Question
At this point, is it even worth it to try to pay off old debts?
I went through a bad divorce, and found out afterwards that many of the household bills and things were not being paid after I moved out and went to collections/judgements. Most of these had my name on them as well, and along with a few other things, I have a horrible credit score (roughly a 450). I opened 2 credit cards and have begun rebuilding. Several months ago, some private student loans came out of deferrment and the company did not contact me for payment arrangements (they claim that they did, but I never received anything until I got a copy of my credit report and realized they had put them all into collections and contacted them myself-7 loans in total). These loans have a total balance of over 70,000 dollars, and this now shows on my credit report as being in collections. I make payments on them, and my sister, an attorney, is looking into the matter, but she doesn't have much hope that we will be able to change the situation, even if they were at fault. I planned on paying all of the bad debts on my credit report off over the next year (roughly 5,000 dollars) in order to improve my credit, but since the situation with the student loans happened, I am not sure it's worth my time now. I am unable to pay the 70,000 dollars to get the loans out of collections, and the company refused to acknowledge their mistake and put them back into a positive status, and so I continue to make payments on it through the collection agency. At this point, is it even worth it for me to try to pay the other stuff off, or is the student loan situation so bad that no matter what I do, I won't improve my credit until they are gone? I really would appreciate professional opinions on this matter. One of my main questions is whether a lender would ever give me a loan if everything else were paid off except for those student loans.
3 months ago - 4 answers
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Paying back charged-off credit card debt will not repair your credit rating/improve your credit score...A charge-off will stay on your credit report for 7 years from the date of default...even if you pay the entire $5,000 back in full. Translation: You'd be stuck with bad credit anyway after paying back all this money. These debts will age off your credit report naturally in 7 years from the date of default...Unless there is aggressive collection activity on these old accounts then I advise to sit tight....You are going to need the money to get the student loans out of default. There is absolutely nothing worse than student loans that have defaulted...use the money instead to bring your student loans current. For the federally backed student loans....not paying back the debt isn't an option. For your last question....with a credit score of 450...it's definitely going to take the passing of time to heal the damage. Assuming that you can get the student loans under control, then maybe after two years your credit rating will start to go back up again. ================= If you follow the advise below about brushing off your student loans...then you'll be in for an unpleasant surprise....Student loan debt in default for multiple years can double due to Sallie Mae's notorious fees.
by CatDad
3 months ago
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Unfortunately, I'm not so sure student loans fall off your report. What I DO know is that if they DO fall off, it wouldn't be until 7 years AFTER your last activity on them - which means if you made a payment last month, you would have to stop paying today, and wait for 7 years without talking to them, without doing anything about the letters they had sent you, nothing.
by Carlii- 3 months ago
pay the other stuff off, blow off the student loans. i have an almost 800 credit rating and haven't made a payment on my student loans in almost 10 years. i owed something like 10000, i have no idea what they think i owe now. thanks to caller id, i haven't answered a phone call from them in maybe 4 years. they hardly ever call now. anyway, when someone pulls up your credit report for a loan or credit card or whatever, they don't care too much about student loans or medical bills (according to this girl i know who's mother was a credit agency employee who did that kind of thing, plus my own experience in the last 10 years.). so just focus on paying the other stuff off.
by cabbage- 3 months ago
I'd personally offer very small payments on the other balances - around $20 per month just to keep the collection agencies off your back. You can even call them and have them give you a settlement offer. They may say, "Ok, pay off 65% of this debt right now and we'll settle." It'll still be on your credit report, but it will also show up as a settled debt. This could actually work to your advantage with the student loans as well - although I'm not sure how lending institutions feel about settlements with those. I've personally offered settlements that have shaved tens of thousands of dollars off of mansions and yachts - so it's certainly worth asking for a settlement offer. The worst they can do is tell you "no." Either way, it will still take time to repair that credit. Another thing I'd do, if able, would be to open a savings account with a few thousand dollars in it. Then, have the bank give you a secured loan on a few CDs (Certificates of Deposit) for about $1,000 each. They can lock the savings account, then use the CDs themselves as collateral, and automatically deduct your loan payments from the savings account. The interest you make on the CDs will go against the interest on your loans, so you'll literally be paying only a couple of extra dollars a month to vastly improve your credit. I've seen bankrupt people do this with great results. Once the terms of your loans and CDs are up, you'll get all that money back, too. You can save it, spend it, or roll it over and continue the CDs.
by heyimjason- 3 months ago