Could this ruin my credit?

Question

my husband and i have a huge disagreement. our checking account is a couple hundred in the negative and we got a notice in the mail saying its over and we need to pay some or they will turn it over to a credit agency and it could ruin us with any financial institution for 5 years. we have finally worked out a payment plan with the bank but our argument is this: my husband swears that even if they turned it over to the creditors, there is no way that it can ruin us for 5 years. and i say that the letter plainly states that and i even talked to someone at the bank and they said it also. he says that they will say anything to scare us into paying and that i am gullible for listening to it and thinking it can ruin us. he got mad at me for not listening to him but i completely believe that our credit will be ruined if we just ignore it !!! who is right ? me or him ?? do they have the power to ruin us for 5 years possibly if we dont show effort to pay and it gets turned over ????

Answer 1

It is actually more like 7-10 years (yes, haters, it CAN be 10 years).  It can stay on the checksystem for up to 5 years which yes it can hinder your ability to open a checking account in the future.

Answer 2

Banks, Creditors, Loan Officers etc. don't want anybody to have perfect credit.  That is why they will turn you in to all three credit reporting agencies.  Even just 100 points negative on your credit score will give you a higher interstate rate on credit cards, car loans, house loans etc..   Yes they will turn you in for just about any reason and it stays on your credit for a very long time.  Weather it's 5 years or not I'm not sure.  I do know it takes a long time to clean up your credit.  

If you claim bankruptcy it takes 7 years for it not to show on your credit report.

I would just pay it and keep a very close eye on your credit.  Don't charge what you can't pay by the end of the month.  That is what my wife and I do.  If we need it, we save and pay by credit card and then pay the credit card off each and every month.

Good luck

Answer 3

You are right to a point.  If they turn it over to a collections agency, it will appear on your credit report as a negative.  How much it "ruins" your credit depends on who is reading it and for what purpose.  It also does affect your credit score which has become increasingly popular with banking institutions.  The reality of it is it will stay on your credit report for up to 7 years after the date of last activity.  In other words, if they report and you never pay it stays for 7 years.  If they report and you pay in a year, it can still stay on as long as 7 years.  The bank does not control how long it stays on your credit report directly.  Once they assign the debt, the collection agency can keep it on or remove it.  Strictly looking at the report, your "efforts to pay" won't show much but it is something you can explain to anyone who reads it and they will most likely look on you favorably for it.

Answer 4

It is a little more nuanced than either are telling you. Yes, it can affect your credit. No, it is not going to ruin you for an indefinite period of time.

If the bank sold the debt to a collection agency, they can absolutely report it as a collection item to the credit reporting agencies. This will adversely affect your credit. It will decrease your score. Its not going to mess you up for a long time, especially if you pay it. But it will hurt you. But not for a terribly long time.

But my advice, if it is just a couple hundred bucks, pay it immediately. It can definitely go on your credit report, and that will cost you more than the few hundred bucks you owe in higher interest rates. The negative report won't be the end of the world, but it will cost you. Hope this helps.

Answer 5

They are probably talking about Chexsystems - a kind of banking "blacklist."  Once you get into that database, most banks will refuse services to you.

Answer 6

Now I'm not sure how long it would do harm to you, but it can/will do harm. If your account stays in the negative for too long, a bank can and/or will close your account because of the negative balance. This, of course, means that you owe the bank the money. Some banks call it a "write-off" if they close your account due to a negative balance. The bank will then report the written-off account to a system that other banks use to check your banking history. The other banks will see that you had an account closed in the negative and, more than likely, will not open an account for you. Trying to get a loan through a bank in the future might be difficult, too, as I don't know if the bank would look at the system for that as well. Your husband is wrong when he says that the bank is just trying to scare you. The bank will report it if you don't pay what you owe them since you spent more money than what was in your account.

Answer 7

Yes, it is definitely not less than seven years. And should they sue you and if there is a judgment against you, it will be a few years longer.

Answer 8

First of all, "ruin" is a little but dramatic. This would be a line of negative reporting on your credit reports, which will impact your credit score, and it will stay for 7-10 years. A bankruptcy or something of that magnitude is what could ruin your credit. Something like this would just impact your credit score.

EVERY collection agency has to give you 30 days to respond in writing, they CANNOT by law, report anything negative with out notifying you in writing, and giving you the 30 days to respond. I would reply in writing, and either contest the debt, or, if you plan to pay it, then write and tell them that under the fair credit reporting act, they cannot ding your credit until you have 30 days to reply. Then indicate what you plan to do. So MAKE sure to respond, in writing, before 30 days. Things like this are really a no brainer, b/c if you pay the debt, they will go away. Is saving a couple of hundred dollars worth the risk of a lower credit score? I dont think so. So, work out a payment plan if you have to, BUT, YOU HAVE TO notify them in the 30 day period. If they report you before the 30 days, you can sue them, and each reporting can get you up to 5k!