Paying Old Defaulted Debts May Harm Your Credit Score

Most people realize that it’s bad to default on a debt. Your credit score goes down, collection calls go up, and the world is rocky. But what happens if, years later, you’re suddenly able to throw a few bucks at some of those old tradelines?

Stop before you start. When you make a partial payment on an old debt, the creditor may report the payment to the credit reporting agencies. One would ordinarily think that’s a good thing, but think again.

Debts typically remain on a credit report for six years from the date of last activity. When you’ve got a recent charge-off or other delinquency, the creditor may cease actively reporting the debt because there’s nothing new to say. In six years, it’s gone from the credit report. Make a payment and suddenly that ticking time bomb gets a longer fuse.

Make no mistake - I’m not saying that you should dodge payments or play the odds that a creditor won’t sue you for a past due balance. But it’s important to recognize the ramifications of your actions, and to know that a payment on an old delinquent debt may well keep your credit score low for a longer period of time.