Potential creditors and lenders question your creditworthiness when they see collection accounts on your credit report; you might find it harder to get approved for new credit cards and loans. If you’re working on repairing your credit, or just cleaning up your credit report, you might question whether you should pay a collection, especially if it’s an old one. Here are some factors that play into your decision.
The Statute of Limitations
After an account has been inactive for a long period of time, a debt becomes time-barred, and debt collectors can no longer sue you for it. This period of time is known as the statute of limitations and varies by state. If the statute of limitations has passed, it’s illegal for a debt collector to sue you (but it’s up to you to prove the statute of limitations has passed if they do sue you). Find out the statute of limitations in your state help decide whether you should pay an old debt.
Note that making a partial payment, a payment arrangement, or accepting a settlement offer on an old debt can restart the statute of limitations. Restarting the statute of limitations gives the creditor or debt collector more time to sue you for the debt. Payments do not, however, restart the credit reporting time limit which is seven years for most debts. By comparison, the credit reporting time limit is the amount of time a debt can be listed on your credit report.