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When it does make sense to repay old credit card debts

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By: Good Nelly
on 5th Apr,2013

Years ago you were unable to pay off credit card debts because of financial constraints or some other reason.
When it does make sense to repay old credit card debts


Years ago you were unable to pay off credit card debts because of financial constraints or some other reason. Now your financial situation has changed for the better but you've completely forgotten about the debt.

Surely, you can neglect your old credit card debts. However, there are certain situations when it makes sense to pay off your old credit card debts. For instance: when you want to avoid creditor harassment, when you wish to improve your credit, when you desire to flourish in your career, etc.

Read along to know about the circumstances when it makes sense to repay your old credit card debts.

1. When you genuinely want to improve your credit record

You may not get sued for an old delinquent debt if it has crossed the statute of limitations (SOL) period in your state. The SOL period in most states stretches between 3 and 6 years. If the SOL period on your debt has expired, then it has become time-barred. You won't have to worry about the legal hassles. However, the listing will be there on your credit report for 7 long years. The delinquent status of the account hurts your credit score. So, getting out of the old delinquent debt is certainly in the best interest of your credit.

It is true that the item will not go away from your credit report even after the debt is paid off. However, the updated account status will increase your creditworthiness. This would be helpful when you're applying for a loan or a line of credit.

2. When you wish to obtain low interest rate on a loan

Paying off the old debt makes sense when you wish to obtain low interest rate on a loan. Lenders may agree to offer a low interest on a loan after seeing that you've paid off an old debt.

Old and unpaid debts harm your credit. However, the impact becomes less with time. Your credit score won't increase by a huge margin after paying off an old credit card debt. Still, the credit scoring models will look at you approvingly after a delinquent debt is paid off. Moreover, a lot of lenders check the credit report of the borrowers before giving out a loan. They may not like the borrowers who have not bothered to clear their old debts.

3. When you want to get a job

An unpaid old debt may prevent you from getting a job in accounts department. Many employers check the credit report of job seekers and delinquent old debts send red signals to them.

If you wish to get a job in accounts department, then its best to repay your delinquent debt, even it is time barred. Employers may not prefer to recruit people who can't manage finances efficiently, especially in the accounts department.

Finally, the best part of getting rid of old credit card debt is that collectors will stop calling you regarding payments. Creditors are allowed to call you regarding old and unpaid debts, even if they're time barred. Once you eliminate those old credit card debts, collectors will be happy and they will stop calling you. You can live in peace.

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