One of the most negative items listed on your credit report is a collection paid or unpaid.
This negative information will show on your credit report for seven years or until the statute of limitations runs out, whichever is longer.
Some credit specialists may suggest you are better off waiting until the statute of limitations is up on the account and having it fall off your report in seven years. Beware that seven years is a very long time and this negative information will be viewed by all.
Your credit history has a direct impact on your ability to get:
- Utility Services
- Cell phones
- Rent an Apartment
Credit reporting companies must investigate the items you question. If this investigation does not resolve the dispute to your satisfaction, you can post a “statement of the dispute” in your file.
But, you are better off taking charge and negotiating a settlement directly with collection agency.
- Obtain your credit reports. The Fair Credit Reporting Act permits consumers to request a free copy of their credit report once every 12 months. Visit annualcreditreport.com to get your free credit report.
- Target the unpaid collections listed on your credit reports.
- Contact the reporting collection agencies. Negotiate a settlement in writing, before, you pay them.
- Fax the “Settled or Paid” letter to all 3 credit reporting agencies.
A paid collection does not raise your credit score, but is goes a long way in showing your good faith and character.
Credit scores work on the basic concept, that past habits and attitudes of the individual in this case the “Credit Consumer” will reflect their future behavior. This is called Risk Management.
Loan Managers and Personal Bankers do not work with just your credit score. If you are going to apply for a Personal Loan or Mortgage, these attempts to take care of past debt can be seen as favorable.
Be Credit Wise! It is far smarter to take the time to deal with the problem than hoping for the best.