If you're being hounded by a debt collector on an older debt, it may be tempting to take whatever deal they offer just to get them to stop calling. The saying that “the squeaky wheel gets the grease” has persisted for a reason – it's true. The loudest baby bird will get the most worms. And the debt collector who makes your life the most miserable is most likely to get your attention and your money, but that's likely not the wisest route to go. Here are some reasons to slow down before you pay up.
#1 You can reset the statute of limitations – Debt collectors often get the loudest right before their options grow far more limited. In North Carolina, the statute of limitations to sue for most commercial debt is three years from the date of late activity (i.e. last charge or last payment). If it's been two years and 10 months since your last payment, you can expect a lot of noise to try and get you to send some money. If the debt collector can get you to send even $5, the statute of limitations resets!
#2 You can pay someone you don't owe – Most debt collectors buy accounts then buy accounts from other collectors third or fourth hand. Your unpaid debt may change hands many times over its life before it expires. Somewhere along the way, the legal right to collect that debt will likely not follow the list that's being sold. In fact, your debt may be sold to several collectors at once. Push back on loud collectors to make them substantiate that they have the right to collect on the debt.
#3 You can lower your credit score – If you have a debt that's older and is about to fall off your credit score, not making a payment is your best course of action. Once it falls off, it will stop negatively impacting your credit rating. But if the debt collector talks you into paying a small amount as “good faith gesture” and it resets your statute of limitations, you can look forward to another seven years of that credit transaction haunting your FICO score. And there's no way to undo this action once it's done.
#4 You can lower your score for longer – If a debt collector contacts you about an older debt and can talk you into paying a lump sum, this will also hit your credit score hard. Even though you're technically paying off the account, it resets the statute, so it will be on your report for another seven years. And second, it shows as payment for less than the full amount, so that lowers you score. And because it's in collections, that's two negative entries on your credit that will last for years to come.
When it comes to older accounts, often your best approach is to let the debt collectors continue to call and not cave in and make any payments and let the accounts fall off your credit report. To know when the statute of limitations expires, pull your free annual credit report and check the account they're calling about to verify. Also, be sure that the credit report is accurate. Sometimes creditors and debt collectors will try and keep the account active longer by showing activity at later dates. It should be the date of your last charge or your last payment. You may need to file a protest with the credit agency to fix it if the date is not correctly reflected.
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