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Reports shed most bad debts in 7 years

By HELEN HUNTLEY
Published August 15, 2004

Are your old debts haunting you?

Bad debts generally should disappear from your credit record after seven years. The sale of an old debt to a collection agency does not extend the seven-year limit.

However, some readers tell me that debts in collection have been known to linger on their reports, lowering their credit scores. It can be a particular problem if a debt is resold several times.

"Each of those subsequent collection accounts is considered a continuation of the original debt and therefore a continuation of the original delinquency," said Rod Griffin, a spokesman for the credit bureau Experian. He said the seven-year clock starts running with the original delinquency date, the month that the account was first delinquent and never again brought current.

Griffin said collection agencies sometimes try to start the clock running again by changing the account number or the amount owed to make it more difficult to trace its origin. However, that tactic is illegal and you have a right to have an account removed if it has passed the seven-year limit.

There are some exceptions to the seven-year limit, including unpaid tax liens, which may stay on your record indefinitely, and bankruptcies, which linger for 10 years.

If your credit record includes old debts, check the dates for accuracy when you review your credit report - something we all should do at least once a year or so. If you find an error, write the credit bureau to report it.

You can order credit reports through credit bureau Web sites or through third parties such as www.myfico.com To order by telephone, call each credit bureau: Experian/Credit Data Services: 1-800-749-7576, TransUnion: 1-800-888-4213, Equifax: 1-800-685-1111.

You'll have to pay for the reports unless you have been denied credit. Federal law will require credit bureaus to provide each of us one free report a year. However, the requirement is being phased in and won't apply to Floridians until next June.

Q. I have noticed an ad for a computerized stock trading system. Would you care to voice an opinion?

If you are going to trade, using some type of disciplined system is likely to work better than relying on your emotions and intuition. Systems usually are back tested to prove they would have worked in the past. However, the future is never just like the past and figuring out how it will be different is pretty much impossible.

Keep in mind that if this system were really that great, the people who developed it would be spending their time trading stocks instead of trying to sell their methods to you.

Q. I have had a fixed insurance annuity for 15 years. After my death will my beneficiary be required to pay taxes on the accumulated interest?

Yes. If an inheritance is a tax-deferred vehicle such as an IRA, annuity or savings bond, taxes are due on the interest and IRA contributions that have never been taxed, the same as they would be if the original owner withdrew the money.

Q. I will be inheriting some cash from my mother's estate in Maine after her home is sold. Is this income for me that has to be reported to the IRS and pay taxes on?

In most cases, an inheritance is not taxable income. Most likely there will be no capital gain due on the sale of the house. When someone dies, the value of his or her ownership interest in a property is "stepped up" to the value at the date of death. Thus, there is no taxable gain on your mother's house unless the property sells for more than it was worth when she died.

There is no estate tax except in the case of very large estates (more than $1.5-million for people dying this year).

- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to huntley@sptimes.com or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

[Last modified August 14, 2004, 00:39:28]


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