Paying Off Old Debt Has Negative Consequences

There are many people who believe that paying off old debt on car loans can help improve their credit score, but it can have negative consequences.

Now theoretically speaking once a borrower falls behind on their vehicle loan they have an obligation to repay their lender back ASAP. Of course for several reasons we as people sometimes fail to do this at the best of our ability.

The only time a person might consider righting this wrong is when they apply for bad credit auto financing at a website like autonetfinancial.com and find that their credit score has dropped, and they hear people tell them to address their past debt.

How Paying Off Old Debt Hurts

This is a good idea as it helps a person keep collection agencies and other auto finance companies from harassing them about paying off their debt. The problem is that it doesn't always guarantee credit improvement,
especially if you have waited too long to address your previous line of debt.   

Typically after seven years a creditor will have your debt "charged off" you report, and with time a collection agency may leave you alone. However, by trying to do the right thing by paying off old car loan debt you could in fact start the entire process over and cause further damage.

Once a past lender begins to receive repayment on past delinquencies they immediately update your credit report with the same missed payment, but adding a new date to make them relevant. This can quickly lead to further credit damage, more harassing from collection agencies, and possible lawsuits.

How to Make Paying Off Old Debt Improve Credit

So with all that said it may seem conclusive that once you fall behind on your car payments that you should never address them again, right? Wrong! Remember paying off old auto financing debt is morally right and how it affects your credit score is all about timing and the type of lender you're working with. 

By taking the time to settle all late debt before they reach "charged off" status you can actually bring your accounts current and engage in do it yourself credit repair tactics that help your credit report. It may still show that you were late, but this is were persistence can be a benefit for you.

If you do decide to address very old debt it's important that you come to a solid agreement with the lender to have all instances removed from your report following full payment. Knowing how to properly negotiate with a creditor can limit the negative impact on your credit score, and move you closer to a debt-free life.