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Posted in Paying Your Bills
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Question By
adriennecruz

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should i pay off closed accounts?
I have balances on my credit report that have been closed or written off by the creditor. Should I pay start paying these off to raise my credit score? Do they still affect my credit if I don't?
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Be VERY careful in paying collections

Helpful to 16 out of 20 people

Here's a story...Just food for thought.

My very first major credit card was a co-branded Bank of America Visa with a credit line of $3500.  I took very good care of it, in the sense that I never had a late payment, for six years. Because I did not have the first clue about utilization rates or the notion of paying it off each month, I did, however, always have a large balance on it. 

At one point, Chase acquired, from Bank of America, the portfolio of accounts that included my card.  I continued making on time payments for another couple of years, though some particulars about my card changed--everything from interest rates to customer service.  

A couple of years into the new credit relationship with Chase, with a balance that was now bumping the top of my credit limit, I found myself struggling to make ends meet.  I was transitioning between school and work, and I got behind on payments for the first time. 

 At sixty days late, I called customer service. I spoke to a CSR who was very kind and told me that as long as I got a payment in by a particular date--just before the 90 day mark, my account would not go into collections, and I would be able to get back on track. 

I scrambled to pull the money together and, when I called to make a payment by phone, a couple of days ahead of the deadline, I spoke to another CSR who told me I was too late. My account had already been sent to collections.  I told her that the previous CSR had told me that, so long as I got my payment in by that particular date, I would be ok.  She said that they could alter that at their discretion since I was already significantly behind. And now, I was responsible for making the balance payment in full.  I was told that I had already been given the option to make payments and had failed. GREAT!

My delinquency began as of November 2005.  Because of my own ignorance of the games that Collection Agencies play, this account continues to wreak havoc on my credit and my life.  

The account went into collections.  It ended up in the hands of a large, aggressive and unsavory debt collection company.  They contacted me in 2008 and told me that if I didn't pay the balance, plus interest, I would be sued. They also told me they were collecting on behalf of Chase.  

That was a lie.  

I didn't know it at the time, but this group, like other junk debt buyers, purchased my Chase debt at pennies on the dollar. Chase had long since written off my debt.  I was in VERY bad financial straits at the time, but I thought I would try to pull something together because they were offering for me to make payments--something I had not been able to negotiate with Chase.  

The collection agency insisted I make payments through Western Union (meaning no record of transactions would be connected to my bank account). I began making payments--which immediately reset the clock on my debt.  It also meant that I was double dinged on my credit report because the Chase delinquency continued to appear, as well as this new collection account--as if it were a new one.  I paid about $1200 on the debt and then was unable to continue, which brought the collection agency's pursuit of me to a whole new level.

The collection agency handed my account over to their partners in crime--and I say that with the full measure of its perceived meaning--a large legal firm who focuses on collections.  That group filed a lawsuit against me--unbeknownst to me, because they NEVER served me.  

In my absence, they won a judgment against me for an amount far greater than my initial debt to Chase, all without my knowledge. There was no record of or indication that I had paid anything of that $1200 to the collection company (an amount, I might add, that was likely MUCH more than they had paid out to Chase to acquire my debt). 

Now, the debt clock was ticking away on an amount far greater than anything I had ever charged, with interest accruing at a legally sanctioned 10%.

I only learned about the judgment after my part-time wages began being garnished--deducting from what was already a meagre amount.  Further, each time they took from my paycheck, a fee for payment processing was also deducted from my paycheck for the sheriff (or marshall)...I got paid twice a month, so I had to pay that processing fee twice a month.

My employment status during this period was thus--I was a single parent trying to go to school to earn a teaching credential.  I had finally earned that credential at the end of 2008 and began looking for full time teaching positions. I landed a temporary contract and had my first salaried position. Unfortunately, because it was only for one school year, it didn't continue. I took a part-time, non-teaching job in the school district for the next school year, hoping that another teaching position would open up. 

Instead, what greeted me that fall, was a judgment against me--a garnishment of wages through the district.  Essentially, I was blacklisted from higher levels of employment. I was never considered for another teaching position. I was laid off at the holidays that year, and have never returned to work for the district again. In the time since, this has made it difficult to pay anything, let alone that judgment, and I have struggled with employment, in general, ever since.  

So,  in review:

By paying the collection company, none of the money was going to my original creditor, so I wasn't making good on the original debt anyway.

The collection company paid Chase pennies on the dollar, in exchange for the right to pursue me for the debt at the full amount, plus interest. Though I did pay them  a substantial portion of my debt, there is no record of those payments, as they were not processed through my bank account.

By resetting the date of my delinquency--by paying the collection agency--I opened myself up to a lawsuit. And I now have a judgment  against me, keeping me from good employment opportunities, home and car purchase options, etc. The amount is at about $7000 and growing. 

Further, the lawfirm who has the judgment against me is entitled to renew the judgment, when it expires, for another ten years--and then another ten years after that. Unless I figure out some way to pay them, my entire financial future is in jeopardy, and I am not getting any younger.  

Had I NOT paid that collection agency, I would not have reset the date of the debt.  Had I NOT paid that collection agency, they likely would not have forwarded the account to their attorneys--but even if they did, the debt would not be appearing on my credit report, as it does now, long past the seven year mark. Had I NOT paid that collection agency, I would likely be several years into a teaching career that I fought hard to have.

