Q & A - Questions and Answers

When I pay off a past-due account, it will show paid and will no longer be negative, right?

Wrong! It is quite difficult to restore your credit without somehow satisfying your outstanding debts. However, the act of paying off a debt can actually hurt your credit. Negative credit is allowed to stay on the credit report for a maximum of seven years, except for bankruptcy, which may remain on the credit report for ten years. This seven-year clock begins ticking on "the date of last activity" or, in other words, when the last action took place on the account. By paying an outstanding, delinquent debt you will change the account status to "paid collection," "paid was late," or "paid was charged off" - which will still stand out as a very negative listing. Furthermore, you will create a new date of last activity on the day you settle the account. The seven-year clock will reset and begin all over again. When you have outstanding debt, it is almost always prudent to seek professional help so that you may settle your debts without further damaging your credit.

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