John Ulzheimer is a nationally recognized credit expert and contributor to On the Money. Learn more at Credit.com or JohnUlzheimer.com.
Q. I recently purchased my 3 credit reports. Some of my debts say that the account was written off and that I owe no money. One of my co-workers said that I should leave those accounts alone because eventually they will take it off my report.
I called one of the credit card companies in regards to one of my debts so I can pay it and he said that as far as he can see the account is closed and that I do not owe any money. He said that I should get in contact with the credit bureaus and ask for an investigation and if they come up with anything I guess they will let me know.
Please help, About a year ago I had no job and of course no money. Now I'm at a really good job and am now able to pay off my debs. What should I do? --Shermika
A. Shermika, I commend you for wanting to do the right thing and pay off your past due debts. Bravo to you!!
While credit reports are usually very accurate (shocking, I know) you should not depend on them to determine how much you owe especially on old debts. Credit reports are notorious for outdated information and just because they lead you to think that your balances are $0 in some cases that may not actually be true.
Here’s my suggestion. Contact every single creditor that you think you may owe money. Call them and ask them if you still owe them anything? If they say “no”, then you’re still not off the hook. They may have sold the debt to a collection agency and you may owe THEM something. Ask the creditor if they’ve sold your old debt and to whom. Then contact that company and make arrangements to pay your debt. You can also probably see the collections on your credit reports.
When a debt collector buys a debt they pay a small fraction of the face value. So, for example, if you owed the Bank of Ulzheimer $12,000 on a credit card it’s possible that it was sold to a collection agency for a few hundred dollars. The collector will still try and collect $12,000 and, if they are successful, will make a killing.
In this situation, and only in this situation, you should offer a lesser amount. This is called a settlement. Normally I am adamant that you should pay your debts in full but you don’t really owe the collection agency $12,000. And the bank can’t take any of your money…technically you don’t owe them anything because they sold the rights to collect the debt to someone else.
Just get any offer they make you in writing!! Let me know how it goes --J.U.
Q. I get a lot of Credit Card applications in the mail. I know that closing credit card accounts can affect my credit score. However, does it affect my score to use the "Opt Out" option to stop all this junk mail? --Jeff
A. Hi Jeff – There is a very common credit scoring myth about this. The myth is that you will actually IMPROVE your scores by opting out, which you can do for free at www.optoutprescreen.com. There is no truth to this at all.
Opting out, which is your right, has no impact on your scores one way or the other. When you opt out you prevent the four credit bureaus (yes, there are four) from selling your information to anyone as part of a prescreening/preapproved mail or phone offering. I’ve been opted out for years and I get almost no credit card applications other than those from issuers where I already have a relationship elsewhere (like a car loan or mortgage).
You can opt out for a variety of periods of time and can always opt back in at any time. I’ve heard people argue that by opting out you deprive yourself of perhaps better credit offers than you currently have. I’m not a “buyer” of that little nugget of gold. The downside risk of fraud or identity theft outweighs the benefits. Stealing mail from your mailbox is one of the most common ways thieves steal your identity and credit card applications are what I call “high theft value” mail.
So go ahead and opt out. See how you like it and then you can decide if you made the right move. --J.U.