20-year-old debt should not come back to haunt you
Repaying ancient debt is a moral decision; courts won't force you to pay it
Credit Score Report
Dear Credit Score Report,
was recently contacted by a creditor. I haven't had this credit card since my
early days in college -- over 20 years ago -- and I just received a settlement
offer giving me a 60 percent savings if I make monthly payments. If I accept,
how will this impact my credit score? I went through years of bad credit, and
I'm trying to improve my credit score. I'm afraid if I accept these terms, I will start the time clock all over
again and it will do nothing to improve my current score. Please help me
understand my best options. -- Andre
Whether you choose to repay that debt may come down
to a moral decision, because you probably aren't in any danger on the legal or
credit scoring fronts.
Experts say that debt from more than 20 years ago is
too ancient to hurt you. "Not only is this information too old to
include in a credit report, it may be past the applicable statute of
limitations," says Chi Chi Wu, staff attorney for the National Consumer
Law Center in Boston. "While I am not familiar with all of the state statute of limitations, many of them are shorter than 20 years." In fact, when it comes to credit card debt, no state has a statute of limitations more than half that long.
means if you don't make a payment, in most states, while a creditor can take you to court in an effort to collect on that unpaid credit card
account, the creditor can't win (if you put up a fight and legally object).
If you submit a payment voluntarily, however, you run the risk of
"re-aging" that old debt. While the vast majority of states do not permit debtors and
collection agencies to successfully sue for unpaid bills that are more than 7 years old,
making a payment can re-start the clock on the statute of limitations. Additionally, by acknowledging an old debt,
you extend the window of time for potential debt collection lawsuits. That's
why the best financial course of action may simply be to not repay that debt --
provided you can rest easy with a decision to leave an unfulfilled promise to your
Even with a clear conscience, it may be tough to sleep if
that creditor is calling you at all hours, demanding payment. To prevent that
scenario, begin by mailing your card issuer a letter asking them to verify that
account. Their response is important. By law, they must stop collection
activity if they can't show evidence that the debt is yours. If that doesn't end
their collection efforts, write another letter requesting that they cease
communication regarding this debt. (CreditCards.com has a number of such debt collection sample letters on its website.) If the creditor continues to harass you,
be sure to exercise your rights under the Fair Debt Collection Practices Act.
That includes filing a complaint with the Federal Trade Commission.
As for guarding your credit score against damage, make sure that
old debt doesn't appear on your credit reports. Since negative items typically
must be removed after seven years, you can dispute the appearance of this credit card account with the three credit bureaus -- Equifax, Experian and TransUnion. "There are time limits as to how long
negative information can stay on a credit report (with the exception of
criminal convictions). Twenty years is
waaaay longer than these time limits," Wu says in an e-mail.
So while many of my columns end with a call for the reader
to pay all their bills, in this case, your credit history may be better served
by not fulfilling your old debt obligation.
See related: State statutes of limitation for credit card debt, Debt collection sample letters, Know your rights: Fair Debt Collection Practices Act, Free credit reports: How to get the actual free one, How to dispute credit report errors, Decade-old credit mistakes shouldn't appear on your report
Jeremy M. Simon is a former CreditCards.com reporter who wrote about credit scoring, economic data, credit card crime and other issues. He is based in Austin, Texas. He is a graduate of Vassar College and has previously worked for Thomson Financial in New York City, where he wrote about the stock markets, and Texas Monthly, as well as several publications in Austin.
Published: November 9, 2010