Monday, April 20, 2009

Will Paying Off Delinquent Debt Improve My Credit Score?

Eliminating Deliquent Debt

    Delinquent debt follows a debtor for seven years or more, depending on the type of debt it is. Paying off the delinquent debt decreases the amount of debt and stops late payment marks from being added to the credit report. Certain loans, such as mortgage loans, may require delinquent accounts to be brought current.

Updating Deliquent Accounts

    Collectors and creditors may not update an old delinquent account until a payment or other type of account activity is made. When a delinquent account has a recent activity date it can have adverse effects on the credit report. Old collections that have fallen off the credit report may reappear due to payment.

Bottom Line

    Paying off delinquent debt improves the credit report in most cases. Creditors look more favorably on reports with paid collections and delinquent debt than those ignoring their credit obligations. A recent activity date on older collections may cause a slight credit score drop but the drop is usually balanced out by the increase from paying off the delinquent debt.

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