From the category archives:

Debt Settlement

In the prior post, I began responding to the questions asked by one of our readers at FinanceTheDream.com. The questions Candace asked were:

1.    What happens to the credit score when debt validation letters and the pay for delete process is used?
2.    When derogatory items are removed, does your credit score go up or down?
3.    When derogatory items are removed, does it show that I have a shorter time length of credit history?
4.    Can I get paid collection accounts removed?
5.    How Do I get the account numbers from the collection agency without admitting the debt?
6.    How long will it take for my score to improve?

The first two questions were answered in the prior post on how to clean up your credit report. In this post, we will continue to address, in detail, her additional questions so you too can understand how to clean up your credit report.

Debt Resolution

Q:   When derogatory items are removed, does it show that I have a shorter time length of credit history?

A:   There are three answers to this question and they are yes, no and it depends. Great answers, huh? Everything clear as mud? Let’s clear things up. Ok, when derogatory items are removed, it may show that you have a shorter time length of credit history IF, and IF being the operative word here, IF the items removed are the oldest and longest reporting accounts on your credit report AND there are no other accounts of the same age. If the accounts that got removed through debt resolution practices were not the oldest accounts, then the answer is no, it will not show that you have a shorter time length of credit history.

Even if the accounts are the oldest on the credit history, if they are showing as charge-offs or collections, you still want to get them removed because they certainly are not helping your credit report, credit score or overall credit profile from an underwriting perspective.

When you have to worry about accounts being removed that are the oldest is when the account that is removed or disappears is the oldest and is a positively reporting account. This is why you absolutely have to have Equifax Credit Watch Gold with 3-in-1 Monitoring when working on credit restoration. Believe it or not, you can actually have positively reporting accounts drop off and not report. This is devastating to your score and can really impede your ability to qualify for a loan, get a job, etc. Equifax Credit Watch Gold with 3-in-1 Monitoring allows you to see what is and is NOT being reported in real time. This is an essential element in credit restoration because it lets you know what to attack. When used in conjunction with
Equifax Score Watch you have live metrics so you can see what is being reported, be immediately alerted to changes in your credit report, your credit score and run simulations that will tell you what will happen if you get a derogatory item removed, pay it off, etc. You can also run simulations that will show your credit score over a period of time so you can see the impact of simply continuing to pay your bills on time or paying them off early. If you are serious about credit restoration, you absolutely have to have Equifax Credit Watch Gold with 3-in-1 Monitoring and Equifax Score Watch. It is what the pros use and you should too!

Q: Can I get paid collection accounts removed?

A: The answer? Yes, of course. Anything, whether positive or negative, that is on your credit report can be removed. Some are infinitely more challenging than others, like public records (bankruptcy, foreclosure, judgments, tax liens) but a paid collection account can be removed. The approaches to this are through the dispute and debt validation processes since this isn’t really a debt resolution issue since technically, there is no debt to resolve any longer. If you have watched our video on how to develop a comprehensive plan to credit repair, you already know that you have to begin with the end in mind and there is a certain chronology in way you prioritize each aspect of credit restoration, debt resolution, etc. So, before I would personally waste time on getting a paid collection deleted, I would run it through Equifax Score Watch and determine how much it would impact the score. Likewise, if there are other things that need to be addressed, I would run those through Equifax Score Watch as well. Once that is complete, you know the credit score impact of each item and can prioritize your efforts. Typically, debt resolution through dispute, debt validation and pay for delete of unpaid charge-offs and collections will yield a higher credit score faster than eliminating an old paid collection account. Having said this, Equifax is constantly tweaking the credit scoring matrix and unless you run it through Equifax Score Watch you will not know the actual impact based on your individual credit report.

To see the answers to:

  • How Do I get the account numbers from the collection agency without admitting the debt?
  • How long will it take for my score to improve?

please view our next post:

How Do I Clean Up My Credit-Part 3

Additionally, if you have any questions or comments, please use the comment box below.

