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the statute of limitations determines how long you legally owe the debt. that is, a creditor can sue you for payment, until the statute of limitations runs out.
completely unrelated to this, credit bureaus have time limits on negative items that can appear on your credit report. usually the limit is 7 years past the due date. there are exceptions, e.g., bankruptcies can stay on for 10 years.
if they're calling you on a 12 year old debt, that item cannot appear on your credit history. if you're trying to repair your credit, it's worth your while to get a copy credit report and scan it for mistakes. the bureaus rely on merchants to report accurately, YOU are the only fact checker in the process. dispute anything that's wrong.
heck, while you're at it, you can even dispute some things that are right. the merchant has 30 days to prove their side, or else the negative item comes off. big companies (credit cards, e.g.) will always meet the 30 day deadline, but smaller operations might not. heck, the smaller operation might be out of business.
back to the statute of limitations. this varies by state. your state might have a statute of limitations of, say, 15 years. this means that even though the item drops off your credit report after 7 years, they can still collect and sue for another 8 years.
the good news is that delinquencies are only kept for 2 years. so pay everything on time (actually, no more than 30, or in some cases, 15 days late) for 2 years and at least that portion of your report will be clean.
finally, once you've paid off an account, DO NOT CLOSE it. part of your score is the percentage of available credit used. unused open credit is a good thing. if you close an account with a $0 balance, all you're doing is lowering your available credit, thereby increasing the percentage of remaining credit used. this hurts your score.
a good reason for closing an account would be to help control the temptation to (ab)use it, if that's a problem for you. another good reason would be if you really do have too much available credit, enough so that THAT is hurting your score. but that takes a LOT.
good luck!
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