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Keeping Score

If I pay off an old debt, will it damage my rejuvenated credit score?

If the unpaid debt is seven years old or more, it won't affect your score, even if you pay it off now

Summary

Almost all negative items are shown on your credit report for seven years from the date your account first went delinquent and was never brought current. If you pay off an old collection item that’s seven years old or more, it won’t reappear on your credit report.

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Dear Keeping Score,

I’m from Pennsylvania. Back in ’09, like many people, my life went into turmoil during the recession. Several credit cards couldn’t be paid due to a job loss and separation from my ex.

A lot of the time during that period is a blur. I was sued by two of the credit cards. I paid and settled with a large one. The other smaller one ($1,500) I did nothing with. My credit is great now – it was over 800 until I got suckered into paying for my stepfather’s cremation (to find out he cashed out his life insurance).

My credit is still 780-790. I’m suddenly getting calls constantly from Portfolio Recovery Associates (and others that were charged off) about the other judgment. They say the judgment was in August 2012. I never got anything about a renewal and can’t find any proof that there was a judgment online.

If something major happens and I end up having to pay it, would it pop back on my credit report? My credit has been clean for a couple of years now and I don’t want to risk it landing back on there. —Steve

Check out all the answers from our credit card experts.

Ask Steve a question.

Dear Steve,

You are right to be reluctant to open up this can of worms again, especially since the statute of limitations for credit card debt in Pennsylvania is four years. What that means for you is under Pennsylvania law, after four years creditors cannot take you to court for unpaid credit card debt.

You don’t say exactly when the account went delinquent, but you do say this all started in 2009 and here we are 10 years later. So, chances are this debt has become what is known as “time-barred” and you can’t be sued for it.

As to your FICO score, it sounds like it’s in great shape now, even with the other setbacks you have faced. Having a score in the 780-790 range puts you in rare company with an above-average FICO score. There is no practical difference between a score of 780 and 800, so relax.

Additionally, it has been seven years since 2012, so there is no prospect that any of this will show up on your credit report or impact your score. Almost all negative items (the big exception is 10 years for a chapter 7 bankruptcy) are shown on your credit report for seven years from the date your account first went delinquent and was never brought current. In most cases this equates to six and a half years from the charge off date.

See related:  Can the bank take my tax refund to pay off my old card debt?

You still have to pay back time-barred debt

That being said, I want to tell you right up front that just because the statute of limitations may have passed does not mean that you do not still owe this debt. You do and you will until it has been paid or successfully settled.

But there is not much a collector can do to actually collect on the debt besides contact you constantly, as you have discovered. They can’t continue to do that if the debt is time-barred and you inform them in writing not to contact you again.

However, old debts have a habit of resurfacing because they get packaged and resold in bulk to other collectors on a fairly constant basis. Your debt could be resold in one of these transactions and then you may have to go through the same process of asking for verification and informing the collector – in writing – that the debt is past the statute of limitations all over again.

This means that the calls could continue for a long time and each time you will have to do the same thing.

See related:  How to handle old debt soon to be sent to collections

Start a paper trail if the collection calls continue

Note that I said in writing, because you will need to establish a paper trail with each collector until the debt stops being resold. Mailing your letter registered, return receipt requested, is what I always advise in these circumstances so you can prove you contacted the collector to tell them the debt is time-barred and not to contact you again.

That being said, not all collectors abide by the terms of ethical collection practices. Others may not pass on that you demanded not to be contacted when they resell your debt into the secondary market. To be on the safe side, I suggest you find a friendly and inexpensive attorney and have them write the no-contact letter. This should carry more weight.

Now this all may become tedious for you and you may reach the point where you want to just pay it and be done with it. If you decide to go this route, just be aware that any payment will start the clock ticking again on the statute of limitations.

See related:  How do I tell when card debt legally expires?

Civil judgments don’t affect your credit score

Finally, I want to touch on judgments. Civil judgments are no longer reported on your credit report by any of the three main reporting agencies, so they can’t impact your score. A judgment issued in August 2012 for this debt would have been within the statute of limitations in 2012.

It’s important to know that Pennsylvania does not allow wage garnishment for credit card debt. In the case of a judgment, the collector had four years (until 2016) to collect in Pennsylvania, and then they could have gone back to court to have the judgment renewed.

There is no law that says the court must contact you if the judgment is renewed, though. But you should still be able to find out if you do have an outstanding judgment online, so it could well be that either there was no judgment in the first place or it was not renewed.

My advice is to be very careful with what you decide to do about this debt and don’t skimp on the paper trail.

Remember to keep track of your score!

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