What is Zombie Debt? How to Avoid a Resurrection.

What is Zombie Debt? How to Avoid a Resurrection.
What is Zombie debt? How to avoid a resurrection. BrilliantlyFrugal.com

Zombie Debt is OLD Debt

Zombie Debt is debt that has been dead and gone for a LONG time now. This is debt that hasn’t had any activity for over 7 years. Activity is when you make a payment, you missed a payment, or the balance increased.

Check Your Credit Report

Zombie Debt cannot be added to your credit report or should have already dropped off of your credit report if it was already on there. If you notice debt on your credit report that should have already fallen off, report it to the credit bureaus. Check the Transunion, Experian, & Equifax websites to see how to report old debt.

Read The Ultimate Guide to Understanding Your Credit Report here.

Check Your State Law

In most cases, the statute of limitations has also expired, meaning that the creditor or a collections agency cannot take you to court for it. Check your local laws to learn about the statute of limitations in your state

Don’t Resurrect Zombie Debt

Do NOT pay Zombie Debt if the statute of limitations has expired in your state. If you make a payment or promise to make a payment and miss it, the debt counter goes from 7+ years to 0! This means that now it CAN be added to your credit report and it may start the statute of limitations over as well, which means they may still be able to sue you over the debt. DO NOT let that happen! Do not let a zombie that is dead in its grave come back to life. Never make payments or promise to make payments on Zombie Debt.

Collections Calling You About Zombie Debt?

Collections agencies will often buy Zombie Debt from creditors or other collection agencies for PENNIES on the dollar. They then hope to scare consumers into paying old debts that they, in most cases, no longer are legally obligated to pay.

Here’s what to do If you are getting collections calls about Zombie Debt:

1. Don’t Panic.

You and you alone are in control. Do not let a creditor or collections agency call scare you.

2. Make it stop.

Tell the collections agency to stop calling you and to remove your number from their list. Under the Federal Debt Collections Practices Act, the collection agency must stop calling you when you tell  If they call you again, report them to the federal Consumer Financial Protection Bureau here.

3. Know your dates.

Know when your account went into default so you know if it can still be added to your credit report and if the statute of limitations is up.

4. Know your rights.

It is abusive for a collections agency to threaten legal action or a lawsuit or to threaten to call your work or bosses. If a collections agency threatens to do any of these things, make sure you know the name of the collections agency and report them to the federal Consumer Financial Protection Bureau here.

5. Don’t Resurrect the Zombie.

NEVER pay or promise to make a payment on zombie debt. This will resurrect debt that is dead. If you resurrect Zombie Debt, it can show back up on your credit report. Let it stay dead and buried.

Don’t let Zombie Debt and collections call get you down. YOU are in control! YOU are Brilliant!

The Ultimate Guide to Understanding Your Credit Score

The Ultimate Guide to Understanding Your Credit Score

It is 100% okay if you don’t know anything about your credit score and how it’s calculated. I certainly didn’t when I first started. Making the decision to learn and empower yourself is the important part. Credit scores are so confusing and how they are calculated can seem like a big secret, but today you will learn all of those secrets to be brilliant with your credit!

The first step is to know your credit score number. You can request a copy of your credit report directly from each of the credit bureaus. You are entitled to one free copy per year. However, I find this burdensome and limited. I personally like to check my credit report every month, and like everything else, I don’t want to have to pay for it. That’s why I use Credit Karma. You can Download the app HERE or HERE, or sign up on creditkarma.com. It is COMPLETELY FREE. They never ask you for payment information.

Remember that a credit score doesn’t measure whether you have NO debt. It measures whether you can responsibly manage debt OVER TIME. This is measured by 6 main factors to your credit. We will discuss them one at a time.

1. Number of Hard Inquiries

Firstly, Hard Inquiries are when some has pulled your credit. This is usually when you apply for new credit, like a credit card, auto loan, home loan, etc. A hard inquiry shows on your credit for two years. Your goal is to have less than 3 on your credit score at a time. This means that you want to choose when and what credit you apply for VERY CAREFULLY. DO NOT keep applying for credit cards one after another until you get approved. Find out your approval odds BEFORE applying and THEN apply. You can do this through Credit Karma. They suggest cards and show you your approval odds.

2. Payment History

This is probably the most obvious one. If you have late payments, they will negatively hit your credit score HARD. Do everything you can to make your payments on time to avoid it hurting your credit score. Late payments can stay on your credit score for up to SEVEN YEARS. Don’t let a hardship haunt you for that long.

If you are unable to pay a bill on time, call your creditor ahead of time. They may be able to move the payment date or work something out with you. Everyone goes through hard times. They understand. It may be embarrassing, but short-term embarrassment now is better than long-term embarrassment later from bad credit. If that creditor is unable or unwilling to work with you, do everything you can to get it paid. If you have other bills due soon, try to see if one of those creditors will work something you with you so you can pay this one, and get an extension on another instead.

3. Derogatory Marks

Derogatory Marks are anything from collections to bankruptcy. These can stay on your credit score for 7-10 years, depending. These are separate from late payments. However, if you have a bill that is late and then ends up in collections, you will get hit negatively in both categories. This means that even one bad Derogatory Mark will hit your credit HARD. Derogatory Marks should be avoided at all costs.

Avoid collections by trying to work out a payment plan with anyone trying to collect a balance you cannot afford. They will many times take minimal monthly payments, as long as you are paying something and consistently. Bankruptcy can often be avoided by the same means. Look out for a new post soon discussing this topic more thoroughly.

4. Credit Card Utilization

Credit Card Utilization is probably the easiest one to manage. This factor considers the balance on your credit cards, divided by the amount of credit you have available on your credit cards. Your goal is to keep your utilization below 30%. Keep your balances low and pay your credit cards balances in full with every paycheck and this will be a breeze.

Keep track of your credit score and income. Each year, if anything has changed (credit score went up, income increased), apply for an increase in your credit limit on your current credit cards. They will not make a hard inquiry on your credit. The simply look at the new information, and your good payment history, and determine if you are eligible for an increase in your credit limit. This doesn’t mean you should spend more money with them! This is simply a tool for keeping your utilization low and increasing your credit score. (Check out this post about credit cards).

5. Credit Age

You Credit Age is the average age of all of your open accounts. This will likely remain “low” while you are trying to build your credit, but your long-term goal is 9 years. This obviously takes time! My average is only about 3 and a half years right so don’t worry if yours is also low for a while. 

The key is to stagger your new credit. Don’t apply for a bunch of new credit at once. Apply for one (a new credit card, auto loan, etc), wait six months to a year and then apply for new credit (another credit card, a home equity loan, etc).

6. Total Accounts

Lastly, your Total Accounts is the total of both your closed and open accounts. Again, this is one that takes time to build up. Your long-term goal is 11 accounts. By working on your other factors, this one will occur naturally.

Finally, This is a lot of information and I know it can be overwhelming! Don’t worry! You are not alone. I often felt overwhelmed when I was first learning about credit scores too. You cannot build or change your credit score all at once. Work on one factor or couple of factors at a time, but keep in mind what other factors you may be affecting. Take things one at a time and you are on the right track to succeed brilliantly!

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