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Image representing Experian as depicted in Cru...
Image via CrunchBase

Since the beginning of the current financial crisis and the credit crunch in 2007, many people have found themselves in need of significant credit repair. Those who were borrowing to service their debt – both companies and individuals – found their access to credit diminished, if not totally wiped removed, and consequently their credit scores took major hits as they defaulted on debts or fell behind on servicing them.

As a result, there has been a boom of new companies offering all kinds or credit repair services. Most of these companies are perfectly legitimate and legal, but there is a small minority engaged in unethical or illegal behavior as well. These latter are the scams and the savvy customer needs to keep an eye out for them.

The first sign that a credit repair service may be illegitimate is if it makes impossible promises such as “We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!” Realistically, credit repair companies can not do anything that you can not do yourself, but if you decide to use a company, be sure that they do not make impossible promises, like removing bankruptcies from your credit record before the requisite ten year reporting period is over. Bad credit repair can only go so far!

Credit Repair Scammers

Another telltale sign of a credit repair scam is any company that requires you to pay before they have actually rendered any services. According to the Credit Repair Organizations Act, it is flatly illegal for a credit repair company to require you pay before they have performed the services promised. Failing to take advantage of your rights under this law is tantamount to simply giving money away, because as soon as the scammers have your money in hand, they have no incentive whatsoever to do anything else for you.

Any credit repair company that recommends or suggests that you do not contact any of the “Big Three” credit reporting agencies – Equifax, Experian, and TransUnion – are also likely to be scams. There are no negative effects to you contacting the credit reporting agencies directly. Further, failure to contact them means that you can not see whether or not the credit repair company has actually managed to accomplish anything at all.

Finally, if the credit repair company suggests that you do something illegal not only is it a scam, but if you commit a crime at their request, it is you – not them – that will be facing criminal charges. The most common recommendation is to apply for and obtain an Employer Identification Number (EIN) from the IRS to use instead of your legitimate Social Security Number (SSN). Not only will this method fail to repair credit, it could land you in jail!

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Debt Settlement in the U.S.A.

December 8, 2009

Debt, and the legal rights possessed by both lenders and debtor, differ by country; so it is important to keep in mind that not all of the advice you may find online may be applicable to you. Similarly, even within the United States, many separate states have additional legislation on top of federal laws that [...]

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Christian Debt Reduction Options Available Today

November 30, 2009

As recorded in the Holy Bible, people cannot serve two masters (Luke 16:10) and for the Christian this means that serving the Lord must always take precedence over “mammon” (wealth, or money). This means that unlike others, a Christian cannot steal money, lie to acquire money, or otherwise disobey the Lord’s rules for the sake [...]

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Settle Credit Card Debt

October 28, 2009

If you have unpaid bills you may believe that your only option is bankruptcy. Bankruptcy is a painful experience that you want to avoid. Fortunately there are many things to do to avoid it. One way is to settle credit card debt for less than the amount owed.
Before we get into how [...]

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Credit Card Debt Settlement – What You Need to Know

October 21, 2009

Credit Card Debt Settlement, sometimes called a debt workout plan, can be a great solution if you are overwhelmed by credit card debt.
Many people think they need to hire one of the many credit card debt settlement companies out there. These companies advertise credit card debt settlement services heavily and sometimes call themselves [...]

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Negotiate Credit Card Debt – Don’t Walk Away!

October 15, 2009

If you are overwhelmed by credit card debt, you may feel like you will never get your head above water. There are few things worse than financial stress, and at times, you may even feel like you should give up.
The idea of working with your creditor to negotiate credit card debt may be overwhelming and [...]

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Are There Tax Consequences for Debt Settlement?

September 3, 2009

In a word — IT DEPENDS! 
Before you settle a loan for less than the amount you owe, make sure you consider the tax implications.  It is always a good idea to get advice from your tax professional before you do anything!
(I am not a CPA and am NOT giving tax advice.  Always, always speak to [...]

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