Credit Advice...A few quick questions

[Guest021716-4]

I have some money saved up and would like to clean up my credit a little more. I have heard that if you pay something off that is in collections it will show up as a slow pay. A few people have told me that it's best to not pay the old debt than to have a slow pay on my report. It doesn't make very much sense to me not to pay it. Any answers from people who are pretty knowledgeable would be appreciated.

[GneissGuy]

I can't answer that particular question, but I do know that there is a lot of bad advice, misconceptions, scam artists, etc. in the whole question of fixing up bad debts.

There are also a lot of booby traps in the process of paying off debt.

Take everything you hear with a grain of salt. Even what you hear from me.

[mandola]

go to http://ficoforums.myfico.com/ everything you need to know about rebuilding and knowledgable forum members too

[GneissGuy]

Read up on statute of limitations on debts, too.

If you haven't paid on certain types of debt for 4 years (in Texas), they can't be collected. However, if you pay a little, promise to pay, or even say certain things, it restarts the clock on the 4 years. Creditors and collection agencies will try various tricks to restart the clock on you.

Lots of gotchas, pitfalls, and loopholes, of course.

[Billy_Saul]

Originally Posted by Scarlett Rossi

I have heard that if you pay something off that is in collections it will show up as a slow pay. A few people have told me that it's best to not pay the old debt

Unfortunately, this is accurate advice. Credit reports reflect negative information for 7 years from your last entry on that account. If you have an account that has been past due for 2 years it will fall off your report in 5 more years. (Bankruptcy and liens can be longer). If you make a payment today you will be restarting the clock and now that account will be reflected for 7 more years from your last payment. That is how I understand it although I am no expert. If you are closing a mortgage on a home you may be forced to pay certain debts at closing. You just have to weigh your individual circumstances and proceed accordingly.

[Pflugerbill]

Originally Posted by Scarlett Rossi

I have some money saved up and would like to clean up my credit a little more. I have heard that if you pay something off that is in collections it will show up as a slow pay. A few people have told me that it's best to not pay the old debt than to have a slow pay on my report. It doesn't make very much sense to me not to pay it. Any answers from people who are pretty knowledgeable would be appreciated.

In my former life I was a consultant to a firm that offered credit advice and identify theft protection. Here is the bottom line, the ONLY way to clean up credit is TIME. You can get on the websites for the three major credit reporting agencies and file a protest which shows up on your report (one of them you have to write a letter, don't remember which one), but that does little to nothing. You can hire a law firm like Lincoln out of Colorado and they will write letters on your behalf. These will petition creditors for reduced payments or balances but it all negatively affects your credit.

Whatever you do don't restart the clock on your debts by paying. They will disappear after seven years. Time is really the only answer. Let the debts go away after seven. From this point on be responsible money wise. Seven years passes quickly...so to speak.

If you need credit there are plenty of credit card companies that will work with folks with poor or bad credit. Use them and it helps establish new levels of credit.

Another thing you can do is register with some of the free services like CSC. They give you impossibly ridiculous advice about how to manage your money but it does appear favorably on your credit report.

Good luck.

[NastyCanasta]

I speak with a LOT of experience on this....

Originally Posted by Pflugerbill

Here is the bottom line, the ONLY way to clean up credit is TIME.

Not completely accurate, time helps but isn't the only way. The older a debt is the less likely a creditor or collection agency will spend the time to research its validity. It doesn't always work, but sometimes just a dispute letter on a 5 year old debt will get it removed.

Originally Posted by Pflugerbill

You can hire a law firm like Lincoln out of Colorado and they will write letters on your behalf. These will petition creditors for reduced payments or balances but it all negatively affects your credit.

I've personally used Lexington and Ovation, the latter doing a better job in my opinion. Neither of them "fixed" my credit, but they did make it better. They basically send letters on your behalf disputing the debt, requesting validation, etc. in the hopes that a creditor will eventually miss the generally accepted response time deadline of 30 to 45 days, or just get sick of messing with you.


Brush up on the FDCPA and FCRA, as well as the TX laws. TX has VERY aggressive laws to protect consumers. *IF* your rights have been violated, or you think they have, these guys are a ton of help
http://www.attorneysforconsumers.com/
I can't go into details obviously, but they've been bringing me some nice "cheddar" for the last couple of years and are currently working 4 cases for me. Getting a new cellphone number has been a lovely experience!

