative information drop off your report.
Paying off the balances squares you
with the credit card firms, but it won't erase
the negative payment history on your credit report.
Don't flail around trying to get a credit application accepted. Every credit application shows up on your credit report and stays there for two years, although it only impacts your credit score over the first year.
A string of credit applications and
denials makes you look desperate for credit, and
lenders hate lending to desperate people. Try
one credit card provider and if you're denied,
take a look at the Bankrate feature "Baby-step
your way to credit with a secured credit card."
It explains how a secured credit card can be a
good first step in rebuilding your credit history.
Finally, make sure all the joint
accounts are closed by reviewing your credit report.
The Fair and Accurate Credit Transactions Act
of 2003 requires free access to your credit report
once each year. The Bankrate feature "How
to get your free credit report" provides you
with the contact information to request these
free reports.
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