Defaults & bad records

Debt collectors routinely try to collect on debts that they know would not be enforceable in court. They may even try to get you to restart the debt by making a partial payment or by transferring the old debt to a new credit card. But, in a lawsuit settlement with one of the biggest debt collectors, the FTC lets the debt collection industry know that collecting on expired, or time-barred debts, is not ok.

The FTC sued Asset Acceptance, a company who might be listed on your credit report, following allegations that the company violated several rules including: telling consumers they owed debt that the collector may not have been able to prove, failing to tell consumers that their debts were past the statute of limitations, and failing to tell consumers that a partial payment would extend the statute of limitations.

In addition to a civil penalty of $2.5 million, Asset Acceptance has agreed to inform consumers when their debts are too old to be legally enforceable and to let consumers know that a partial payment would essentially restart the statute of limitations on that account. Asset Acceptance also has to inform consumers when they’ve placed a negative account on the consumer’s credit report.

While a judge hasn’t signed off the terms of the settlement, they set a precedent for what the FTC expects of the collection industry. The agency has also released a new publication, “Time-Barred Debts: Understanding Your Rights When It Comes to Old Debts,” to help consumers better understand what to do about old debts.

You may know that the statute of limitations varies by states. It’s generally between Read more…

There are many consumers who have less-than-perfect credit scores these days thanks to the many economic problems facing Americans. However, experts are appealing to those that have been able to maintain their good credit profile not to share their good financial status with others in need.

Since credit scores are used by nearly every industry today, financial experts warn consumers about taking on financial obligations for others because you have a better credit score. This includes becoming a co-signor on a mortgage, car loan, or even a rental application. When you act as a co-signor on someone else’s financial transactions, you are putting yourself in the position of not only having to repay the obligation but also ruining your own good credit standing should the other person default.

More often people who have good credit are asked by loved ones to help them financially. While it is certainly up to you to decide to lend someone cash, it is never wise to lend them your credit status. Those who have maintained low credit scores likely Read more…

Late payments go through several stages. In the beginning, the consequences are mild, there’s very little impact to your credit. As you get become more delinquent on your payments, your credit is affected more, your balance grows and it’s harder to get caught up. Understanding the stages of a late payment may make you want to work harder to keep your payments on time.

Less than 30 days late

If you’ve only missed your due date by a few days, you’re still less than 30 days late. Your credit card issuer will charge a late fee (which may not show up until your next bill), but at this point, nothing goes on your credit report. Send your payment before your next due date and the credit bureaus will never know you were late.

30-89 days late

Once you’re 30 days late, however, the credit card issuer will update your credit report to show that your payment was late. If you catch up on your payments, your account status will go back to current, but the old late payment still remains. On the other hand, if you miss your payment again, making you 60 days late, your credit card issuer can charge the maximum late fee of $35. After that, your interest rate increases to the default rate.

90 to 180 days late

Between 90 and 180 days late, the late notices continue to be Read more…

Failing to make your payments on time will lower your credit score, but that may be the only reason that appeals to common sense. Stranger ways to lose points abound.

It takes years to build up a good credit score, but very little effort to trash it. In fact, sometimes it is the actions you take to manage your credit more responsibly that lower your score.  Obviously, missing payments affects your score negatively, as it should.

If you have several cards and aren’t using them, you might naturally think that getting rid of available credit and loans would show how responsible you are, and get you a nod of approval from the credit police, wouldn’t you? Actually, the opposite is true. Closing card accounts lowers your available credit, so the ratio between any debt you have and the amount you can make use of becomes higher. This is known as your debt to credit ratio, or debt load.

Say you have three credit cards, each with a $1,000 credit limit. That means you have $3,000 available to you. If you charge $1,000 on one card, your debt load is now $1,000 from $3,000, or 33.3% So now you have a monthly payment, and realize that by the time you get it all paid off (depending on your interest rate), you are going to pay $1,400 for $1,000 worth of stuff you didn’t really have to have after all.

You’re thinking like a grown-up now. Proud of your new awareness, you cut up one of your other cards since you will never be so frivolous as to charge $3,000 worth of stuff. You call the bank and Read more…

When it comes to credit, what you don’t know can hurt you. Your financial profile can take a hit based on the information you do not clearly understand. The many myths of credit repair and credit scores can actually leave you in a worse situation than where you started.

The Reality of Medical Debts

One of these myths that is often believed by consumers is that medical bills do not hurt a credit score. Many times people will forgo paying off their medical bills to focus on their other creditor debts thinking that overdue medical bills won’t impact their credit score.

However, medical debts are treated just like any unpaid creditor debt. The money you owe is expected to be paid. The medical provider will not necessarily send the information to the credit reporting bureaus each month but they will pass your accounts to debt collectors. It is then that the unpaid debts will cause your credit score to drop and lenders will see your medical accounts are in bad condition.