But yeah, time heals all wounds...

[Whispers]

I've been helping people fix credit with short term fixes as well as long term goals for about 8 years.

TIME does not fix bad credit.
paying off old collections seldom has a positive affect on bad credit. Most often it has a negative affect.

Most Credit repair companies take far more of your money then you could get away with while resolving it if you feel the need to make payments....

There is the "honorable" way to deal with things....

There is the "practical" way of handling it as well...

When you take a hit on your credit for paying something 30 days. late .... you lose points immediately..... let it ht 60 days past due and lose a few more.... when it hits 90 another couple of points...... then it it just sits there all ugly like forever.....

Does it disappear in 7 years?

hardly..... Before then the debtor writes it off.... and then assigns a big chunk of it to a collection agency...... They repost it to your credit and guess what?

It looks new again.... unless you deal with it then it's gonna hang around while that company chases you.....

File a report against it being inaccurate and guess what! YEAH!.. You might get it to go away.....


But right before it does that collection agency sells it to a sister company who reposts it in a couple of months and comes after you again!

What does it mean for it to be uncollectible after a period of time?

Not much to out of state telecollectors trying to bleed you....

It is a never ending merry go round....

You can affect it here and there but in the long run do very little.....

I tell everyone that talks about the bad debt on their records the same thing...... IF it is a legitimate debt that they owe..... it's never going away.... Accept it and deal with it.....

But dealing with it takes on a different meaning depending on what you want to do.....

The simplest as well as least expensive and fastest way to fix your credit is to file bankruptcy.

For about $1500 your debts can be wiped in about 3 months with the exception of some federal back taxes and federally guaranteed student loans....

You ask if BK is a horrible thing? It's not looked at as negatively today as it was years ago.....

Many Lenders consider someone who was discharged yesterday to be a fairly good risk.

In the current lending environment you can buy a brand new car before the ink is dry on your discharge papers.... You can also have 2-3 Visa/master cards in your purse/wallet within 30 days.... and these are NOT guaranteed cards...

High interest rates.. fees and sometimes a cost up front.....

but 4to 6 months after discharge you can have a credit score in the 680 range.

No the Fountain of Credit offers does not get turned back on right away........ But life as you knew it is restored..... Make your high interest car payments on time.... keep those credit cards below 30% of their limits and make a stable payment every month and your life is your own in 3 years.... refinance the car... get new cards at lower rates... and put those away for a few years before shutting them off....

In 3 years you can buy a New House and get a great interest rate.....

So BK can give you the American Dream inside of 3 years if you take it all seriously......

If you want to try repairig it without the stigma of BK then it really depends on what is wrong on your report as to how to make repairs....

TIME does not help in and of itself.

This is the most common misconception people have about credit.

TIME during which you open and maintain balances and make regular monthly payments on time in a consistent manner WILL raise your credit score.

You need active tradelines.....

Credit Cards..... Taking out a secured credit card is a start... but does little for you in the first few months and isn't maximally effective until it is over a year old.

Secured Loans..... Take the money you have and stuff it into a savings account in a credit union.. Then "borrow" a slightly lesser amount from the credit union and let them secure it with your savings account.... Make the monthly payments on time and do so for over a year....

A year from the day you take these measures, if you have incurred no NEW collection accounts or late payments, your score will have increased dramatically.....

During that year quit applying for credit.....

Your report needs to show you have some, use it wisely, never max it out and don't go looking for more....

There are ways to create short term "windows of opportunity" using some of the techniques involved in challenging credit reports that will let you accomplish something.....

When I sold cars I was taught how to remove someone's negative student loan history from a report and it would stay gone long enough for their score to bounce up, sell them a car, the note to get sold and serviced before the loans reappeared on the credit report..... driving the score back down....

There are other tricks to increasing credit scores.....

Show me a credit report with a couple of charge offs,,, a half dozen collections accounts..... a repo or two more than 2 years old.... where the person has simply been ignoring them all for over a year...... If their score is in the 540 or higher range...... I can probably get it over 600 and get them financed on a home with an interest rate in the low 4's.... and I can do it inside of three months in most cases.... Without them spending any money on old debt....

I don't know where the ste is but a number of years ago I saw a chart depicting a Family Treaa kind of picture of collection agencies and credit repair agencies..... and in the depiction... at the top of tree were the same companies... Yup... One company owned another that would help businesses Collect while at the same time they owned another company that helped people avoid collection and try to repair the credit......

