Dear Liz: I did everything to increase my credit scores, which were horrendous. I see medical bills on my credit reports that look identical. Should I try to challenge them or just let them go? I’ve heard that if you try to challenge them, it allows the creditor to restart the clock to pay them off, which could keep them in your report for another seven years.
Reply: Fortunately, you misheard. Disputes do not extend the length of time that negative information can be reported.
You may confuse the seven-year time limit for credit reports, which is part of the federal fair credit reporting law and limits how long negative information can be stored on a credit report, with state limitation laws.
Statutes of limitation are meant to limit how long a creditor can sue you for a debt. (The key phrase is “supposed to do it.” Debt collectors sue overdue debts, hoping the debtor won’t show up in court to report it.)
Limitation periods can range from two to 15 years, depending on the state and type of debt. In some states, it is possible to restart the statute of limitations by making a payment on a debt, or even by acknowledging that the debt is yours. (In California, the statute of limitations is four years for most debt.)
You’ll want to avoid one or the other until you’re sure the bills are correct. You can start by disputing the bills with the credit bureaus.
If this does not remove the duplicates, you can contact each collection agency in writing. Ask them to validate that the unpaid invoice really belongs to you and that they are entitled to collect. Mention that if they can’t post the debt, you want the bill removed from your credit reports. Also ask the collector to respond to your letter within 30 days.
Removing duplicates can improve your scores. In fact, paying for collections usually won’t. It’s up to you whether you want to try and settle the debts and risk reactivating the statute of limitations, or just wait for the debts to drop off your credit reports after seven years.
To sell or not to sell this collection
Dear Liz: You have Twice Savvy Collectors to sell their collections during their lifetime, rather than leaving the task to an executor who will not have the collector’s intimate knowledge of the market for these objects. Collectibles bring joy to the collector and are probably more appreciated as the end approaches. It would bring sadness rather than joy to unload them at this point in life. Right now I’m trying to declutter my house and even stuff that has been molding in boxes for decades hurts a bit to let go. I am named executor in a buddy’s trust and will have to move his tools. Even though his old arthritic hands can’t operate the lathe anymore, he looks at the machine and I can see the memory of spinning a bowl in the expression he wears. I say, fully accept the responsibility of an executor.
Reply: If you haven’t served as an executor, you might not understand how daunting and time-consuming the task can be, even without having to manage a large collection.
No one is suggesting that people get rid of a treasured collection entirely. But letting go of things can be extremely liberating, as well as a real gift for those we leave behind.
If you need some motivation to continue decluttering, consider reading Margareta Magnusson’s book, “The Gentle Art of Swedish Cleansing of Death: How to Make the Lives of Your Loved Ones Easier, and Your Own Life More Pleasant.”
When paying off debt hurts your credit rating
Dear Liz: You recently replied someone whose credit scores have gone down more than 30 points after paying 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 always actively used credit cards. But you have to remind people that if they stop using credit, they will ultimately have no credit rating.
Reply: Consider them as recalled. It is not necessary to wear balances; it is enough to regularly use credit cards.
A few other readers wrote suggesting that the letter writer get a personal loan to boost his scores. While personal loans can be of great help to people who create credit, there is really no point in increasing scores once they go over around 760 on a scale of 300 to 850. Higher scores don’t. give you that bragging rights, and it would be a bit ridiculous to pay unnecessary interest to a lender to get it.
Liz Weston, Certified Financial Planner, is a Personal Finance Columnist for NerdWallet. Questions can be directed to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.