Though there are many paths to improve your credit they all lead to a single place: removing negative items from your credit report. While some consumers assume this is as simple as paying off negative items, doing so can actually have a negative effect in certain situations. Read on to learn more about the possible negative side effects of paying off old debts, and a solution that works in some situations: pay to delete.
Paying off old debts may hurt your credit more than it helps
It may seem counterintuitive, but paying off old debts really could hurt your credit more than it helps. This is because items on your credit report are generally kept on for seven years past their date-of-last-activity. As a result, if you pay off a debt you haven’t paid on for five years it will update your date-of-last-activity. That debt will show as paid – but it’ll also show that it was previously delinquent, which will hurt your credit score. Because you’ve updated that date-of-last-activity, it’ll now take seven more years to fall off instead of the two it would have taken if you’d left it alone.
Your credit report is just a snapshot
One important thing to remember is that your credit report doesn’t have a memory. It does not include any history that isn’t relevant to your current financial situation. This means that if you take advantage of pay to delete, there will be no trace of the previous debt on your credit report. When potential creditors pull your most recent copy, they’ll see only a snapshot. Essentially, it’s as though the debt never happened.
Dispute all negative accounts before moving forward
Before you even consider pay to delete options, you should dispute all negative accounts on your credit report – even if you owe the debt. After a year or two, most creditors will sell their bad debt to third party collection agencies. These companies get a limited amount of information on you – and often it’s not enough to legally collect the debt. Of course this doesn’t stop them from trying, but often simply disputing a charge will result in the collection agency removing the item from your report entirely.
Pay to delete comes after trying all other dispute methods
After you’ve unsuccessfully disputed your account to the credit bureau several times, and followed all the advanced tactics offered by Leaf Credit Solutions, it’s time to consider pay to delete. In some cases the debt may be a recent debt and the creditor may have the required documentation to prove it’s valid. In other cases, the debt may be continually sold from one credit company to another, and the collection companies may continue to report the debt as new. Both of these situations may warrant pay to delete.
If you need a certain credit score then you may need pay to delete
Another reason we sometimes recommend pay to delete is when our clients need a specific credit score in a short period of time. For example, they may want to apply for a mortgage and the cost of paying off the old debt may be less than the money they’d spend on the higher interest rates that come with a lower credit score.
It’s not always easy to see if pay to delete is the right choice or if you should continue fighting a debt. The good news is that the experts at Leaf Credit Solutions are here to assess your individual case and provide advanced tactics specific to your needs. Give us a call to learn more about how you can raise your credit score quickly.