Credit Repair - How to Improve Your Credit Score » paying off debt

Paying Down Debts to Improve Your Credit Scores

Staff — Mon, 08 Mar 2010 01:29:41 +0000

It’s no secret that excessive debt often contributes to lower credit scores. People who are working to improve their credit scores often have several debts that are in repayment. But how can you know which debts to pay off first, or if you should pay at all? Here are a few tips to help simplify the process.

1. Check your credit report and credit scores. People who know they have poor credit may only know because they’ve been recently turned down for new credit. If that applies to you, get your credit report sooner rather than later. Being turned down for credit entitles you to a free copy of your credit report, even if you’ve already received your credit report in the past year. By getting the most recent version of your credit report and scores, you’ll know exactly where you stand. Start off by disputing any inaccuracies that you see – inaccurate items on your credit report can significantly damage your scores.

2. List your debts from smallest to largest. By itemizing your debts, it will help you to focus on paying down your debts more efficiently. If most of your debts are nearly the same value – $1000 on one credit card and $1500 on another, for instance – then list your debts by interest rate instead.

3. Pay off the smallest debt (or the one with the highest interest rate) first. By getting rid of debts in a targeted fashion, you can improve your credit scores more quickly as you eliminate your debt obligations one at a time. Use the money you spent towards paying down the first debt as an additional payment to pay off the next, and you will be able to get out of debt even faster.

4. Don’t forget to reward yourself along the way. Getting out of debt and improving credit scores is hard work. Whenever you meet one of your goals, set aside a reasonable reward to celebrate your hard work. Whether it’s saving for a vacation, a special night out, or some other treat, make sure that it fits with your current budget and savings goals.

5. Remember that not all debt is bad. Some debts are actually seen as good debt by lenders. In general, if you have borrowed to purchase something that will increase in value, this debt is seen as positive by lenders. Student loans, traditional mortgages, and money borrowed to grow your business all fall into this category. That doesn’t mean that you shouldn’t repay these debts – on the contrary, paying off good debt can only increase your net worth in the future.

Paying down debt and paying on time are two of the most powerful techniques for raising credit scores. If you’re having difficulties with tackling your debt and getting your credit on track, talk to a reputable credit repair agency, and work with a professional to raise your credit scores one step at a time.

Paying the Debts of the Deceased – What You Don’t Know Could Cost You

Staff — Wed, 06 May 2009 02:32:00 +0000

Some debt collection agencies are taking their collection practices to new extremes when it comes to making a profit – collecting from the relatives of the deceased. In most states, the estate of the deceased is responsible for payment of any debts that are presented during the probate period. However, these debt collectors circumvent this process by going directly to the surviving spouse, children, parents or siblings, in an attempt to directly collect. Oftentimes, these individuals are not legally responsible for these debts, and the debt collectors typically do not disclose this fact. By assuming the debt of a relative who has died, these individuals potentially place themselves in a position of unnecessary financial risk.

How can you protect yourself from these predatory practices? There are a few simple guidelines to follow when dealing with creditors who are attempting to collect a debt from a deceased individual. Use these tips to deal with creditors, and if necessary, get legal advice for your particular situation.

Don’t discuss the debts of the deceased. This is likely the simplest solution, overall. Inform creditors who call that the individual they are calling for is deceased. Do not offer additional information, and do not allow the creditor to pressure you into making a payment. If you were not a joint account holder or otherwise responsible for the debt, there is no reason to communicate with the debt collector in most instances.

Don’t provide your personal information. This tip is also important, because if you provide your personal information to the debt collector, they may try to get you to assume the debt, thereby placing it on your credit report. This can have a negative impact on your overall credit, and it also makes it more difficult for you if you later decide that you do not want to handle your loved one’s old debts.

Don’t give in to pressure. If you know that you aren’t responsible for the debt, don’t succumb to creditor pressure to assume the payments. Unless the debt involves secured property that is of value to you or your family, there is no reason to negotiate over payments on a debt that you do not owe.

Do handle any debts on which you are a co-signer or are otherwise responsible. Find out the laws about credit card liability in your state – in many instances, the spouse is not responsible for credit card debt that is not part of a joint credit account. However, if you are jointly responsible for the debts in question, making arrangements sooner, rather than later, can help preserve your good credit.

If creditors are persistent in contacting you, you may want to get legal advice from a local attorney about how best to proceed. In most instances, if creditors do not make their claim during the probate process, they are out of luck – trying to collect from relatives not associated with the original account is a shady practice at best. Losing a loved one is difficult. Don’t let opportunistic creditors make an already difficult time that much worse – know your rights, and don’t offer to pay for any debts to which you are not contractually obligated.

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

Staff — Mon, 24 Nov 2008 23:31:00 +0000

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.