Apparently I had a balance due of about $40 from an electric company from somewhere I lived several years ago. Upon reviewing my credit report, I found it had been placed with an evil collections agency who has never attempted to contact me. I contacted the electric company, and mentioned that I would pay, if the derogatory mark would be expunged from my report. They replied that they would inform the collection agency who would mark it as “paid collection” but not purge it.
I have been rebuilding my credit for the past 7 years - I don’t want it screwed up for a silly $40. Should I pay the electric company and have the agency mark it as “paid”? Should I insist that they purge the record? Any experience with this?
Phouchg
Lovable Rogue
By the way, while you will increase your odds of getting a loan with a “Paid Collection” versus “Unpaid Collection” your credit score stays the same when you pay a collection.
How old is this item? If it went delinquent 7 years ago, just dispute it… they won’t be able to legally verify, and it’ll drop off.
How many years ago was it? You may have shot yourself in the foot by taking an action on it, i.e., calling about it (IIRC if you call them it is an “action”, if they call you, it is not). If it’s 7 years with no action, it has to go off your report. Period.
Depends. This sometimes is a pitfall that honest but naive dudes get themself into. See- anything over 5/7 years (with some exceptions) is purged. But- if you pay off a collection account that is 6 years old- that pay off is a new activity that will stay on for another 5/7 years. Thus, an honest person who goes around & clears up a bunch of old debts is penalized by worse credit than someone who just “let sleeping dogs lie”.
I agree with Jonathan- dispute it with the Credit Reporting agency (transunion, whatever)- but even if it is only a few years old. They might not be able to verify it, then it’ll be dropped.
Among other references. Taking “action” on things doesn’t extend the period at all.
Obviously, the “right” thing to do would be to pay the electric company directly. The exact amount they say you owe. Don’t call a collection agency – they’ll get your number and start hounding you. Remember – you don’t have an obligation to a credit agency for anything, and it’s your right to pay whom you owe. Should the collection agency come after you for a “collection fee” you don’t have to pay that, either – you’re obligated to your debt, interest, and late charges per your original agreement with the utility company.
Also, since the quantity was so small, and depending on how long ago it was, it may not be worth the hassle to try strongarming anyone changing the reporting status.
Here is the straight dope, and none of this is speculation. Take that for whatever you think it means:
Paying it never extends the purge date. The date the collection item or other derog will drop is 7 years from the date it went to collection, or the date it went derog. Therefore, if for example it went to collection in 12/2000, then it will be dropped automatically in 12/2007 (actually more like 11/2007 as the bureaus leave a month for error). Paying doesn’t extend anything. Their could be confusion if the dopes at the collection agency don’t report the right date that the item went derog, but if they have th right date reported, then paying it will never extend the date.
Another interesting note: collection companies suck at responding to disputes from credit bureaus, so you have way better than 50/50 odds it will be deleted when you dispute it.
Yet ANOTHER interesting note: Most collections of under 50 bucks are dropped automatically by credit bureaus when they are disputed. Many scoring models give no weight to small collection accounts and they are rarely ever verified by the coll agency, so bureaus don’t bother with them.