I wish I had kept it.....

Any way.....
Good Luck to those that are trying....

[Guest021716-4]

Wow!! That is a lot of information to process. Everyone has such differing opinions. I did some research a while back and found some ways, like you guys' mentioned, to improve my score. I just did the secured card and loan strictly for credit purposes. I don't have any credit cards...don't want them. I know it's good to have a few lines of credit open, but I still don't want any! AND 7 years my ass!!! The bulk of the negative is from at least 8 years ago.

I don't think I would qualify for bankruptcy as I don't have repos.....just student loans, medical bills, and a couple charge off's.

Thanks for your input wise gentleman! I will surely be doing my research on the sites you mentioned.

[GneissGuy]

Student loans have no time limit. They're special.

[Guest021716-4]

Originally Posted by GneissGuy

Student loans have no time limit. They're special.

Oh yes, I know!!

[bueller22]

I think you're very smart for spending some time researching best way to proceed. Regarding your bad debts, are they chargeoffs? (Have they been charged off by the creditor?) If not, you can probably negotiate a pmt plan with the creditor to pay the debt off at very little or no interest over time and the creditor will report your acct as "pd according to agreement" on your credit report.

DON'T make any pmts to creditors until you've researched how it will affect you...especially if it's a chargeoff.

I would STAY AWAY from for profit credit repair companies who charge big fees to fix your credit. I suggest going for a consultation with CCCS (consumer credit counseling service). http://www.cccs.net/locations_results.asp They're a non-profit and have very low fees. I'm pretty sure you can do a free evaluation meeting where they will examine your situation...look at your report, and make make recommendations that you can trust.

They negotiated some high balance credit card accts for me that I had let get out of hand. The credit card companies agreed to a very low interest pmt...I pay cccs and they pay the creditor. I pay like a $20/mo fee to cccs total. Doing it this way i was able to avoid taking a huge hit on my credit...it's like 760 now.

[RALPHEY BOY]

if they are over 7 years from the 'date of last activity' then is falls off of your report by law, if you try to pay it or call about it, then whamo another 7 years can be added, due to new activity on the account, leave that sleeping dog lying

if less than 2 years you should pay it or settle the amount, 3rd party bill collectors pay pennies on the dollar like .01-.10 cents, so never pay over .20 cents on the dollar if you settle..

[stvlong]

I have been thinking about filing BK due to heavy debt.

Here are two web sites I found to be very useful:

www.debtorboards.com

www.nolo.com (bankruptcy section, pay attention to the "means" test)

Filing BK is a tough call. If you apply for a new job or loan in the future, there is always a spot on the application that asks if you have EVER filed BK before. I have no idea if it affects the decision of the people in charge, but it sure seems to me like it would.

It doesn't really make sense though....I had to file BK because I couldn't get a job, and now I can't get a job because I filed BK. It has not happened to me personally, but everything I have read indicates this statement is true. I have read that there is something floating around Congress to make it illegal to reject hiring someone based on their credit score. Probably the same for getting loans, too. Perhaps Congress has realized that the time period from 2008 or so forward proved to be a difficult time for most Americans. Then again, they are only concerned about getting re-elected, and if that happens, they really don't care what happens after that.

Dave Ramsey has a good show that you can listen to on the radio or podcast. He does not recommend filing BK or even having credit cards. He says to settle the debts for 20% or so with the collectors. It takes a lot of time and headaches but supposedly looks better on your credit report in the end. But he also doesn't seem to be in touch with reality in that most companies these days want you to have a good credit score and valid credit card, even for something as simple as renting a car.

Just be glad you live in a country where you can press the reset button on your life and start over. Texas and Florida have the best protection laws in the US. Ever wonder why most celebrities seem to live in Florida?

I'm not a lawyer, just a normal guy who has had a rough time the past few years like most people. There is plenty of information on the net...too much actually. Some of it will start to contradict what you read before. Meet with a lawyer for a free consultation, but remember that they are hurting for business, too, these days, so guess what they want you to do!

If you do file BK, you cannot do it again for 8 years, but time sure seems to fly by quick!

[Mokoa]

Originally Posted by GneissGuy

Student loans have no time limit. They're special.

As is anything owed to the IRS.