Home > Credit Score > Your Top Credit Questions: Old Debt, How Many Cards is Too Many, Late Spouse’s Debt

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We receive a lot of questions here at Credit.com. I have chosen some of the questions that come up again and again to highlight in this series of posts.

Q: I’ve received a call (or letter) from a debt collector about a very old debt. What do I do?

If you get a call or letter about an old debt, the very first thing you want to do is to research your state’s statute of limitations. State law governs how long a debt collector may successfully sue you to collect. In most states, it runs between four and six years from the date you last made a payment on the debt.

A debt that is too old is often called a “time-barred debt.” In some states, collectors are not allowed to try to collect a time-barred debt. In other states, they can try, but if they sue you, you can point out to the court that the statute of limitations has expired and they should lose their case.

If you are confident that a debt collector is contacting you about a time-barred debt, you can send a letter to the collection agency stating that the statute of limitations has expired, and asking them not to contact you again. Send your letter with proof of delivery, and save a copy of the letter, along with proof of delivery. File a complaint about the collection agency with the Consumer Financial Protection Bureau.

In terms of your credit reports, collection accounts can be reported for up to 7 years and six months from when you last missed your payment with the original lender. After that time, the collection account must be removed, even if it has not been paid.

Not sure about whether the statute of limitations has expired on your debt? Our statute of limitations chart can help, and be sure to contact your state attorney general’s office or a local consumer attorney for details.

[Article: Eleven Ways a Debt Collector May Be Breaking the Law]

Q: What is the best number of credit cards to carry?

There is no single number of cards that is perfect for everyone. You’ll want to consider the following when deciding how many cards you want to carry:

If your concern is your credit rating, you won’t get extra points for having the “right” number of cards. It is helpful to have and use major credit cards, as long as you don’t run up high balances you can’t pay off, or fall behind. Major credit cards paid on time, over time, can help build a strong credit rating.

If you are worried that having too many (or too few) cards are a problem, keep in mind that you don’t want to suddenly open several new accounts, or close a bunch of your existing accounts, because doing so could backfire and hurt your credit scores. If you don’t have at least one major credit card, though, consider getting a secured card.

The other thing to think about is how you will use your credit cards. Will you pay them in full? If so, it may be a good idea to find a rewards card. As long your rewards card offers a grace period, you can pay your bill in full each month and avoid interest charges while racking up reward points, cash back, etc. You can get something for nothing! If you carry a balance, however, look for a credit card with a low interest rate.

If you sometimes pay in full and sometimes carry a balance, perhaps you should consider carrying one of each—a rewards card and a low-rate card—so you’ll be covered either way. It’s also a good idea to have two major credit cards so if one changes the terms and you don’t like them—or if one is lost or stolen—you’ll always have a back up.

[Resource: Get your free Credit Report Card]

Do I have to pay my late parent’s (or spouse’s) debts? »

Image: Frédéric BISSON, via Flickr.com

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  • http://www.bblocklaw.com Brandon Block

    Gerri,

    You are right on the old debt issue. I think consumers need to realize that while debt collectors can ask you to pay a time-barred, they cannot sue you or threaten to sue you on a time-barred debt. Any such actions or threats violate the fair debt collection laws. The Ninth Circuit Court of Appeal rendered another decision on this issue earlier this year affirming the rights of consumers to sue law firms that sue on time-barred debt.

    Thus, consumers should never agree that they owe an old debt, or agree to pay some minimal amount to appease the collector. Collectors generally are trained in how to “re-age” a time-barred debt (i.e., start a new statute of limitations) by getting the consumer to make a small payment or to agree to the validity of the debt.

    Consumers should always send a dispute and “cease contact” letter if they are confident the debt is time-barred. The collector then will have two choices: (1) stop collection efforts, or (2) continue trying to collect on the debt. If the collector chooses the latter and continues to try to collect the debt, the collect is violating the fair debt collection laws. If the collector threatens suit or sues on the debt, that’s an additional violation of the fair debt collection laws.

    -Brandon

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