Should you send in small payments on big debts to stay “in good standing?”
Short Answer: NO.
I got a call recently from a lady who had a solidly defensible debt collection case. She had been sued by an alleged assignee of an old creditor. The account was appearing on her credit report as being due and owing for over $7,000. She had limited resources, having recently been out of work for a while, so she couldn’t afford to pay the whole balance, or even make any settlement offer that would come close to settling the account in full. So she sent in $200 to keep the account “in good standing.” That’s what their collectors told her to do. She had hoped that this would improve the account’s status on her credit report.
Unfortunately, she was wrong. This “good faith” payment did nothing to fix her credit report. She still owed $6,800, she was still over 90 days past due, and the account was still a big fat negative mark against her credit.
And even worse, making a payment on an old debt has two bad legal consequences: it can restart the statute of limitations on the debt, and it can be seen as an admission that the money is owed and the amount is correct. A lot of debt collectors cannot prove that they have the right to collect a previous creditor’s debt, so if your jurisdiction considers a payment as an admission that the collector (and not the original creditor) is owed, then you’ve just proven half of their case.
So if a collector calls you and asks for a “good faith” or “good standing” payment on an overdue credit account, you may be tempted to send them a few bucks just to get them off your back. DON’T DO IT. You should NEVER send money to a debt collector unless you have a written settlement agreement with clear payment terms that you can afford. If you send them money with no strings attached, it will not fix the problem; it will not get them off your back (like seagulls or alligators, they’ll just come back for more once they get hungry again); it will not repair your credit.