Once an account goes into collections, regardless of the account type, you will not only have the drop in credit score, you will also have the Read more…

You don’t have to let your entire credit history go down the drain just because you have a few late payments on your credit report. It’s easier to recover from just one significant blunder – like a credit card charge-off or debt collection – than it is to have your entire credit history trashed by mounds of negative information. These are some of the worst credit report entries that you should try to avoid.

Foreclosure

Foreclosure is another really bad credit report entry that has affected millions of homeowners in the past few years. The reason foreclosure looks so bad on your credit report is because a mortgage is a really big loan. For many people, a mortgage is the biggest loan they’ll ever borrow in their lives. The other drawback of having foreclosure on your credit report is that you’ll have trouble buying a new home for several years. The good news is that, with the right actions, you can take out a new mortgage even before the foreclosure falls off your credit report.

Vehicle Repossession

If you default on your auto loan, the lender may repossess your vehicle. What qualifies as default varies from one lender to the next and is often based on Read more…

Clearing up your credit history often will involve handling collection agencies that have assumed your old debts. Collection agents are infamous for using tactics that are less-than-nice when trying to get back money owed. In many cases, a collection agent will get paid a percentage of the debt they are collecting on so they utilized no-holds-barred techniques to get a payment.

For some consumers who show collection agency information on their credit report, it can be difficult to negotiate the removal of the data from the report. But there are methods to be considered when trying to clear a collection agency debt from your consumer credit report.

Here are four options you have for handling a collection agency debt:

Pay Up In full

If the collection agency is able to validate your debt and it is a relatively small amount, it may be in your best interest to pay the balance off in full with the contingency that the debt information will be removed from your credit report. Not all collection agencies will be cooperative but many will agree to remove the data once the debt has been satisfied in full. They want to get back as much money as possible so they will be somewhat open to working with you. Too many consumers fail to ask for the incentive when they agree to pay in full so they end up with no real changes on their credit report. Get any agreements in writing.

Ask for a Settlement

For larger debts you can not afford to pay in full, discuss Read more…

Credit and debt are very closely related. How you handle your debt can either help or hurt your credit score. On your credit repair journey, it’s important to be aware of what you’re doing with your debt.

Too Much Debt Hurts

A large part of your credit score – 30% – is based on how much debt you’re carrying on your credit cards. If you have a lot of debt compared to your credit limit, then your credit score will be hurt. However, carrying low balances will help improve your credit score and make you a more desirable borrower. Make paying off debt part of your credit repair plan.

Paying Late is Deadly

One of the reasons to keep your debt low is that it keeps your payments at a manageable level. Once your payments get too high, you’ll have trouble keeping up and you may have to miss a month. Late payments will kill your credit score.

It’s not ok to make a late payment just because your credit score is already bad. Doing that will just lengthen the amount of time it takes your credit to recover. Those old late payments will hurt your credit score less as time goes on, but any recent late payments will have to age before the damage lessens. Read more…

Most people think bankruptcy is the kiss of financial death that leaves no chance to get back on financial track. While it is true that bankruptcy should be used as a last resort, it is not impossible to repair credit that has been marred by bankruptcy and make a financial comeback.

Here are some tips for coming back from a bankruptcy and boosting your credit score:

Begin the Rebuild

After you have essentially cleared all or most of your slate through bankruptcy, it is never too soon to start rebuilding your credit. Be sure that this is not an overnight process. You will have to practice patience and persistence to improve your credit past. The first step to rebuilding your credit should be obtaining a secured credit card. By making regular, on time payments in full you can begin to boost your score. It may seem somewhat illogical to get a credit card right after a bankruptcy but it is one of the fastest ways to rebuild a credit history and can be the first step back to learning good financial management. You also may consider taking a small personal installment loan from your bank or credit union which will help give you a more well-rounded credit report. Read more…

Debt settlement is a legal option available to financially strapped consumers who are struggling to recover from huge debt burdens.  Despite the fact that this option is perfectly legal and been in practice for many years before the recession, debt settlement is strong medicine for your debt problems.  It should be considered as a last resort option for individuals who have fallen behind on their financial obligations but want to avoid filing for bankruptcy.

What is debt settlement?

Also referred to as debt negotiation, debt settlement is a practice where an individual or a third party company hired to represent an individual, negotiates with a creditor to reduce the balance needed to pay off an account.  Most creditors are unwilling to negotiate a reduced payoff amount if an account is current, which is where problems with your credit first begin.  In order to negotiate with your credit card company you will likely have to be delinquent on your account which obviously affects your credit score.  With that in mind, understand that while a successful negotiation of your debt may help you reduce the amount owed, the process itself will damage your credit.

How to repair credit after debt settlement?

Consumers who have gone through the debt settlement process have a long road ahead to repair their credit.  Fortunately, despite the negative affect of debt settlement on your credit, the consequences are less severe than filing for bankruptcy.  Credit repair after debts have been negotiated can be accomplished with the following steps. Read more…