Published: Friday, 12 Sep 2008 | 4:05 PM ET

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By: Gerri Detweiler

Credit Reports and Collection Accounts

One of Brandi’s goals is to clean up her credit so she can buy a house. I have good news and bad news for her. The bad news is that paying off those old accounts won’t help her credit rating one iota. The negative listings will still remain for as long as they can legally be reported, and will continue to affect her credit, paid or unpaid.

But here’s the good news: Collection accounts cannot be reported for more than seven and a half years from the date you first fell behind with the original creditor. That’s true whether they are paid or unpaid. (New York residents see that information drop off their reports after five years.)

Because many of the collection accounts reported on Brandi’s credit reports don’t list the original date of delinquency (when she first fell behind), she needs to clarify that date for each account, to make sure old accounts aren’t reported longer than they should be. That may mean disputing those items with the credit reporting agencies. If the accounts are too old – or are not verified by the collection agencies – they will be removed from her reports.

One last piece of advice for Brandi: I notice she has no current, active credit card references on her credit report. I recommend she goes to Credit.com to find a secured credit card. A good credit score requires recent positive information, and Brandi needs to start establishing that. She can put a few hundred dollars of the money she has saved into an FDIC insured account with the secured card issuer, and use that card for purchases she would make anyway – such as groceries and gasoline. I would encourage Brandi to use her new card sparingly (but do use it, so it remains active) and pay the bill off in full each month to avoid interest charges.

I am sending Brandi a copy of my new book, Stop Debt Collectors: How to Protect Your Rights and Resolve Your Debt (Credit.com 2008) so she’ll have detailed information on how to resolve these collection accounts and get on with her financial life!

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