The following is presented for informational purposes only and is not intended as legal advice or credit repair.
We hear this one a lot: "I have an old debt that's been on my credit report for almost seven years. Should I pay it or let it fall off my report? Will it stay on my credit report longer if I pay it?"
It's a great question, because there are two totally unrelated issues at stake when it comes to an old debt like this: the impact on your credit and your legal responsibility to the debt in question.
Nothing will change how long an item stays on your credit report
There's a fairly common misconception that you can inadvertently "reset the clock" on delinquent items on your credit report. Just when you thought it was going to disappear from your credit report, you make a critical mistake and now your credit report (and credit score) gets dinged for another seven years. Fortunately, that's not possible.
TheFair Credit Reporting Actwas amended in 1996 specifically to prevent unscrupulous collectors from taking actions that kept delinquent items alive on your credit report for years and years and years.
Now it’s pretty cut and dry. The reporting period runs for seven years and 180 days from the date of the last delinquency or missed payment. It doesn’t matter when the account was charged off, when it was sold or if you ever paid a single penny towards the debt. That means that if you missed a payment due date over seven and half years ago, and never made any payments from that point, the account in question is very likely to have fallen off of your credit report by now.
(As an aside, it’s important to remember that even if you pay off an account all delinquencies still stay on yourcredit report until the reporting period is over. The difference is that the account is listed as paid, rather than unpaid, which is definitely better for you.)
The statute of limitations can reset with certain actions
The idea of “restarting the clock” comes from the statute of limitations for collecting on a debtand has nothing to do with how the debt is reported by the credit bureaus. Broadly speaking, once the statute has expired, your legal responsibility to repay the debt goes with it.
The statute of limitations is set by each state, so the timeframe varies. It’s completely separate from your credit report. In fact, if you live in a state where the statute is greater than 7 years, a collector could sue you for a debt that's already fallen off of your report.
The statute of limitations in your state doesn't protect you from being sued, necessarily, but if you can prove that the applicable statute has expired, you should be able to get your case dismissed.
Crucially, making a payment, agreeing to a repayment plan, or, in some instances, simply confirming that the debt is yours can revive the debt and restart the clock. So it's important that you know whether or not the applicable statute has expired before making a decision.
There are rarely drawbacks to paying off an old debt
So what should you do about an old debt? The answer really depends on your unique circ*mstances.
Generally, if you have the funds to pay off a debt they're really aren't many drawbacks to doing so. It certainly won't hurt your credit to pay off an old debt, and while it may "revive" the debt that really doesn't matter once the debt's paid off (just make sure you keep adequate records of everything).
Either way, your old delinquency will fall off your report after seven years regardless of what you decide to do (or not do). But in the meantime, anyone looking at your credit report will see that unpaid debt. If you’re considering getting a loan or looking for a new job or even moving into a new home or apartment, it might be worth it just to be certain that you don’t miss out on something good because of a really old debt.
Questions about your own debts (old or new)? Work with a nonprofit credit counselor to find out what options are available. Help is free and available 24/7, online and over the phone.
FAQs
Defaulted debt can crush your credit score and hurt your chances of borrowing money in the future, whether it's applying for a mortgage, car loan or credit card. If you have the means to pay off old debt, it will help your overall credit — both your score and your report.
Is it worth it to pay off old debt? ›
Generally, if you have the funds to pay off a debt they're really aren't many drawbacks to doing so. It certainly won't hurt your credit to pay off an old debt, and while it may "revive" the debt that really doesn't matter once the debt's paid off (just make sure you keep adequate records of everything).
Should I pay a debt that is 7 years old? ›
Although the debt won't be factored into your credit score after seven years, there are still consequences. When you stop paying your debt, the creditor will start charging late fees and interest will continue to accumulate, increasing the balance you owe.
Is it better to pay off old debt or settle? ›
So, if you've fallen behind on payments, it's crucial to address the situation head-on as soon as possible. In general, paying off your credit card debt in full is the optimal solution that preserves your credit score and history.
Does paying off old debt raise your credit score? ›
For some credit scoring models, paying off collection accounts may improve credit scores. FICO® Score 9, FICO Score 10, VantageScore® 3.0 and VantageScore 4.0 credit scoring models penalize unpaid collection accounts. Paying off collection accounts may help improve these scores.
Can I be chased for a 20-year-old debt? ›
If you've already been given a court order for a debt
There's no time limit for the creditor to enforce the order. If the court order was made more than 6 years ago, the creditor has to get court permission before they can use bailiffs.
How long before a debt is uncollectible? ›
At what stage is a debt considered bad? ›
Bad debt accrues when money due by a certain date isn't paid. This could be as simple as your client forgetting to pay or, in a more serious case, if they've had to liquidate. However, when debt reaches 90 days, it's increasingly more difficult to collect.
Does unpaid debt ever go away? ›
In general, most debt will fall off of your credit report after seven years, but some types of debt can stay for up to 10 years or even indefinitely. Certain types of debt or derogatory marks, such as tax liens and paid medical debt collections, will not typically show up on your credit report.
What is the average debt of a 70 year old? ›
In 2022, the average debt of consumers aged 65 to 74 was $134,950, according to the latest Federal Reserve data, compared to $94,620 for those 75 and older.
Wiping out high-interest debt on a timely basis will reduce the amount of total interest you'll end up paying, and it'll free up money in your budget for other purposes. On the other hand, not having enough emergency savings can lead to even more credit card debt when you're hit with an unplanned expense.
Should I pay off a 5 year old collection? ›
If you have the means to pay off old debt, it will help your overall credit — both your score and your report. Remember that even if debt is time-barred, creditors and debt collectors can still reach out to collect debts.
What is the best way to settle old debt? ›
Steps to negotiate your debt
- Work with a credit counselor.
- Enroll in a debt management program.
- Try various debt payment strategies like the snowball method.
- Ask the creditor for a payment deferment.
- Ask for a lower interest rate.
- Consider a debt consolidation loan.
“I would never pay a debt after the statute of limitations has expired because legally I do not owe the money,” says Ash Exantus, founder of BookRich. “You should simply contest the debt if it's on your credit report and begin building new credit.”
What happens if you never pay collections? ›
Ignoring these efforts could lead to further financial strain, potential wage garnishment, or the seizure of assets through a court judgment. Additionally, the debt may remain on your credit report for up to seven years, negatively impacting your credit score and future financial opportunities.
What is a goodwill deletion? ›
What is a goodwill letter or late payment removal letter? In a goodwill letter, sometimes called a late payment removal letter, you ask the creditor that reported your late payments to remove the derogatory mark from your credit reports.
Is it good to pay off bad debt? ›
It pays to pay off debt.
While it's important to save, it's even more important to pay off non-deductible, high-interest debt, like your credit card balance, as fast as possible. Using some of your savings to pay off this kind of debt can actually be the most cost-effective way to help you spend less over time.
Should I pay a 5 year old collection? ›
The best way is to pay
Most people would probably agree that paying off the old debt is the honorable and ethical thing to do. Plus, a past-due debt could come back to bite you even if the statute of limitations runs out and you no longer technically owe the bill.
Should I pay a debt from 10 years ago? ›
Can a Debt Collector Collect After 10 Years? In most cases, the statute of limitations for a debt will have passed after 10 years. This means a debt collector may still attempt to pursue it (and you technically do still owe it), but they can't typically take legal action against you.
