Hi Bill, thank you for taking the time. I'm a third-year law student and will be taking the bar next year. For the character fitness determination, I need to pay off my old debts. These debts are from 1996 and no longer appear on my credit reports. So I want to find out how I can pay off these debts without having any adverse impact on my present credit rating. The old debts were from my stupid college days and have been financially responsible since. I have very healthy credit. Thanks for your advice.
First, I would advise you to go speak with the bar admissions advisor at your school to discuss these old debts and what bearing, if any, they may have on your application for admission to the bar. Due to the age of these debts, the circumstances under which they were incurred (while you were in college), and the fact that you have built a solid record of fair dealing with your more recent creditors, I would be surprised if these old debts had any significant bearing on your admission to the bar. One of the key issues that most examination boards look at when it comes to an applicant’s moral character and fitness is “rehabilitation,” that is, a significant change in the pattern of behavior since the time of the questionable act took place. For example, the Pennsylvania Bar Association states “evidence of rehabilitation is the most critical factor the board uses to determine whether past problems should lead to denial of admission. The board's standard for admission is current good character and fitness. Generally, the board will assess whether the problems continue and, if they do not, whether the applicant's life has changed in ways that suggest they are unlikely to recur” (see here).
Given the fact that your recent financial history shows a definite change in your behavior toward your legitimate creditors, these old debts may have very little actual impact on the board’s overall view of your moral character and fitness for admission to the bar. I mention this only because, aside from your application to join the bar, you would probably have little reason to pay these debts, as they have already fallen off your credit report and the statute of limitations has likely expired, depending on your state’s laws. Again, I would encourage you to consult with your school’s advisors to determine if these old debts are something that should concern you.
I understand that, after having invested as much time and money as you have into your legal education, you may want to go ahead and pay off these debts to avoid even a slight chance that these old debts could hurt your chances for admission to the bar. If you do decide to contact your creditors and pay off these debts, this action should have no effect on your consumer credit profile. Derogatory credit accounts are removed from your credit report seven years after the date of charge off; as you mention in your question, these accounts have already fallen off your credit reports. Once an account falls off of your credit report, paying the account off will not result in the account being put back on your credit profile. Paying an account off does not affect the date on which the account was charged off by the creditor, and it is that date which determines how long an account can be reported by the credit bureaus. However, to be on the safe side, when you contact your creditors to make payment arrangements, you may want to confirm that they will not re-report this account or any payments you make to the credit bureaus.
The Federal Trade Commission offers a wealth of information related to federal credit reporting law, specifically the Fair Credit Reporting Act.
In addition to trying to address your outstanding debts, I strongly encourage you to review your credit reports to make sure that all of the information appearing in your files is accurate. Credit reports are notoriously inaccurate, and close scrutiny is required on your part to make sure that your credit report is current and accurate. In a situation like yours, inaccurate derogatory credit information could cause serious problems. In addition to the information regarding credit reporting laws, the FTC offers a free guide to disputing items on your credit report, as well as a guide to credit, which may assist you in cleaning up your credit report if you find any inaccurate information that needs to be removed.
To learn more about credit, credit reports, and credit scoring, I encourage you to visit the Bills.com credit resources page.
I wish you the best of luck in your bar application and in your future professional life, and I hope that the information I have provided helps you Find. Learn. Save.