Collection Accounts-if I pay it will be get deleted?
Outside of bankruptcy and foreclosure, arguably the biggest black eye that you can have on your credit report is a delinquent debt that went to collection accounts. These accounts are some sort of debt that you fell behind on, then just let escalate to the point where a debt collector took it over. Collection accounts can cause your credit score to take a huge hit. Worst of all, they can stay on your credit report up to seven years from the time you fell behind on payments. But if you pay off the delinquent account, it will be removed from your credit report, right?
Wrong. This is a common misconception that many people have. But regardless, it’s still crucial to settle any outstanding accounts that have gone to collections. We’ll explain why in this post.
So What Good Is Paying Off A Collection Then?
We know what you’re thinking – if settling a collection account won’t get it removed from your credit report, then what good is it to settle it? Settling is important for two reasons:
It prevents you from potentially being sued by the debt collector, which can result in the court ordering wage garnishment, putting a lien on your properties or freezing your bank account until the debt is settled. Lawsuits are headaches that you don’t want to have to deal with, trust us.
Settling a debt can actually help your credit score over time. That’s right, while the collection account may stay on your report for up to seven years, the account will be marked as paid. As this information on your credit report gets older – and you maintain good consumer habits – your credit score will gradually improve the closer you get to that magic seven-year mark.
Is There Anything I Can Do To Get It Removed?
Yes, but you must know that in the end it’s still likely that the collection account – even if it’s paid – remains on your credit report. If you really want to do your due diligence and kick the tires on every option to get collection accounts removed, contact a qualified credit repair company to help you in your cause. These sorts of companies have the know-how and expertise to work with both the credit bureaus and creditors themselves to permanently remove paid delinquent accounts – and well before the seven-year removal period.
The best way to have collections removed from your credit report is to make sure that you never have an account go to collections in the first place. Do this by making smart borrowing decisions, paying all of your bills on time and practicing good debt and financial management techniques.
Charge-Off – What exactly is it?
Keeping your credit score high is incredibly important for many people, particularly those who rely on debt to finance homes, vehicles, or anything else that may come up throughout life. Paying bills on time is an important part of keeping your credit score high. On the other hand, failing to pay bills can result in a dramatic reduction of your credit score. One of the worst things that can happen to your credit score is for your of your creditors to report a “charge-off” on your credit report.
What is a charge-off?
A charge-off occurs when a creditor – such as a credit card company, bank, or anyone else with whom you have signed an agreement to pay a debt on a specific basis – decides that they are no longer willing to wait for you to pay a debt that you owe. Typically, this occurs after months of attempts to collect on the debt, including multiple letters and even delinquencies on your credit report.
The charge-off itself occurs when the creditor sells your debt to another company (typically a debt collection agency) for pennies on the dollar. In other words, a $10,000 debt will be sold for as little as a few hundred dollars. Creditors are willing to sell the debt for such a small amount because they do not believe they will get paid by the debtor (or they don’t think the effort it will take to collect is worthwhile). Debt collection agencies buy up this debt because they believe they will be able to earn more (on average) by attempting to collect on these debts.
Ultimately, however, the charge-off shows up as a major derogatory on your credit report, and results in a significant drop in your overall credit rating. Many creditors, specifically those offering auto loans and mortgages, will not lend any money to an individual who has unresolved charge-offs on their credit report.
How long a charge-off stays on your credit report
Unfortunately, charge-offs stay on your credit report for a long time. The specific amount of time varies by state, however in most states they are legally required to be removed 7 years after they are reported. However, it is important to remember that the 7 year charge-off timer does not start when the debt is first left unpaid; the timer starts when the debt is initially charged off, which is typically about 6 months after the account first went unpaid. While a charge-off will have a diminishing impact as time goes on, they still have a significant impact until they fall off your credit report entirely. Also, it is important to remember that the debt is still legally owed by you even after it falls off your credit report.
How to get rid of a charge-off
Unfortunately, it is very difficult to get a charge-off removed from a credit report. The only way to have it removed entirely is to have the original creditor agree to a “pay for delete”, in which you pay off the debt in exchange for a complete removal of the charge-off. Most of the time however, the best you can hope for is a “closed” or “settled” notation, which debt collection agencies will agree to in exchange for a repayment of all or some of your owed debt. It is important to speak to a professional in credit repair when determining the best course of action.
For additional information and a comprehensive review of your credit report, feel free to contact our office at 877-842-5215 or schedule a free consultation below.
FACTA – How it changed the world!
