Christian Science Monitor's Financial Feature Asks Bryan Beatty to Field Reader Queries
May 14, 2007, Christian Science Monitor — “Paying off an old debt may salve your conscience, but not your credit,” the Christian Science Monitor was told by EBW’s Bryan Beatty, a certified financial planner in Vienna, VA. Beatty was one of several financial planners who fielded financial questions directed to the Christian Science Monitor.
Question: My daughter got a credit card while in college, ran it up, and then failed to pay. The bank wrote it off and sold the debt. She has now received an offer to settle the bill for much less from a company that is not the original creditor. A letter says it will alert the credit bureaus of the agreement and consider the debt settled. Should she repay this debt this way? — S.K.W.
Bryan Beatty says: It won’t do a huge amount of good to repay a charged-off account unless it’s done at the time it’s charged off, according to Bryan Beatty, a certified financial planner in Vienna, VA. His reasoning is that once the account is written off, the reporting activity stops, and a clock begins to tick, and your score will begin to improve (slowly, but it does). If you were to then negotiate to pay it off after that charge off, that money-due clock will start ticking all over again.
By resurrecting a charged-off debt, you may relieve any guilt of having walked away from an account. But you have reopened a wound on your credit report, Mr. Beatty says, and it takes seven years for old information to disappear from a credit report.
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