Painfully, one of the biggest mistakes I see people make when they begin working on credit repair is to pay off old charge offs, collections and judgments. This is the last thing you should and it should only be done using the pay for delete method. The reason for this is because:
1. You may not legally be obligated to pay the obligations (even though you think you are and your creditors and their collection agency henchmen will tell you the same)
2. It refreshes the date of last activity on the account enabling the creditor or collector to continue reporting the derogatory item for ANOTHER 7 YEARS.
So, if you have suffered from credit card default and think that your only solution is to pay off the charged off accounts or collection accounts, think again. You have legal options that may help you not only avoid having to pay them at all, but also help you get the derogatory account legally removed instead of having it continue reporting.
The various methods that can be utilized are:
1. Debt Validation
2. Debt Investigation
3. Statute of Limitations
4. State Licensing Requirements for Collection Agencies
5. Litigation in Small Claims Court
6. Pay For Delete (if all else fails)
One of the first steps to effective credit repair is to understand what the laws are and how they pertain to your specific legal rights. You will find that in most cases, your rights are being violated by the credit card companies and collection agencies who get away with their leg breaker tactics mainly due to the ignorance of the population at large about credit law.
Don’t be a victim to ignorance or pay for your mistakes twice. Understand the law and use it for your benefit. You will find that a simple understanding of the various credit, collection and credit repair laws (The Fair And Accurate Credit Transactions Act or FACTA, and the Fair Credit Reporting Act or FCRA)
And NEVER begin your credit repair efforts by paying off charged off or collection accounts!
Absolutely, I agree. This is one of the biggest mistakes people make when they try to fix their credit.
Also, once the date of last activity is updated, that bad tradeline becomes a very recent item on a report.
New Bad Credit is much worse than Old Bad Credit.
Often times, people’s credit scores go done after paying off an old collection or chargeoff.
All of my clients are shocked to hear that the money they’ve spent has made the problem worse.