Oct 5, 2009

Credit and Charge-offs: Three Possible Solutions to Increase Your Credit

A charge-off occurs when you are so far past due on payments that your creditor feels that they will not receive any payment. A charge-off means that the creditor has written off the account as a bad debt, but it does not relieve you of the obligation to pay the debt. Charge-offs have a severe negative impact on your credit, but once the account has been closed, you may find it difficult to get it reopened in order to continue making payments. However, there are some options when it comes to getting rid of charge-offs on your credit report, provided you have the means to pay at least a portion of the debt.

Your first and likely best option is to write your creditor and request a pay-for-deletion arrangement. In the letter, offer to pay a percentage of what you owe provided that the creditor agrees to remove the charge-off from your credit report. If the debt is fairly recent, you may need to offer the full amount as payment in order to get the creditor to agree. Not all creditors will agree to this type of arrangement, but if they do, be certain you have the pay-for-deletion agreement in writing before you send in your payment. You will have to use certified funds in this type of an arrangement, so be prepared take the extra step of purchasing a money order or cashier’s check. This option works best, because the derogatory credit history will be gone from your report as if it never existed.

Your second option is to arrange for the debt to be listed as ‘Paid in Full’ on the credit report, in exchange for payment. Just as with a pay-for-deletion agreement, you must be certain to get this in writing, especially if you work out a payment arrangement that is less than what you owe. The ‘Paid in Full’ listing will improve your credit score, but not as much as having the derogatory information removed entirely. What you do not want is a listing of ‘Settled’ on the account, as it indicates to other creditors that you do not fully meet your credit obligations.

Your last option, if you cannot work with your creditors in any other way, is to pay off the debt in full, with appropriate account numbers, reference numbers and any other necessary information included with the payment. Make copies of everything, and once the payment clears, you can dispute the listing on the credit report to have it updated as ‘Paid in Full’. Keep in mind that you must provide proof that the debt was entirely satisfied in order for this method to work, so you won’t be able to make a payment that is less than the full amount owed if you want this to be successful.

One final note: charge-offs remain on your credit report for up to 7 years. If the date for the charge-off to be removed from your credit report is close, you may wish to wait for it to be removed from your credit report entirely. This is true whether or not you ultimately decide to repay the debt, because repaying older debts can cause your credit scores to drop temporarily.

Getting your credit repaired can take some time if you have several charge-offs. Be patient, wait for the written agreement, and make the payments in certified funds in order to obtain the best results.

Posted in charge offs, charge-off, credit history, credit report, pay for deletion | No Comments »



Jun 16, 2009

Pay for Deletion – Can it Really Help?

One of the many means that people often use to repair their credit is the pay for deletion agreement. With this agreement, your creditor (or a collection agency who currently holds the debt) agrees to have your derogatory collection account removed from your credit report, in exchange for payment on the account. In some cases, you may pay the full amount you owe – in others, you may only pay a percentage, anywhere from 40%-80%.

Pay for deletion is not the same as a settlement agreement. When you pay off a settlement account, the account itself remains on your credit report, and will be listed as either ‘Paid in Full’ or ‘Settled’ depending upon whether or not you paid the full amount to the creditor or a partial payment. Having these settled accounts on your credit report can actually hurt you in some instances, as potential creditors may consider you a risk when it comes to repaying your debts in full. With pay for deletion, the record is removed from your credit report entirely – a potential creditor will not see the account, and it will not be a factor in your credit score.

Pay for deletion is most helpful for charge-off accounts that have been purchased by collection agencies, and other very old debts that have not been paid. By removing these debts from your credit history, you may be able to raise your credit score by several points. If you are using a credit repair agency, and they recommend a pay for deletion strategy, be certain that you have the agreement in writing before you pay – without the written agreement, you may find that the derogatory account remains on your credit report, even after you’ve paid.

It’s important to realize that pay for deletion is only a useful strategy when you have the money available to pay. Creditors will expect money in certified funds, such as a cashier’s check or money order, so having the funds on hand will help to expedite the process, should your creditor agree to the pay for deletion arrangement. Some creditors do not enter into these types of agreements, so it’s not a one-size fits all solution. However, even if the creditor does not agree, you or the credit repair agency may be able to negotiate other favorable terms in order to avoid having a ’settled’ account on your credit report.

