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Thread: Paying off credit card debt/ defaulted account

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    #1

    Confused Paying off credit card debt/ defaulted account

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    A few years ago I defaulted on my Wells Fargo credit card. I couldn't afford the payments and eventually my card was closed. However, I still had a balance on my card that I needed to pay off. Eventually, I was able to afford the payments again and I have been making payments to lower the balance, even though I cannot use the card. There is no interest anymore that is being added to my balance either. I'm almost finished paying off the rest of the balance and I had a question about how it would affect my credit score.

    This might sound dumb but if I just pay off the rest of the balance, will that improve my score? Or will it hurt it? Will that account still show up on my credit report, even if there is no balance and its technically already been "closed" since I defaulted? Just want to make sure I'm doing the right thing!


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    #2
    I could be wrong, however, I thought I heard/read the following:

    1) you should "catch up" the credit cards that are less than 120 days late. After 120 days, it doesn't affect your score as much as a rececnt 30 or 60 day late.
    2)after a certain number of years (depending on the state), if you defaulted on an account and it was closed, then it no longer affects your credit score. it's like you never had the card.







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    #3
    Honestly, what's done is done. Your credit is already affected by the account going default and being closed. It takes I believe 7 years for it to 'fall off' and that's 7 years after its paid off. Making payments and paying it off shows some good faith in that you are trying to be responsible, but whatever damage to be had has been done.

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    #4
    Contact the company and make sure that they are reporting your payments on the account since it is closed. Once the balance is paid off, they should notate that it wasn't something they wrote off, that you did pay off the balance.

    It will still have a negative impact until the closure rolls off your card. It also will have impact, if they have been reporting monthly as you've made payments because technically the money was past due and any time you are making payments on a balance, you could have started the timing clock over again. But as long as once the last payment is received that report that the balance was paid in full, your score will start to climb.

    It won't recover fully until it rolls off your score in a few years. But I'm not sure if the account closure or the payoff is the one that will need to roll off for full recovery.

    Did you make arrangements with the company for payoff, or did you simply start making payments again without talking with them? Do you have any type of written deal with them regarding repayment?
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    #5
    You're doing the right thing--will it have an immediate dramatic affect on your score, no, but is it part of the process to improve your score over time, yes. Check your report for free at AnnualCreditReport.com to see how it shows up. As already noted, the farther away you get (time), the less impact this sort of thing will have on your score (especially in the context of carefully managing credit now and into the future). The other thing to consider is that there may be a situation where a lender (or some other entity that uses credit history!) views your efforts in a positive light!
    J.J. Montanaro is a CERTIFIED FINANCIAL PLANNER practicioner with USAA Financial Planning Services one of the USAA family of companies.
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    #6
    Um, this thread is 4 years old, and your comment didn't even address the OP's question.
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    #7
    Quote Originally Posted by villanelle View Post
    Um, this thread is 4 years old, and your comment didn't even address the OP's question.
    What happened here? Did a post get deleted? You are pretty on the ball with not commenting on random old threads so I am wondering if a post was deleted?
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    #8
    Quote Originally Posted by HisJuliet View Post
    What happened here? Did a post get deleted? You are pretty on the ball with not commenting on random old threads so I am wondering if a post was deleted?
    Yes, the post must have been deleted. It was a 1st time poster who wrote that they had zero debt, always paid their card off in full monthly, etc.




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    I thought it was really strange!

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