Never turn your back on an old debt

Debt can be something of a ghoul, haunting you at all turns, popping up when you least expect it. And like a ghost, debt has a way of hanging around long after you thought it was dead.

Debt from beyond the grave

Author Pamela Redmond Satran recently penned an article entitled, I Paid Off My Credit Card…and Then the Nightmare Began, which chronicles her experience fighting a negative mark on her credit report. The derogatory reporting stemmed from a credit card account she’d thought she’d paid in full – only to find out much later that she’d been charged for residual interest after the fact. That would have been fine, if not for the fact that the final statement went to the wrong address, the collection department called the wrong phone number, and all email correspondence went to someone else's email address.

So the debt wasn’t paid in full and Satran’s credit suffered as a result.

Of course, Satran argued that she would have been happy to pay the leftover interest, had she known about it. And eventually, after weeks of back and forth, they arrived at the conclusion that Satran should have updated her address and her telephone number, however, the creditor had her correct email address and couldn’t account for where the incorrect one had come from or why they had used it. Ultimately, the derogatory mark was removed.

Stay alert

While this is a unique case in some ways, it’s an important reminder of why you can’t afford to assume when it comes to debt and personal finance. Here are a few crucial things to keep in mind:

  • If you’re about to pay off a debt, contact your creditor directly for a payoff amount. Simply paying the amount listed on your statement may not be sufficient to cover what’s owed, depending on when your billing cycle closes and how interest is being calculated. Go straight to the creditor to get an accurate payoff figure based on when you are planning to make the payment. Afterwards, verify that the payment was received and the account is paid in full. Hold on to your final statement verifying that the account is paid in full for at least a year.
  • Monitor your credit and loan accounts monthly, even if everything is automatic. Don’t assume that someone else will catch account errors on your behalf. The sooner you notice incorrect charges or misplaced payments, the easier it will be for you to correct the error.
  • Pull your credit report regularly and review the status of old accounts. This is especially important if you’ve previously settled on old debts. Some companies have been known to “resurrect” the unpaid portion of a settled debt and attempt to collect. Make sure you have a clear understanding and record of all account statuses.
  • Read your mail. Don’t assume strange/unsolicited mail is a mistake or a form of direct marketing. If someone says you owe them money, review the letter and take steps to verify whether or not it’s accurate. Don’t ignore it.

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.