While pay for deletion is not always a viable option for everyone, it can help some individuals who have old debts that they can afford to pay off right away. Whether you are repairing your own credit, or relying on the services of a credit repair agency, get the pay for deletion agreement in writing, be ready to pay, and follow up to be sure that the account has been successfully deleted from your credit report after you’ve paid. As long as you pick accounts that are best suited to this type of agreement, you may be able to benefit from a tangible boost to your credit score.

Posted in charge offs, credit history, credit repair, pay for delete, pay for deletion | No Comments »



Nov 24, 2008

Three Common Credit Myths and How They Can Harm Your Credit Score

With the current state of the economy, having a strong credit score is more important than ever. Unfortunately, common misconceptions about credit and how your credit score can be improved ultimately do more harm than good. With a sea of credit repair companies promising flawless credit, it can be easy to succumb to misinformation. Here are three common credit myths that could potentially damage your credit score:

Myth: Once a Debt is Charged-Off, I Don’t Have to Pay It

Charge-offs may seem like a positive at first, namely because the term sounds very similar to a “discharged” debt, which is one that has been cleared. Charged-off debts, despite the similar-sounding name, do not clear you of the obligation to pay the debt. Instead, it is an indication that the company does not believe you will pay the debt and therefore it has been removed from their accounts receivable. It essentially makes your debt an expense on the record books of the company, but that does not relieve you of responsibility. Charged-off debt classifies you as a ‘high-risk’ to many credit issuing companies, and can severely impact your ability to get future credit.

One Caveat: if the debt is past the time allowed by your state to collect, you don’t have to repay the debt, whether it’s been charged-off or not. Typically, the age of the debt has to be anywhere from 4-6 years before this is the case, but because these regulations vary by state, it’s best to check your local laws to be sure you’re in the clear.

Myth: Credit Repair Services Can Erase All Negative Credit Information, Even if it’s Legitimate

Reputable companies won’t promise to erase legitimate debts. Under the Fair Credit Reporting Act, you are allowed to challenge debts that you believe to be erroneous or questionable. That does not mean that you should challenge any and all debts. In fact, doing so may result in collection agencies and bill collectors ignoring any legitimate requests you may make to have truly erroneous information removed. This is because if the company feels that your dispute is ‘frivolous’ they can ignore it, and leave the debt on your credit report.

There are numerous ways to have negative items on your credit report removed. Disputing them is not the only way. If the debt is legitimate and being reported correctly, you may want to try to negotiate a pay for delete. When using this method, remember to always get the terms in writing.

Your best bet is to choose a credit repair service that has a reputation for success, and that uses ethical and legal methods to improve your credit score. You may not be able to get rid of all negative information, but the removal of even a few items could see your credit score improve dramatically.

Paying Off Old Debts Will Improve My Credit Score

Surprisingly, paying off old debts will not always improve your credit score, and may actually worsen it. This is because paying on an old debt can sometimes make the debt appear to be new. If the amount you owe is substantial, this can make it seem as though you’ve just taken on a lot of new debt. While the credit bureaus are working on finding ways to eliminate this setback, currently there is still a chance you could see your credit score fall as a result of old debts being paid. Be particularly vigilant when it comes to knowing when your debt’s statute of limitations for collections has run out – you don’t want to pay on a debt that is no longer enforceable by law unless there are very special circumstances.

Keeping the truth behind these three myths in mind can help you to avoid unnecessary declines in your credit score. If you need help improving your credit score, always deal with a reputable agency, and be sure to check the facts to be certain the law is on your side in your quest for better credit.

