Expert: Regan Shinski - 1/17/2010

Question
I may have asked a question a few weeks ago to you but have one more question. I recently looked at my credit report so that I can start trying to clear it up and take care of things in order to get into a low income apartment I'm interested in. I have 6 things against me (all for low amounts) 3 of which being credit cards and they each say charge off next to them and then 3 others that are collectors. Is it possible that the 3 collectors are for the 3 credit cards them self? I was told no and that I would need to pay all 6 however just want to make sure. I'm kind of confused because for example one of the credit cards is for walmart for 150 and says charge off and then one of the collects MCM is for 188..  I just got a bill from them and it says its for Walmart. So I'm guessing those are for the same actual credit card problem. Should I worry about paying off the charge-off's at this point and focus more on the collectors that are on my credit if I can't afford all? For the 3 charges offs it says my balance is $0. And the 3 collection agencies have actual balance amounts? I'm just trying to figure out where to start on paying these off and don't have much money so don't want to just start sending checks to all these places and paying for the same bill twice. I was told by a debt collections place that helps you that I would need to repay all 6 however remember a long time ago trying to help pay off a friends medical bill and they said it is no longer their bill and now the collections agency so I'm wondering if that is the same as the charge offs?

Answer
Hi Angela!

I have a few very strong opinions on your situation.  I would not pay ANYTHING and certainly would not pay ANYTHING until you know what it is.  It is VERY common - happens ALL the time - to have the original creditor and a collection agency reporting for the same debt.  Many times there are even more than one collection agency reporting the same account because they switch collection agencies or sell the debt to another collection agency.

How old are the debts?  Find out the statute of limitations for your state on a written contract.  If it is past that date you definitely should not pay it.  They have no recourse against you.

Personally, I would be hesitant to pay it even if it was recent.  you likely are not going to see the benefit in your credit score you think you are.  In fact, it may lower your score by making a more recent date appear on the derogatory account.  Most people do not see any improvement at all by paying a collection account.

There are very limited times I would recommend paying a collection account:  

1.  If it is part of a pay-for-delete agreement.  Some people have negotiated that the collection agency completely DELETE the account upon receipt of payment.  If you do this, make sure you get this agreement in WRITING BEFORE you send money!

2.  If you are being sued or are at extreme risk of getting a judgement against you.

3.  It is being paid in the 30 day window BEFORE it reports at all.

4.  Another lender is requiring you to pay it in order to get credit from them for a major purchase.  This is usually for a house.

5.  You win the lottery, want to do the moral thing, and don't care about your credit score :)

I would give serious consideration to credit repair.  You can take the first steps by disputing the accounts directly with the credit bureaus and asking for VALIDATION under the FDCPA directly with the collection agencies.  You should ask for validation anyway to confirm what the debts are for.

If you want to proceed with paying, you should try and settle first.  Shoot for a deletion from your credit reports as the primary goal and get it in writing.  If they say they cannot do this "legally" they are wrong or outright lying.  It happens everyday.  Personally, I would not pay without the deletion - see above.  You likely can get a reduced amount as well.

You should also check this link:

http://www.creditinfocenter.com/rebuild/statuteLimitations.shtml#2

and scroll down to the "Does a partial payment restart the SOL?" section.  If you have a larger debt, making a partial payment can restart the statute of limitations leaving more open to being sued.  BTW, higher on this link is the SOL by state.

Anyway, in general and with the 5 exceptions I list above, I think your choices here are to negotiate for a full deletion, aggressive credit repair to delete the accounts, or ignoring it completely.  In paying it, the credit boost will be limited at best and possibly negative.  The risk in negotiating and repair is that they may not budge and you may "wake the sleeping giant" and they may start legal action.  However you said these are smaller debts that you wanted to pay anyway, so even if they start legal action, that is a good time to pay and negotiate terms.

Good luck, I hope this helps.  I would NOT talk to them on the phone unless you are LEGALLY recording the call.  Send any communication in writing and keep all paperwork and receipts.

Regan