In 2003 , Congress passed a law, the Fair and Accurate Credit Transactions Act, that enhanced consumer credit rights in a number of ways. FACTA made credit repair efforts much easier for consumers by ensuring that they had accurate information and also aimed to help those who had been victims of identity theft. It also enhanced your rights to medical privacy and provided ways to opt out of financial marketing. The law is broken down into a number of provisions, each of which can affect you:
Free Access to Credit Reports
Under FACTA, consumers have the right to access their credit reports from the three major bureaus once a year. The most convenient way to do this is to go to AnnualCreditReport.com, the website operated by Experian, Equifax and TransUnion in cooperation with the FTC.
Protection Against Identity Fraud
The identity fraud protections are broken down into several different parts, some of which are intended to prevent identity fraud, others of which are intended to help consumers recover if ID fraud occurs. Protections include:
Truncated credit and debit numbers. Merchants are only permitted to print 5 digits of a card number to protect against theft. Those who violate this rule can be assessed for damages that are anywhere from $100 to $1000 per offense.
Fraud alerts. If you report to the credit agencies that you are concerned that you have been or might soon become a victim of identity fraud, they must put a 90 day fraud alert on your accounts.
Red flag rules. Financial institutions must have policies that help them assess whether one of their customers has been the victim of identity theft. Rules include ones that help them tell the difference between genuine and fraudulent change of address requests.
Enhanced Medical Privacy
Health issues can be used to discriminate against people when they are job or house hunting. Under FACTA, medical creditor names and addresses cannot be included in reports sent to third parties unless they are coded. This way, the details of your medical history won’t be inadvertently revealed.
Opting Out of Marketing
Under FACTA, you have the right to restrict businesses from sharing your information with affiliates for marketing purposes. Once you opt out, that restriction is good for five years.
Your Right to Dispute Inaccuracies in Your Credit Report
When you are working toward a home purchase, inaccurate negative reports can keep you from getting the loan that you want. Under FACTA, you have the right to dispute inaccurate reports directly with the agency that supplied the information. When you, or a credit repair agency working on your behalf, make a written request for validation of a debt, the creditor must respond within 30 days if they feel that the debt is valid.
Being aware of your rights under the law can help enhance your financial health and increase your opportunities. With this knowledge, you can expand your employment prospects, spend less money on financial products ranging from mortgages to insurance and increase your family’s prosperity.
History of the Big Three Credit Agencies – Education
As you embark on the credit repair process, you find that almost every decision made about your credit-worthiness leads back to one of three big credit reporting agencies. Ever wanted to learn more about these three companies that know so much about you? Meet the big three below:
Equifax is the oldest of the three big credit reporting agencies. The company was founded in 1899 as the Retail Credit Company in Atlanta, Georgia. By the 1960s, the Retail Credit Company had files on millions of Americans and Canadians and was one of the largest credit reporting agencies. Although their business has always included credit reporting, their largest business through the 1970s was accumulating data for insurance companies to assess risk. Their sweeping records of individuals’ financial and personal lives was the catalyst for the Fair Credit Reporting Act of 1970. In 1975, RCC changed its name to Equifax. The company has 7,000 employees in 14 countries and maintains files on over 400 million people worldwide.
TransUnion began its life as part of the railcar leasing company Union Tank Car Company. They began offering credit reporting services after acquiring Credit Bureau of Cook County in 1969. CBCC, at the time, maintained 3.6 million card files which were stored in 400 seven-drawer file cabinets. They became the first company to automate and computerize their data, leading to quicker access to consumers’ credit information.
Over the last decade, the company has found itself the focus of controversy for failing to remove erroneous data from their credit files. In two separate cases, plaintiffs were awarded significant settlements. The company has been owned by Advent International and Goldman Sachs Capital Partners since February of 2013.
Experian was formed when British retail company GUS plc bought credit reporting agency TRW Information Services from Bain Capitol in 1996. Over the next decade, they expanded into countries in Eastern Europe, Asia and Latin America.
While that era involved mostly business to business, they started offering credit monitoring to individual consumers in 2002 via their newly acquired ConsumerInfo.com site. They have since expanded to offer marketing, data gathering and consumer services throughout the world. They have been criticized for charging for credit reports on their site FreeCreditReport.com, as consumers are guaranteed free credit reports at the government mandated AnnualCreditReport.com. They also paid a large settlement to the FTC in 2010 for failing to adequately disclose the $79 fee associated with the credit monitoring services offered on ConsumerInfo.com.
While there are other credit reporting bureaus, these three are the ones that will have the greatest impact on your home purchase goals. What’s most notable is the controversies that each has faced at some point in each of their histories. By knowing the past of each bureau and educating yourself about your rights as a consumer, you can gain confidence in your abilities to strengthen your financial health. Arm yourself with information to empower yourself as you repair your credit and work toward your life and financial goals.