Posted in FCRA, charge offs, charged off debt, credit, credit repair services, credit report dispute, credit scores, paying off debt | No Comments »



Aug 27, 2008

"Re-aging" Debts and Illegal Debt Collection Practices

What does it mean when a debt is re-aged? For credit reporting purposes, a debt is considered re-aged when the date of delinquency is moved forward. For example, a debt that was originally past-due in August 2006 may be “re-aged” to show that it was originally past-due in August of 2007, or even later. Your original creditor may do this as a part of a mutual agreement – if you had problems paying your bills in the past, but have worked out an arrangement for payment that allows you to avoid a charge-off. This type of re-aging is perfectly legal and can even be in your benefit if you are able to make the payments per the arrangement agreed upon.

However, there is another type of “re-aged” debt. When your past-due bills are charged-off by the original creditor, they are oftentimes sold to collection agencies. These agencies pay mere pennies on the dollar to acquire these debts, and then attempt to collect and make a profit. Sometimes, unscrupulous collection agencies will “re-age” this newly purchased debt. This is a major problem for two reasons:

1. It makes the debt look like a new debt that is delinquent, rather than the same old debt, owned by a new creditor.
2. It gives the collection company additional time to attempt to collect the debt, even if the debt is too old to legally collect.

The additional delinquency will cause your credit score to take another hit, and the revised delinquency date gives the credit agency a longer time to pursue the debt. While this type of “re-aging” is illegal, there is no simple way for the average consumer to get immediate relief from this type of unfair practice. In order to dispute re-aged debt, the consumer has to carefully document the discrepancy and file a complaint with the FTC. If the collection agency states that the falsely re-aged debt is legitimate, you may be able to sue.

Unfortunately, if you’ve made a payment on one of these “re-aged” debts, it can be almost impossible to have the matter corrected, as the payment serves to renew the time that the debt remains on your credit report! This means a payment to a collection agency can leave you with a delinquent debt that cannot be removed for another 7 to 10 years if it is not paid off.

Unscrupulous practices like these are why it is so important to carefully monitor your credit report, and to avoid dealing with any collection agency that uses high-pressure, unfair tactics to try to get you to pay. Most importantly, if the debt in question is too old to collect based upon the laws of your state, do not offer to pay! It is in your best interests to state that the debt is past the statute of limitations for collections and to send a certified “cease and desist” letter to any agency attempting to collect. Don’t let “re-aged” debt ruin your credit score or your chances for good credit.

Posted in cease and desist letter, charge offs, collection agencies, credit, illegal debt collection, re-aging | No Comments »



Aug 6, 2008

Deleting a Charge-Off from Your Credit Report

“How can I get a charge-off deleted from my credit report?” is one of the most frequently asked questions at the credit repair forum – and for good reason. Credit report charge offs can linger on your report and damage your credit scores for 7 years. It seems like an awfully long time to pay for a single slip up, but having just one charge off on your credit report can prevent you from getting a mortgage in some cases. If you are fortunate enough to be approved for a home loan, high interest rates could end up costing you $100,000 or more over your life time, depending on the house you choose.

What most people don’t understand is that credit reporting is voluntary. Your creditors don’t have to report your accounts to the credit bureaus. In fact, they can even pick and choose which ones they report to! Your creditors can also delete a charge off that they have reported if they wanted to. In fact, before you ever agree to pay a charge off, you should ask for the creditor to delete the reported charge off in exchange for your payment. Always get it in writing.

The problem with the “pay for delete” theory is that most creditors and collection agencies will blatantly lie to you and say that once it’s been reported they can’t remove it. This is obviously a lie because thousands of charge offs get removed on a daily basis.

If you have already paid the charge off, perhaps you could send the creditor a good will letter or make a call and simply ask them to delete it for you. Chances are they won’t (because the employees are told they can’t) but, it’s worth a try.

Another way, and perhaps the most effective way, is to dispute the charge off with the credit bureaus. There are right ways to do it and wrong ways to do it. In fact, some of the wrong ways can basically ensure that it stays on for 7 years. That is why I recommend letting a credit repair service do it for you; because they know what they’re doing! However, for the do-it-yourselfer’s, I do teach people how to write credit repair letters at the forum. The biggest mistake you can make is just jumping into it. Do your homework, put in your time and repair your credit.

Posted in affordable credit repair, charge offs, credit, credit repair letters, delete charge offs | No Comments »



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