Time heals all wounds, so the saying goes. When it comes to old unpaid debt already reported as a negative item in your credit report, you still are responsible for paying it, although it already has negatively impacted your credit score. Other debts may expire under the Statute of Limitations.

Debt and your Credit Score

Your credit report monitors all of your financial activities including all payments on debt that you owe. That means if you miss a payment or repeatedly make late payments, creditors will inform credit rating agencies, so each late payment will occur on your credit report reducing your credit score. However, most negative items must be removed from a credit report seven years after the first date of uninterrupted delinquency. A bankruptcy can stay in your credit report up to ten years. If you pay off a collection account, it will be noted in your credit report, but the delinquency itself will not be removed until the seven year period is up. Any creditor viewing your credit report before the delinquent account must be removed, is more inclined to grant you credit when accounts are paid off rather when they are not.

Debt and Statute of Limitations

The statute of limitations on debt is unrelated to credit reporting and differs from state to state and debt type. Activity on your account is recorded and the clock starts from the last date of a payment activity on the account. If you have not made a payment on an account for five years and the statute in your state is four years, under the statute of limitations you can prevent the account form being collected in court. The last date of activity is the key driver. Any form of activity, whether it is a payment or an agreement to pay is considered an activity and will reset the clock on the statute of limitations. Be aware that although your creditors cannot use the courts to collect or enforce payment, they can make your life miserable with endless phone calls, emails and letters. A good attorney will help you deter persistent collectors since pursuing a debt past the statute of limitations can be waste of time for any debt collector.

If the amounts you owe are small, it makes sense to just pay off the account to avoid future collection attempts and start building your credit history.