There are many things we do as consumers that have an affect on our credit scores. You may have a perfect history of making your payments on time, never being as much as 30 days late on an account and yet drive your scores down. Or, you may have had some problems years ago, but over the last few years, your scores have come back up due to stellar credit management since then. Simply by doing some or all of the activities we will cover over the next few days, you could sabotage your credit scores without even knowing it!
Today, lets look at 'old' judgements and or collections. Did you know that you should never pay-off old collections or judgements... unless you have no intention on seeking new credit for any reason for at least 2 years!
If you attempt to pay any of these off (especially if you may be applying for a new mortgage) it brings that OLD derogatory or delinquent credit account to NEW activity on your credit report. Now it is no longer an old dormant account... you just made it
an active account and unfortunately an active account with a poor payment history. It is the date of the last activity that the bureaus are looking at most to determine pay history. The result is lower scores... until they become old and dormant again... time, more time.
Now, that said, the fact that you have paid off, or attempting to pay off, an old bad account is in principle, a great thing and honorable. The problem is that the system does not work in your favor in the short term. That is what you are most concerned with when applying for new credit. After you have paid these off, and time passing, your scores will be improved and even greater than they may have been prior to paying them off, when they were still dormant. So in the long run, it can benefit your scores, but that could take a year or even two. If the lender is not requiring that you pay off old collections or judgments, consider not doing so unless you have the time to wait the time it takes. Good luck.
Next, we will discuss closing accounts you don't need or use... or not?
This has worked for us in the past for paying off those ugly credit cards.
There are several steps you should take to get out of credit card debt. Paying off several thousand dollars or more in credit card debt takes time, so you must discipline yourself.
1) If you have several cards, your first goal is to pay off the card with the highest interest rate. This process is called laddering.
2) Pay more money toward that credit card and slightly less toward the other cards, and eventually you can rip it up. Then you move onto the next card, and so on, and so on...
3) One proven way to pay more toward the most expensive card - and to get rid of it faster - is to make a separate payment every 14 days to the credit card company. Mark your calendar every 14 days and write that check or send your online payment that day. Making a payment every 14 days equals one extra month's payment you've made at the end of the year. Work these payments around your statement cycle to avoid paying lates fees.
Posted by: C Brown | February 20, 2007 at 01:57 PM
What about credit information from traffic fines. Are these calculated in your credit score.
Posted by: Rich | January 19, 2007 at 03:58 PM