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Battling bad news on your credit report

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Dear Dr. Don,
I have several open accounts on my credit report that are more than two years old. My question is, will it help my credit if I pay them off, even if they are more than two or three years old? Most of these open accounts have $300 to $1,500 balances. Thanks,
— Daniel Debtor

Dear Daniel,
Since there’s no real negative connotation to having open accounts on your credit report, I’ll take a guess that you’re describing several accounts where the outstanding balances have been “charged off” by the creditors as bad debt. That doesn’t mean that you don’t owe the debt, just that the creditor doesn’t consider this loan as part of its current book of business.

Paying off the outstanding debts will take your balances to zero, but it won’t take away the listing of missed and late payments. Negative information like late payments and missed payments stay on your credit report for seven years.

Creditors can sue you in court to have a judgment levied against you for payment of the debt. Often, accounts that are charged off are turned over to a collection agency, and that agency threatens to sue to obtain a judgment against you. If they are successful, the judgment stays on your credit report for seven years or until the statute of limitations runs out, whichever is longer.

If you’re not judgment-proof, meaning that you have the means or the assets to repay your creditors, then you should pay off these debts and start rebuilding your credit history.

An alternate approach is to negotiate with the creditors in an attempt to get them to accept partial payment on these debts. What needs to be part of the negotiation and what you need to get it in writing is that the creditor will report the debt as paid in full to the credit bureaus. Be wary about hiring firms that promise to negotiate these repayments for pennies on the dollar and have the debt erased from your credit report.

Dear Dr. Don,
I have tried to fix my credit but still have things on my credit reports that should not be there. How can I fix this? Everything is paid up and paid off, but the bad credit reports keep interfering. Please help.

— Deborah Debacle

Dear Deborah,
Most negative information stays on your credit report for seven years. A Chapter 7 bankruptcy filing, however, stays on your credit report for 10 years. Getting current on your bills isn’t going to clear a history of late payments off your credit report. It just shows the current status of these accounts.

Under the Fair Credit Reporting Act you have the right to dispute inaccurate items on your credit report. The FTC guide How to Dispute Credit Report Errors will help you dispute inaccurate items on your credit report. The credit bureau will review the disputed item with the creditor and rule on the disputed item within 30 days. You’re most likely to be successful if you can provide documentation that supports your position. Just saying that it’s not so isn’t going to get you anywhere.

I know this to be true because I recently reviewed my Experian credit report and found an auto loan listed on the report that wasn’t mine. I disputed the item and was told that the investigation results showed that the item should stay on my credit report. How I prove that I didn’t have this loan remains a matter of interest to me, but for the moment I’ve placed a statement on my report that I don’t know this loan as mine. Under FCRA you have the right to place a statement on your credit report when a dispute isn’t resolved to your satisfaction.

Do what you can to clean up the disputed items, add a short, concise statement to items that you believe are wrong but weren’t resolved in your favor, and then wait for time to heal what you can’t fix. Keep making timely payments on your bills, and your credit report will be on the road to recovery.