A bill shows up twice in a credit report. Now what?
Dear Liz: I have been doing everything to raise my credit scores, which were horrible. I see some medical bills on my credit reports that seem identical. Should I try to dispute them or just let them go? I heard that if you try to dispute them, it allows the creditor to restart the clock on paying them, potentially keeping them on your report for seven more years.
Answer: You heard wrong, fortunately. Disputes don’t extend the limit on how long negative information can be reported.
You may be confusing the seven-year credit reporting time limit, which is part of the federal Fair Credit Reporting Act and restricts how long negative information stays on a credit report, with state statutes of limitation.
Statutes of limitation are supposed to limit how long a creditor may sue you over a debt. (The key phrase is “supposed to.” Collectors do file lawsuits on debts that are too old, hoping that the debtor won’t show up in court to point that out.)
Statutes of limitation can range from two to 15 years, depending on the state and the type of debt. In some states, it’s possible to restart the statute of limitations by making a payment on a debt, or even acknowledging that the debt is yours. (In California, the statute of limitations is four years for most debts.)
You’ll want to avoid either until you’re sure the bills are correct. You can start by disputing the bills with the credit bureaus.
If that doesn’t remove the duplicates, you can contact each collection agency in writing. Ask them to validate that the unpaid bill actually belongs to you and that they have the right to collect. Mention that if they cannot validate the debt, you want the bill removed from your credit reports. Also ask the collector to respond to your letter within 30 days.
Removing any duplicates may help your scores. Actually paying the collections typically won’t. It’s up to you whether you want to try settling the debts and risk reviving the statute of limitations, or simply wait until the debts fall off your credit reports after the seven-year mark.
To sell or not to sell that collection
Dear Liz: You’ve twice advised collectors to sell their collections while they’re still alive, rather than leave the task to an executor who won’t have the collector’s intimate knowledge of the market for these items. Collectibles bring joy to the collector and are probably most valued the closer the end approaches. It would bring sadness rather than joy to unload them right at that point in life. Right now, I’m trying to declutter my house and even the stuff that has been moldering in boxes for decades hurts a little to let go of. I’m named as the executor in a buddy’s trust and will need to move his tools. Even if his old arthritic hands can’t operate the lathe anymore, he looks at the machine and I can see the memory of turning a bowl in the expression he wears. I say, accept the responsibility of an executor fully.
Answer: If you haven’t served as an executor, you may not fully understand how daunting and time consuming the task can be even without having to deal with a large collection.
No one is suggesting that people divest themselves entirely of a prized collection. But letting go of stuff can be immensely freeing, as well as a real gift to the people we leave behind.
If you need motivation to continue your decluttering, consider reading Margareta Magnusson’s book, “The Gentle Art of Swedish Death Cleaning: How to Make Your Loved Ones’ Lives Easier and Your Own Life More Pleasant.”
When paying debt hurts credit score
Dear Liz: You recently answered someone whose credit scores dropped more than 30 points after they paid off a mortgage. You mentioned that the big drop was probably because the mortgage was the person’s only installment loan. Credit scores like to see active use of both types of credit, installment loans and credit cards. Because this person’s scores were so high, they almost certainly were still actively using credit cards. But you should remind people that if they stop using credit, eventually they won’t have any credit scores at all.
Answer: Consider them reminded. There’s no need to carry balances; just using credit cards regularly is enough.
A few other readers wrote in suggesting the letter writer get a personal loan as a way of increasing their scores. Although personal loans can be a great help to people building credit, there’s really no point in increasing scores once they’re above about 760 on a 300-to-850 scale. Higher scores only get you bragging rights, and it would be a little silly to pay a lender unnecessary interest to get those.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.
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