That's what I got out of trying to make good on a debt to a collection agency.  

My advice...Be careful. Get everything in writing. And know that, even then, you could be opening yourself up to a whole lot more trouble than you might imagine. I am all for doing what is right.  Just be in charge of what happens to you. Know the rules and hold collection agencies accountable.  Proceed on your terms and protect yourself.

Reply by
alflup

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Helpful to 1 out of 7 people

Bankruptcy.

I'm 100% serious.  Just declare bankruptcy.  It'll cost you about $1000.  But it'll be the best $1000 you ever spent.  7-10 years later everything will be cleared up.  I hated doing it, but it was the best/worst desicisions of my life. It got everything back on track.

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Helpful to 1 out of 1 people

there is also the option of credit repair! for $99 a month at lexington law you can get a lot of derogatory items off all three reports. by law once

they are removed they cant be put back on.  they will challenge late payments chargeoffs judgments anything negative. when it comes to dealing

with creditors they have to be able to prove you agreeed to the debt. but when the debt is sold to the creditor there is no paperwork involved.

the creditor cant prove its a valid debt. so when its challenged and either they cant prove it or dont eespond within 30 days it is going to be removed.

this option may be a lot cheaper than bankruptcy.

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Most Helpful Response

Helpful to 21 out of 22 people

are they held by a collection agent, or by the original creditor..?

If they are held by a 'collection agent'... then nothing you do or say will turn that negative into a positive... what has happened is the original creditor sold your debt to a collection agent, for pennies on the dollar, and written off the full amount of what you owed as bad debt. period end of story, that file is closed as far as the original creditor is concerned.

Once you get to this point, any money you pay, will go to the 'collection agent' and not the 'original creditor'... All you are doing at this point is feeding them profit.. It will not come off your credit report, and it will not change anything. your account still went to collections and will still show that way in your file.

You could even make matters worse for yourself. Say you defaulted on a charge card, in 2000... it goes to collections and just sits around, untill say 2006, when you decide things have improved enough for you to pay that debt off.. Now almost every debt is subject to the statute of limitations, which in most states is 7 years, which means if the original debt isn't satisfied within 7 years of the date of first delinquency, then the debt is extinguished and is no longer collectable. In that case, it falls off the credit file, and your score goes up.

On the other hand, you have that same debt, go to collections in 2000, just like before but, this time, in 2006, you make contact with the collection agent, who then updates your credit file to show the debt is active, which resets the statute of limitations and the debt clock starts all over again, for ANOTHER 7 years...

So now what you've done, is spend money you didn't need to.. The account may show PAID IN COLLECTIONS, but now the debt clock has been reset so you've got a collections line that will stay on your report untill 2014 possibly even later. As a result, score stagnates or, worse yet goes down, because you have recent collections activity.

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Closed Accounts

Helpful to 1 out of 2 people

Hello I bought a car coming up on two years , and  my loan was bought out by someone else because they said I've been good at paying my notes. But my question is? Why does it show up on my report as a closed account if I'm paying it?

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Helpful to 1 out of 2 people

wow, so im basically screwed!

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Helpful to 3 out of 19 people

I say if you can pay them pay them.  You borrowed the money with the promise to pay it back with interest.  Pay them off, cut up the credit cards, don't get anymore and pay CASH for your future purchases.

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0 People Helped

Closed Accounts

Helpful to 0 out of 1 people

I am currently trying to join the United States Air Force, I passed the ASVAB and Scored high enough for every job category that they have, but there is one problem. I am in debt with verizon wireless,Sprint and a hospital bill which isn't too bad but I cannot enlist because of these debts. So what I am asking is should i pay my closed account with Verizon Wireless as well with the debts of the Sprint and the Hospital bill? Does the Air Force look at my Open Accounts or what? Because i want to go in as soon as possible.

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Paying off a closed account ONLY

Helpful to 1 out of 4 people

Question, I have a "closed account by credit grantor" on my report.  Back in 2007 I got  $1,000 line of credit with Circuit City and then they went out of business a few years later, 2009/2010 time frame, and the account went to Best Buy.  A few years later I got an email from Best Buy telling me they were no longer honoring old Circuit City accounts and would be closing those accounts and invited me to apply with Best Buy for a new credit card.  I decided not to and they closed my account, which had a $800 balance, around 2011/2012.  I just checked my credit reports and it shows "Account closed by credit grantor" and show no negative history, as I always paid each month.

The Balance is only $236 now, as I have it set on autopayments for years, and I am thinking of just paying it all off right now, just to get it done and to stop paying interest charges (my fault as it is on auto pay and payments are small, so I really never thought about it).

Would that hurt/help my credit score?  Or no difference whatsoever?

Thanks in advance for any advice!

Reply by
MeOnMyWay

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17 People Helped
Helpful to 0 out of 1 people

It won't hurt you to pay the account off.  The card will continue to report as 'closed by credit grantor' but, even though it is closed, it will appear as an account with a positive history. I have a few older accounts like this on my history too--cards that were closed after being acquired by other companies etc...I believe these 'positive but closed' accounts stay on your report for up to 10 years so they help in that they increase your AAoA. Paying it off would be good, for the very reason that you cited--save yourself the interest charges.

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