Should I Just Let My Bad Credit Sit and Fall Off? – Lucas

“Dear Steve,

Pretty much, at one point, i was living well…. then came the layoff. everything i had (including student loans, and car loans) went into default. now, almost 6 years later i am finally gettin back on my feet. All my defaulted debt is expired debt in colorado and their statute of limitations to sue has passed. my credit score is a 525 and all my bad defaulted debt is very old (totallying about $7000). I have my student loans in rehabiltion status and have one payment remaining until it is rehabilitated and showed as “paid as agreed”. everyone says my score will sky rocket once that happens

I was thinking it would be a good idea to let it all merely fall off my credit report; but then again, getting credit under my circumstances is out of the question. which would be a better idea? let time run its course and let stuff just fall off and settle debt that wont “fall off”‘ then do tradelines to up my credit score; or should i just file bankrupcy. keep in mind that all my defaulted debt is 6 years old in co and is considered “expired debt” in colorado. My main goal is to relocate and purchase a $150,000 house in texas as soon as i can, my yearly income is about 55,000 – 60,000 . also one thing to keep in mind is that i have not done my taxes in three years and i claim 0 so i get a large return. once my student loans get out of default, i can do my taxes without them being offset and they should amount to about $15,000 or $20,000. also, should i just let my bad credit just sit and fall off and put $20,000 down on the house, or should i work on my credit first.


Dear Lucas,

The best course of action would be to jump backwards a couple of years and start working on rebuilding your credit. What’s dragging you down is not that you have old bad credit, but that you have no new good credit.

See also  My Past Credit is Dragging Down My Credit Score. I Want to Buy a House.

It’s like failing a class in school and that drags your GPA down. You need to start getting some better grades to bring your grade point average up.

The large return is not wise. The goal is to break even at the end of the year so you can put more money in your pocket each month instead of giving it to the government for free.

Get your taxes done as soon as you make that next student loan payment. If you wait too long you may not be eligible for a refund on some of what you are owed. You only have three years to claim a past refund.

For example, your 2007 tax return was due on April 15th, 2008. 2006 plus 3 is 2011. You have until April 15th, 2011, to file your 2007 tax return and still get a tax refund.

While you can’t be sued for that old debt, they can still attempt to collect on it. If you wanted to close the door on the old debt then bankruptcy would be the way to go and since your score is already low then this would be the time to do it before you file your returns. They you can follow my credit rebuilding process and go from there.

Please update me on your progress by

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Steve Rhode
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