Common sense tells us that paying all of our old (6 months or more) debts is our best move to help us financially, improve our credit, and remove hassle from our lives. Is this thinking correct? Answer: Not usually.

First off the type of debt does matter. If it is a debt to a government institution or government -subsidized entity such as tax liens, student loans, or child support then your best move is to pay these debts as liability for them never ends.

Now what about collections? It is unfortunate that paying older collections does NOT help one’s credit score, and in many cases, can actually hurt your score. However, there are a few side benefits: Paying old debts does help one’s debt-to-income ratio and some lenders look at you more favorably when you have no outstanding debts. Also, paying old debts prevents a creditor or collection agency from taking legal action against you.

Every state has a statute of limitations for debts and debt collection. After this date has passed, no further action can be taken against you for that debt. See http://www.fair-debt-collection.com/statue-limitations.html for the statues for the state in which you attained the debt. In Colorado, most debts over 4 years old are past their statute time period. Keep in mind that when you send any money towards these debts, the clock is reset and the statute of limitations is made four years longer, so be extremely careful who you send money to.

For more information on how to best use your resources to improve your credit, get a better mortgage, get out of debt etc., contact Crusader Consumer Services.