The Trouble of a Paid Tax Lien
After a couple week absence from the mailbag, I have returned! Whenever I am spending time on forums, or learning about new situations, I am always amazed at the term re-aging. This is highly illegal, yet collection companies threat (and occasionally do) re-aging as a ploy to get you to pay. A re-aging question tops this weeks mailbag, and a paid tax lien question is on the docket!
I received a letter in the mail from LVNV to settle on an old Citibank credit card which charged off in 1989, and which I lived in Omaha, Nebraska at the time. I now live in the state of Illinois, and I was not aware of this account because my ex-husband handled all the finances and he was the one using the card. I was a young woman woman who let her husband handle everything. I didn’t know what a charge card was placed in my name. There is no trade line on my credit report at this time, how do I handle this 23 year old problem without re-starting the statute of limitation and getting my mortgage denied?
There is a good reason why the 1989 charge-off is not included in your credit report. It is prohibited by statute. A charge-off from 1989 would necessarily have had a date of first delinquency leading up to the charge-off that was prior to the charge-off.
FCRA 605(a)(4) in conjunction with 605(c) prevents the credit reporting agency from including a charge-off in your credit report beyond 7 years plus 180 days from the date of first delinquency on the original account. Those dates are absolute, and nothing the debt collector does or reports can change those statutory dates. So have no concern about it popping up on your credit report. Presuming the statute of limitations has also expired, the debt would be time-barred, and thus noncollectable. There is no threat of legal recovery.
You can simply send the debt collector a cease communication letter under FDCPA 805(c), and forget about them. If they contact you thereafter, it is a violation of statute.
Is a paid tax lien really hard to remove? This paid tax lien is for Illinois and it looks like it will be difficult to have the lien completely removed from my credit file. My question is will I get any kind of score bump from the paid tax lien showing a 0 dollar balance?
Unfortunately, you will receive no FICO score boost from just paying the lien. Remember, FICO scores are usually decided once a negative entry is listed. It does not factor in paying items that are negative, as just existing as a negative entry indicates potential risk to future lenders.
I am looking to get a score boost fast! I have five open credit cards, all with high balances. The limits on 4 of the cards are small, so I can pay all four of them off now, or I can take the money I would use on those cards and pay down my high interest card. Which will help me get the most points?
Quite frankly, it is paying off the four cards with the smaller limits. There are two basic strategies for paying down revolving debt, one based on financial benefit, and the other based on FICO scoring impact. They are often at odds.
Financial benefit would come from paying down the highest interest balances first. Those reflect out of pocket costs and money saved.
The FICO benefit would come from paying down the highest percentage of utililzation cards first, as higher precentage utililzation is generally considered to have a more negative impact than reducing a lower percentage utililzation card by the same amount.
I also encourage people to do what makes the most sense for them finanically, as a credit score is just a number. However, if you are looking to get score boosts, you need to have as many cards showing a zero dollar balance as possible (as long as at least one is showing a balance of under 9 percent of utilization)
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