Will Your Credit Score Recover If You Don’t Pay an Old Debt?

July 2nd, 2014 | Author:

[I]t’s much easier to get in financial trouble than you think. You get numerous offers for credit cards that you apply for and get approved. You start to use them and even think “I’ll pay it off when it comes due.” You continue to spend and rack up more debt that you can’t pay. And then you default.

If this has happened to you, you’re not alone. Many people end up with debt that they didn’t mean to incur and now can’t afford to pay. They may learn from their mistakes and become more responsible in the future. However, they may also find they can’t afford to pay those old bills. So, what happens if you never pay them?

Statute of Limitations

You certainly don’t want to get into new debt by using all of your money to pay off old debt and not having enough for current responsibilities. That being said, old debt is going to continue hanging over your head. However, there is a limit of time when it can hurt you.

First, every state has its own statute of limitations for when a creditor can sue you for money owed. Once that time has passed, there is no legal action that can be taken. That doesn’t mean that you won’t hear from them again. In fact, as long as they don’t violate the Fair Debt Collection Practices Act, they can continue to contact you as long as they want.

Credit Reports and Old Debts

Old outstanding debts can also be reported on your credit reports for several years. Generally, this is for 7 ½ years from the time of delinquency. However, as the negative information gets older, it has less of an impact on your credit score. The first two years is when it does the most damage. You also have the danger that the account will be sold and a new creditor will report to the credit bureaus. This will appear as a new account that could hurt your credit score.

Should You Pay?

It’s always a good idea to pay your old debts if you can afford to. If for no other reason, it will give you peace of mind. But it can also show creditors that you have learned from past mistakes and will be responsible with credit now and in the future.

Newest Answers

Big Changes Coming to Credit Reports

August 18th, 2017 | Author:
h

[I]f you have a bad credit score, you may benefit from the changes coming to credit reports soon. If you’re one of the lucky ones, you’ll see your credit score improve. In fact, it is expected that up to seven percent of those who have credit histories could see a benefit. What Changes Most civil […]

Continue Reading »

Be Realistic When Budgeting to Get Out of Debt

August 17th, 2017 | Author:
h

[Y]ou’re deep in debt and you want to pay it off to improve your credit score and to make life simpler. You want to pay it off as quickly as possible, which means making some major changes in your finances and life. Many experts tell you to stop spending any more money than you have […]

Continue Reading »

3 Ways You Can Waste Your Money

August 11th, 2017 | Author:
h

[I]f you’re trying to become more financially stable and improve your credit rating, you must be careful with how you spend your money. While you don’t want to give up everything fun in life in order to be frugal, you also want to avoid wasting your money on unnecessary expenses. Here are three ways people […]

Continue Reading »

Starting Over from Bad Credit

August 9th, 2017 | Author:
h

[Y]ou hit rock bottom with your credit. All of your accounts went to collections and your car was repossessed. You don’t even want to check your credit score because you know it’s bad. While the situation might seem hopeless, you can turn it around. Once you’ve lost any credit worthiness, you are ready to work […]

Continue Reading »

How to Talk to a Boyfriend/Girlfriend about Their Credit Rating

August 7th, 2017 | Author:
h

[I]f you’ve been dating someone for a while, you may be getting serious. Before you start dreaming about the perfect wedding day or what life will be like with 2.5 kids and a dog, you need to know you’re on the same page about important issues. While many people think nothing of talking about how […]

Continue Reading »

3 Ways Credit Matters to Everyone

August 4th, 2017 | Author:
h

[Y]ou pay everything with cash. Your motto is “If I can’t pay cash, I can’t afford it.” That means no credit ever. You may assume that you don’t need to worry about your credit score if you don’t plan to use credit to buy anything. Unfortunately, credit isn’t just about loans and credit cards. A […]

Continue Reading »

3 Tips to Help Your Kids When They Have Summer Jobs

August 2nd, 2017 | Author:
h

[I]f your kids are old enough to take on a summer job, now is a golden opportunity to teach them about money and finances. If you start them out right, they will know how to handle money and financial responsibility for when they are earning a full-time income. Here are three tips to use this […]

Continue Reading »