What does ‘paid collection’ on a credit report mean?
Dear Dave,
We just terminated a lease on a car because my wife had some medical problems that left her unable to drive and we didn’t have the money to continue the agreement. The car company was willing to work with us under the circumstances, but what exactly does a “paid collection” mean on your credit bureau report?
– Erik in Portland, ME
Dear Erik,
Basically, it means that you didn’t pay them, but they decided under the circumstances that it’s okay. It is an amount you owed, but they forgave the debt and it leaves a gray mark on your credit report. If they wanted their money and you simply didn’t pay, then it would leave a black mark on the report, which is much worse.
I’d strongly suggest that you get the agreement in writing, Erik. That way they can’t come back and try to collect it later if some new manager takes over and attempts to start the whole thing up again.
– Dave
What about interest-only loans?
Dear Dave,
What do you think about interest-only mortgages? The idea is that you invest what you would normally pay toward principal over time, and your house will increase in value regardless of principal pay-down. Your investment will grow and increase your overall net worth, as well as giving you flexibility in making payments toward the principal.
– Taylor via email
Dear Taylor,
I understand the idea behind interest-only loans, and I think they’re stupid. The best thing you can do is become debt-free on your home as quickly as possible. Live like no one else, so that later you can live like no one else.
This is your HOME. This is where your kids live, and you’re talking about trying to be a day-trader with it and play some kind of shell game. Do NOT monkey around with your house on an interest-only loan. Pay the mortgage off, Taylor, as fast as you can. In all your “sophisticated” analysis you left out the fact that you have exponentially increased risk. And risk can be mathematically entered into the equation, making your supposed gains disappear. Never do an interest-only mortgage!
– Dave
Debt: To pay or not to pay?
Dear Dave,
We were dummies and bought a timeshare years ago. We paid it off in three years, and always paid the maintenance fee up until about two years ago. Then we got a call recently from a collection agency saying we had a $3,100 balance. He said they’d take $2,000 and call it even. I tried to negotiate with him, but he wouldn’t budge. What can we do now?
– Carmen in Oklahoma City, OK
Dear Carmen,
It’s a valid debt. You signed a contract promising to pay the maintenance fees, and I’m sure the contract is enforceable. I wouldn’t recommend choosing not to pay it, because they could sue you and would probably win.
If I were you I’d call this collections agency back and settle up with the understanding that you’ll be released from any further obligation. Let them know that if they don’t agree that you’ll sue them on the basis of misrepresentation.
Fight them as much as possible over this, but if the agency or timeshare manager will let you go free for $2,000, then under the circumstances you’re getting a bargain. Don’t send them anything, though, until you get, in writing, a statement saying that upon receipt of the $2,000 you will be released from any and all future obligations and past obligations regarding that particular timeshare. Make sure you send the money in a way that will provide you with proof of delivery, such as certified mail, FedEx or UPS.
– Dave
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