Improving Credit by Paying Old Balances

Old balances on your credit reports are probably accounts that are no longer active. Chances are you stopped paying on the accounts at some point and they were closed by the original creditor, who then sold them to a debt collector. The accounts are now considered to be collection accounts and will cause a drag on your credit scores. In some instances the dormant account is not sold to a debt collector but is kept in-house with the original creditor's collection department.

Instructions

1

Get a copy of your credit report. You can get a copy for free at the website AnnualCreditReport.com. Or call 877-322-8228. The nationwide reporting bureaus established the site to offer free reports as required by federal law. You can order up to three reports every 12 months.

2

Review your reports to find the delinquent accounts with old balances. The name and contact information for the creditor or debt collection company will be listed with the account.

3

Call the creditor or debt collector with an offer to pay. Offer less than the full amount owed through a process call debt settlement. According to The New York Times, debt collectors will sometimes accept as little as 20 percent of the balance to resolve the debt. Settlement for about half is more common. During your negotiations ask that the collection activity be erased from your credit report. It is now likely being listed as a "Collection" account, and once you pay, that will be changed to "Paid Collection." Both are negative entries that could impact your ability to get new credit. Asking for the entry to removed altogether will improve your credit scores. Also any reduction in your debt load--including paying off old balances--can improve your credit. Note that debt collectors can legally remove the negative information such as collection notations but are not required to do so.