Watch Out For This Credit Repair Tip
Some credit repair companies not the reputable ones claim that they can get even legitimate accounts removed from your credit record. They may advise you to dispute every negative record on your credit report, or offer to do it for you .
The Fair Credit Reporting Act requires credit bureaus to verify your account within 30 days. Sometimes even a legitimate creditor will fail to verify and the account will be removed.
Thats especially true of older collection accounts that have passed from one collector to another. That is one case where it could be worth disputing an account that you know is yours. Information may have been lost as the account was passed on.
In most cases, this strategy isnt worth the effort. Creditors know this routine and they have the information and systems in place to deal with it. Youll also force creditors to update their records, and that could harm you.
Even if you do succeed in removing an item, it may not be gone forever. Creditors can report a debt for seven years from the date of the first delinquency, and if the account is legitimate its likely to reappear.
How Does A Charge
Unfortunately, a charge-off is one of the worst types of negative items you can have on your credit report. It shows future lenders that youre not a reliable borrower and that you have a history of not paying back your debts. A charge-off can typically stay on your credit report for up to seven years, so it will impact your ability to get approved for credit for many years to come.
A charge-off can lower your credit score by many points. Additionally, the months of missed payments leading up to the charge-off will also likely lower your credit score significantly. And, if the charged-off debt is sent off to a collection agency, having a collection account on your credit report will likely cause a notable drop in your credit score as well.
Add More Positive Data To Your Credit Report
Whether your file is thin or fat, adding positive trade lines will always help your score. Negative information counts for less and less each month as it ages until it disappears altogether in seven years. But around year two, most negative items have lost their big impact.
To rebuild your credit faster than just waiting for time to heal your wounds, try adding new accounts. Easy adds include gas and retail cards, secured credit cards, passbook loans and installment loans on small furniture purchases.
Adding positive information to your file will speed your score recovery by balancing or offsetting negative data quickly. Using programs like Experian Boost and UltraFICO can also be helpful in getting approved when you decide to apply for new credit.
Of course, be sure to make those new payments on time, every time, and youll be in the good credit column before you know it.
Remember to keep track of your score!
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How Long Will A Charge
The Fair Credit Reporting Act lets charge-offs remain on your credit reports for up to 7 years. As long as a charge-off appears on your reports, it has the potential to affect your credit scores in a negative way.
Its worth pointing out that the 7 year credit reporting clock starts ticking on the date of the original terminal delinquency. Thats the date the original account became 180 days past due.
If a collection agency buys the debt, this seven-year clock does not start over. Making a payment doesnt restart the seven-year statute of limitations either.
Nothing can legally restart the credit reporting time clock when it comes to charge-offs or any other negative item on your credit reports. If a creditor tries to manipulate the date of a charged-off account to keep it on your credit reports for more than seven years, you should dispute it and possibly speak with an FCRA attorney.
The good news is that youre not doomed to a life of bad credit for the entire 7 years a charge-off is on your reports. Credit scoring models place more emphasis on recent events.
So, a charge-off that took place last month will have a much bigger impact on your credit scores than a charge-off from several years ago.
What Other Options Are There For Removing Charge
No matter what route you take, it may not happen exactly the way you want it to. However, you may still benefit from this task by having the status changed to closed or paid. It may also say settled instead of just being charged-off.
While these options arent as beneficial as getting the charge-off completely removed, it does help your credit scores and future credit applications because the potential lender or credit card issuer sees the account as resolved. There are a few different ways this can happen.
Settled means the charged-off account has been paid but was paid either in collections or for less than the full amount. It may even state on your credit report Settled for less than the full amount. Paid or closed status implies that the debt was paid in full. This is the preferred option if you cannot get the account removed.
If you cant pay the full amount at once, you may be able to make regular payments until the obligation is fulfilled. Youll first need to look at your budget before you contact the creditor to determine how much you can pay and when. Its better if you can pay the full balance, but you can work with whatever you can afford.
