Pay off my bills

[Jonathan]

Should I pay off my bills, or is it better to simply let them age off my report?
I have a few defaulted medical bills that are 3-4 years old. From what I understand, paying them off may even lower my score because updating the status brings it to a more current standing?

So my questions are:

1. Is it true that paying old defaulted items can lower my score?
2. Is there any rule for which debts are worth paying and which are not

Thank you

[Stacy Wall]

Re: Pay off my bills

There are various considerations when it comes to paying defaulted debts.

First – there is the moral issue. I won’t deal with it here.

Second – Your debts aren’t old at all. Collection agencies have plenty of time to sue these debts, and since they are yours – they are likely to get a judgment against you. You will end up in a much worst situation. Not only you will add a judgment to your credit report, you will pay much more than the original debt (interest, late fees & legal fees).
Not to mention that a judgment will re-start the 7-1/2 clock…

Third – It is true that paying old debt doe’s nothing to your credit score. The damage is already done, and paying the debt does not erase your history of delinquency. However, since Fico score is 90% based on the previous 2 tears activity, the effect of the debts diminishes with time.

Forth – potential creditors look at much more than just your score. When they see unpaid debts, they are not likely to approve you new credit. When you pay the accounts, their status will be updated to “Paid in Full” or “Settled“, which looks much better.

Lastly – Try to negotiate a Pay for Delete Agreement, especially if these are single items (rather than defaulted credit cards). It’s not easy to do, but if you can pay in full, you might get them to erase the negative item from your credit reports.

See why-pay-off-debts.html for more information.

Good luck.

[Author]

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