Paying Off Old Debt, or Let it Fall Off Credit Report?

Question

About 6 years ago I got sick and lost my job, and had to quit school. In this time, I racked up a lot of debt which I was not able to pay off. These debts are about to fall off of my credit report.

My question is, should I pay them off, or let them fall off the credit report? What effect will each of these options have on my credit score?

Gregory H. · Answer

If the debt is legitimate and you can afford to pay it, then paying it is the right thing to do. That is more important than how your credit report will read tomorrow.

Steve Vaughan · Answer

Even if it 'falls off' your credit report at the 7 year mark or whenever, it can always come back.  A new collection agency may buy it and it and a lawsuit against you will pop up at the least opportune time.

Paying it if you are able is the right thing to do as @Gregory Hiban mentions.  A debt this old is likely to settle.  I'd scratch up about 40% or so and offer a settlement.   Get the settlement in writing and don't give access to your bank acct.  Pay by cashier's check or money order.

Jeremey Allen · Answer

How do you negotiate a settlement? Should I just call them, or do it in writing?

Jeremey Allen · Answer

I plan to pay it either way. I want a clean slate to start my REI career. My only concern was the effect on my credit score.

Jeremey Allen · Answer

I've been told that paying it off may actually hurt my credit score and it may be better to let it fall off. There are so many differing opinions.

Gregory H. · Answer

If it is legitimate medical debt, then pay it. If it were too large for you to pay, that would be one thing. However, if you can afford to pay off your student loans of $15K in a few months, then you can afford to pay a legitimate expense someone incurred to treat your illness. Just make sure before you pay each bill, that you are paying the final payoff amount, and not just the original balance since fees & penalties could have ballooned the balance.

Jeremey Allen · Answer

They are relatively small medical bills. They total just under $2000.00 all together. I haven't ever paid on these in particular. They are due to drop off of my credit report in 6 months or so.

I have $15,000.00 in student loans that I am currently paying off, and plan to pay off in full in the next few months.

My goal is to raise my credit score.

Gregory H. · Answer

@Jeremey Allen I don't think anyone will be able to provide a useful answer without a few more details. Could you provide an approximate size of the debt and how long it would take you to pay it off if you concentrated fully on it?

What type of debt is it? Student loans prior to drop out, medical caused by the illness, consumer cause by the job loss, or a mix of two or three of those (if a mix, a percent breakdown would be helpful).

Are they just unpaid/delinquent accounts, or was bankruptcy declared?

Just a few of the questions, any other specifics you could provide would be helpful.

Paying Off Old Debt, or Let it Fall Off Credit Report?

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