As you move on with home purchase plans, you will discover that you have a wealth of choices when it comes to mortgages. Big bank or mortgage broker? Traditional or FHA? And finally, fifteen year or 30 year mortgage? Each has their advantages, and which will work for you will all depend on your personal financial situation.
Money Out of Pocket
A 15 year loan will mean a monthly payment that is hundreds of dollars higher than the one for a 30 year loan. But, you pay less over the life of the loan since the interest rate is lower and the term far shorter. Seems like an easy trade-off, right?
However, there is an opportunity cost that comes with those savings. A mortgage payment that high can prevent you from investing as much in other areas, such as putting money away for a child’s education or funding your retirement.
Also, depending on the interest rate on your loan, you could get a far better return on your money by investing than by paying off your mortgage as quickly as possible. Say, for instance, that you have a 3.5% mortgage rate. Historically, the stock market has grown an average of 10% a year. If a homeowner were to put those few hundred a month extra that a 15 year mortgage costs into investments instead, he or she could come out tens of thousands of dollars ahead by the time a 30 year mortgage was paid off.
Thirty year mortgages offer far more flexibility than 15 year loans. A 30 year loan gives you the freedom to pay it off faster, if you choose, by adding extra payments. If you have a life event such as an illness or job loss that make the higher payments unfeasible, you can simply return to your regular loan payment schedule.
With a 15 year loan, you are committed to higher payments every month. You could, theoretically, refinance the loan if you fall on hard times. But, the sorts of issues that would cause someone to need a lower mortgage payment, such as unemployment, or being financially over-extended, are red flags to lenders, and could prevent you from getting a new loan.
Typically, you will find much lower interest rates on 15 year mortgages than on 30 year loans. This means that, even if you were to make extra payments on a 30 year loan, you will still spend thousands of dollars more over the life of the loan.
We advise those who are shopping for a mortgage to run many different scenarios to determine which loan is best for their needs. Do not just calculate the difference between payments on a 15 and 30 year loan. Consider your total discretionary income, and whether you have adequately prepared for college tuition and retirement. By taking your entire financial future into account when you are choosing a home loan, you can continue the healthy growth that started with the credit repair process.
As credit scoring bureaus have become more open about what makes up your credit score, people have become more educated about maintaining good credit. However, there are still many myths that abound that can damage your score and get in the way of home purchase dreams. Don’t believe any of these dangerous myths:
Myth: You can buy a new credit identity.
Some fraudulent credit repair companies say that they can get you a brand news credit identity free from part credit mistakes. What you actually get when you deal with these companies is an Employer ID Number. It has nine digits, just like a Social Security Number, but it has a distinct purpose. Trying to use it instead of you SSN is fraud and can result in criminal charges.
Myth: You should close old accounts that you aren’t using.
Many people believe that old credit accounts can hurt their credit score because creditors fear that, with too much credit, you’ll get in over your head. Those old accounts, however, look good to potential new creditors. They show that you can be trusted with large amounts of credit without going on a spending binge. To make sure that old accounts stay open, make sure you make an occasional charge on the account. One of the best ways to do this is to put one of your monthly automatic withdrawals, such as a health club membership, on the card and sign up to have the bill automatically paid.
Myth: Reducing Your Limits Can Help Your Score
Like the old account myth above, this is an action that can actually hurt your credit. Potential creditors want to see low utilization of credit, as it signifies that you can be trusted.
Myth: You should always keep a balance on your cards.
The truth is, credit reporting companies have no way to know whether you are keeping a balance on your cards. Your credit card debt is reported once a month, usually when your statement goes out. Whether you pay in full each month or leave a bit unpaid won’t be noticed. Plus, credit scoring bureaus tend to give higher scores to those who use only a small portion of their available credit. Don’t carry a balance if you don’t have to and save yourself unnecessary interest payments.
Myth: Looking at your own credit score counts against you.
When you look at your own score, this is known as a soft pull. Credit reporting agencies are only concerned about hard pulls; that is, ones that indicate you are shopping for more credit. In reality, you should look at you scores from all three agencies at least once a year to ensure that everything is accurate. Make sure that you request the information directly from the three credit reporting bureaus. If you buy your score from a third party, this can appear to be a hard pull.
Being educated about what helps and what hurts your credit score can make you a more savvy consumer and open up new opportunities. As you work to improve your credit and accomplish dreams of owning a home, learn all you can and apply it to your financial health.
Probably the greatest idea an individual could apply when trying to fix their credit rating is to learn the best ways to spending plan their money. Offer your self a concrete as well as set quantity you could manage to pay down your debt monthly and also you will have a far better idea about exactly how long it will certainly take you to settle all your debt.
When filing a dispute with a credit agency, supply duplicates of files that support your argument. Anything to assist the credit rating agency understand your side of the dispute will aid.
