It might seem strange to weight the pros and cons of paying off credit card debt. Intuitively, there are no negative consequences to paying off debt, and no positive consequences when debt is left unpaid. But this applies only to debts that are current or very recent.
When it comes to old debts, there are definitely pros and cons to paying off old credit cards. If a debt is near the statute of limitations on collecting old debts, the question becomes a bit more complicated. And after seven years, old debts can no longer be counted against you on your credit report.
Cons to paying off old credit card debt
- If you make a payment toward an old debt, you ‘reset the clock’ on the collection of that debt. So if your debt is at or near the 7-year mark, it might be best to leave it alone. Any payment toward that debt will allow debt collectors to put it on your credit report for another seven years and pursue collections against you aggressively.
- Once a debt is “charged off” on your credit report, it will remain listed that way for seven years whether you repay it or not.
- After carrying a bad debt on your credit record for seven years, you have already faced negative consequences. You have “paid” in the form of having severely damaged credit. Paying it now means you’re essentially paying twice for the same mistakes.
Aside from the negative, there are some obvious “pluses” as well:
Pros to paying off credit card debt
- While collectors might not be able to post unpaid debts to your credit report after seven years, they can still harass and hound you until you pay. Paying off the debt can end the hassle of dealing with collection activity.
- Some lenders look beyond the credit score, and will want to see that you resolved old unpaid debts. Paying off accounts that you could otherwise ignore will make you a better candidate for a loan from them, even if it doesn’t improve your credit score.
- Most people feel that repaying debts they owe is the right thing to do, no matter how old the debt.
No matter how old your debts are, NFCC certified counselors can help answer your questions and create a plan to help you deal with them.
Melinda Opperman is Senior Vice President of Community Outreach & Industry Relations, Springboard Nonprofit Consumer Credit Management, Inc; and Executive Director, Springboard Education Foundation. Springboard Nonprofit Consumer Credit Management is a member of the National Foundation for Credit Counseling.
Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.