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Blogging for Change Blogging For Change
by Jesse Campbell on May 12, 2014

Mother sorts through debt collection notices

Ask the Experts: Three questions about debt, debt collection, and credit reports

Hi, I am not working now and would like to eventually pay for my debts; however I’m not able to do so at this time. Should contact the credit agencies to notify them or wait until I get a job? – Nicole

Hi Nicole,

I’m sorry to hear about your situation. Being out of work is stressful enough without having to worry about debt payments.

When your income is disrupted, your debts are usually the first thing to go on the back burner. Creditors understand this and in some cases may be able to defer your payments for a short time while you get your finances back in order. As soon as you know that your ability to pay your debts is going to be compromised, contact your creditors. They might not be able to do anything for you, but in a lot of cases they can provide hardship assistance.

Every creditor is different, though, and each policy is unique. So call them and find out what they can and can’t do for you.

Unfortunately, if they can’t offer you a hardship program and you can’t pay, your accounts will likely become past due. Once you have a steady income again you may want to consider speaking to a debt counselor about a possible Debt Management Plan to help you get caught up and, in some case, bring certain past due accounts current.

Good luck!

If my debt has gone to a lawyer for collection, will it show up on my credit report? – Chelsea

Hi Chelsea,

The short answer is yes.

The long (potentially unnecessary, but bear with me) answer is that the account appears on your credit report the moment it’s opened. The status of the account changes over time.

In this case, I would assume that at some point in time you were no longer able to make payments on the account. Your credit report would reflect that the account was 30 days delinquent, then 60 days delinquent, and so on until it was charged off and sent to a collection agency.

The account will remain on your credit report for approximately 7 years from the time it was charged off. The status right now is probably showing as charged off and unpaid, and there’s an excellent chance that it’s hurting your credit score. Even if you pay off the debt, the account will still show on your credit report. The status will change, however, to reflect that it’s been paid off, which should help your credit.

A few years ago, I hit an economic slump and my credit suffered. I am trying to rebuild my credit but after reading and researching online, I hear that paying off a debt collector doesn't help your credit. Is this true? – Nidia

Hi Nidia,

As I alluded to in the previous question, collection accounts don’t drop off your credit report for 7 years, regardless of whether or not you paid them off.

People often make the mistake of assuming that correcting a credit-related error makes that error go away. It doesn’t. If you miss a payment and then get caught up the next month, your credit report will continue to note that you were once 30 days past due.

The good news is that as time goes by, those negative marks have less and less impact on your score. A 30 day delinquency from three years ago will hurt a lot less than one from 3 months ago.

So when you hear that paying off an account in collections doesn’t help your credit, that’s incorrect. It doesn’t make the fact that your account was charged off go away, but it does change your report to reflect that the account was eventually repaid, and that does help your score. Maybe not as much as you’d like it to, but you have to keep in mind that the purpose of your credit report is to help lenders decide whether or not to extend you new credit. The fact that you defaulted on a debt is important for them to know; as is the fact that you ultimately did pay back the debt (although obviously not under the original agreed-upon terms).

If you can pay off your collection accounts, do it. Just make sure that you’re dealing with a reputable collection agency, and that they update the reporting of the account to reflect that you’ve paid it off.

Thanks for the question!


Barbara Lynch says:
May 15, 2014

My husband and I did a short sale on our house, in 2012. On my husbands credit report shows that we owe the bank money. Even though the bank closed on the short sale, should this still be on his credit report? Do I contact the bank and ask them to remove it? Thank you for any help you can provide.

Colleen says:
May 15, 2014

I have been making the creditor or the agency give me a letter in writing confirming the terms of my payoff and their release and acceptance of my settlement payment. That way I have a record of what I have paid and that they agreed to the settlement. I am hoping this will help if I need to support the payoff for future credit references.

Anonymous says:
May 15, 2014

One note- when you are out of work and talk to your creditors to let them know what's going on, they may be able to give you assistance. If so, great, but make sure you get it in writing! When we lost our job, our mortgage company told us they would put a hold on our accounts for 6 months, then 6 months, later told us we were 6 months late. They stopped sending us the bills, but didn't actually put the account on hold. We had no way of proving the earlier agreement (or checking whether we misunderstood), because we didn't get it in writing and it cost us our house. Get everything in writing!

Anonymous says:
April 28, 2016

Sherry, if your debts are "years" old--especially if they are almost 7 years old, the magic number--don't "start" paying them off. Did you know that with each payment you make on a debt, the 7-year clock STARTS OVER? So if you have a debt that will soon expire and drop off your credit report and you make a partial payment, that clock resets to zero and you'll have to wait ANOTHER seven years for any hope of it dropping off your report due to age. DON'T EVER MAKE PARTIAL PAYMENTS. Pay an "old" debt only if you can pay it in full.

Jade Brunet says:
August 19, 2016

I am looking to know more about how debt works. It is interesting to learn that even if things are being dealt with through a lawyer, the debt will still show up on the credit report. It would be wise to contact a professional or work with a debt collector to help this cause.

Sherry says:
May 15, 2014

I have had debt for years and im about to start paying it off a snowball effect I could do it the easy way by bankrupt, but I think lenders will like this better down the road; also I have a soon to be ex im sure wont help any.. Either way whats the best way to find all the debt and debtors. Ive got some that went away and came back, so i just wanna start plugging away...

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