A vital suggestion to think about when functioning to fix your credit report is the truth that if you have inadequate credit report, you could not get approved for the housing that you prefer. This is necessary to consider considering that not only could you not be gotten approved for a property to purchase, you may not also certify to lease a home on your own.
Take into consideration acquiring a credit report counselor that can help you with your credit rating repair methods. Research the company prior to you join them to guarantee they are legit and also reputable. An excellent business will manage to obtain your bills level and assist you to obtain out of debt in a few years.
Do not evade the calls from collectors. You have thirty days to pay from the receipt of the collections discover just before it appears on your credit rating guide. On a regular basis, they will certainly permit you to separate the settlement into a couple of month-to-month settlements and also it will disappoint on your credit history guide.
Nothing will mend your credit besides time. If you have late settlements, defaults or even bankruptcy, your credit score will drop. There is no way to get rid of these once they have been stated. Only time and good behavior will eventually make them less as well as much less of a determining consider your credit score and the credit rating that you obtain.
If you have been distressed and really felt inhibited about your bad credit history, take these pointers and also utilize them to transform that. These ideas could help stop the freefall of your credit score and also begin making your score rise. Keep your concentrate on improving your credit score and also you’ll be simply fine.
Luckily, there are ways to improve it as well as you could acquire begun by having an appearance at these credit history maintenance and repair pointers.
Consider obtaining a credit therapist to assist you with your credit report maintenance and repair methods. Simply time as well as good actions will eventually make them less and also less of an establishing aspect in your credit score and the credit that you receive.
If you have been irritated as well as felt prevented regarding your bad credit report score, take these tips and utilize them to alter that. These pointers can help quit the freefall of your credit score and also start making your credit score surge.
Beat The Debt Collectors
Collection Methods … Win The Game!
Have you ever wondered why points occur in multiples? Many times it is of our very own doing, yet sometimes there appears to be some undetected force creating these issues. More later!
An analysis of your credit record will most likely give you a sign of exactly how particular bodies run. Indicators are that at least 75 % of the guides are wrong or deliberately incorrect.
On the subject of credit report records: It is your duty to see to it the access are appropriate. Credit reporting companies do not care if the information offered to them by debt collectors is accurate or otherwise! Realize the fact that credit rating reporting firms receive a bunch of cash from collection agencies, and so on. Memberships by companies, financial institutions and the like make their presence possible! It does not matter if the reports were purposely false, or constructed of spite, or perhaps entered with untrue dates, amounts or nonexistent companies.
While the above paragraph paints a miserable picture, the activities are indeed illegal, as well as also usually go unchallenged, since folks are unaware of the circumstance or are so daunted by the press reporters of info that they reluctantly approve them.
To refer back to the very first statement (points occur in multiples): Often times when a collector checks out a credit record he/she understands numerous accounts behind and also thinks that the person in question does not test reports or does not know concerning the records and assumes he/she could be quickly frightened and also persuade the debtor into fast pay. Additional details included in the credit history guide likewise includes where the individual is utilized and also if repayments have actually loomed to various other companies so the broker once more presumes the individual desires to pay the debts.
By the time the financial obligation reaches this point many fines, passion and also other costs have been included that the initial financial obligation is numerous times the initial amount. This profiteering is why agencies are so incessant in their intimidation. Bear in mind the representatives are experienced in this “career”.
It is important that you arm on your own with know-how: Get a record of your credit rating as well as figure out if the details is proper. You could quickly obtain the information you have to test the debt, stop bothering phone calls, require proof of financial obligation as well as overall stand up to unruly intimidation tactics. See here.
An essential extra action is to get command of your finances (never ever permit a collector command your own). There many publications and institutional entities that provide excellent guidance as well as help. Be mindful that several largely marketed financial obligation alleviation as well as advising services are worse compared to the collectors in integrity and sincerity.
One last word: Never Make Your Financial Choices From Concern!
On the topic of credit rating records: It is your duty to make certain the entries are proper. Credit history reporting companies do not care if the details offered to them by creditors is precise or not! Be aware of the fact that credit report reporting agencies obtain a lot of money from collectors, and so on. It is critical that you equip yourself with expertise: Get a report of your credit history as well as determine if the information is right.
Can a charged-off debt still be collected? – Q&A
People call and ask us this question when attempting to repair their credit. The answer is i simply….YES.
A creditor still has the right to collect on a debt after they have charged the debt off.
Most installment loan debts will be charged off 120 days after non payment.
Most other debts will be charge off 6 months after non-payment.
The IRS allows a creditor to take the charge off as a tax deduction against profits but contrary to popular belief the creditor can continue to collect the debt up to the specific statutes of limitations (varies state by state).