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Disputing Errors And Expired Debt
If you identify expired debt that is still being reported, you will need to dispute the debt with the reporting agency. These agencies are only allowed by law to report the debt for 7 years. When disputing this or any error on your credit report, you should do so by writing a dispute letter. The letter should be sent via certified mail so that you can request delivery verification. The agency then legally has 30 days to respond or it violates the Fair Credit Reporting Act.
How To Find Out What You Have In Collections
Getting collection activity removed from your credit report can help you reach credit goals like improving your score or qualifying for different types of loans. But how do you figure out what you have in collections, if anything?
Well, if you start to get calls or notices in the mail about bills that are past due or payments missed, it might mean these accounts are delinquent and the 3 major have been or are soon to be informed. If the debt hasnt been reported yet, you can call the creditor directly to try to work out an arrangement that prevents that from happening.
But, if you believe its been sent to collections, then the first thing to do is review your credit report. Its easy to access your credit report for free from AnnualCreditReport.com. From there, you can create a free account, then go to the Credit history and accounts section. This is where youll find information about any missed or late payments.
If you have any, your credit report should list whether the collection is a paid or unpaid debt, any balances owed, and the date the account went delinquent. Then compare the details of the collection listed on your credit report with your records for that particular account. If you havent kept records of your own, log into the account in question to view your payment history.
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Negative Accounts Stay On Your Credit Report For 7 Years
Although few Americans have likely read it, they owe some thanks to the Fair Credit Reporting Act . Responsible for regulating the collection, dissemination, and use of consumer information, the FCRA is responsible for, among other things, keeping your credit information in the right hands.
The Fair Credit Reporting Act dictates how long negative accounts can remain on your credit report.
Another important section of the FCRA is the portion that addresses the length of time harmful information can stay on your credit report. Specifically, most types of negative accounts can stay on your report for up to seven years from the initial date of delinquency.
This means any charge offs and the hefty credit score dips that accompany them will remain a thorn in the side of your attempts to get credit for the better part of a decade. Whats more, paying off the debt will not automatically remove the charge off from your account. Instead, it is designated a paid charge off, which has less impact on your report but still isnt looked on very favorably by future lenders.
When A Collection Agency Steps In
Charge-offs don’t end your obligation to repay the debt.
Even if your original creditor no longer owns the account, you’ll still owe the debt to the collection agency that acquired it. Charge-offs and other negative account history, such as late or missed payments, can stay on your for up to seven years.
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Will My Credit Score Increase If A Collection Account Is Removed
Your credit score may or may not improve when you pay off a debt thats in collections. Again, some newer scoring models take this into account, but older ones dont. You can monitor your score before and after paying your debt to see if it changes or improves. As mentioned above, payment history accounts for 35% of your FICO® Score, so your score might go up if a collection account is removed. But how much it increases will depend on other items listed on your credit report, such as credit utilization and payment history.
You Can Ask The Creditor Or Collection Agency For Deletion In Exchange For Payment
This strategy is tricky and often doesnt work. You can try to negotiate with a creditor to delete a charge-off from your credit reports early in exchange for payment. A creditor could ask the credit bureaus to delete the account early if it desires to do so. Credit reporting, after all, is a voluntary process.
The catch is that the credit bureaus dont like payment for deletion deals and might not honor them. The Credit Reporting Resource Guide instructs creditors and collection agencies not to make such arrangements with consumers. If a creditor or collection agency gets caught offering pay-for-delete settlements, a credit bureau might close that companys account. Then the company could no longer pull credit reports or report any credit information to the bureau.
If you do convince a creditor to accept payment in exchange for deletion, get the offer in writing before you hand over your payment information. In the event the account doesnt come off of your credit report after payment as promised, you might need to speak with an attorney or submit a complaint to the Consumer Financial Protection Bureau.
Payment for deletion is legal, but the credit bureaus tell creditors and collection agencies not to make such arrangements.
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Tips To Write A Charge
When youre writing a letter to the creditor, one of three things can happen:
- The charge-off status comes off your report
- The charge-off status is changed to paid or closed.
- The charge-off is changed to settled.
There are some tips to consider before you write your letter:
- Communicate directly with the original creditor. They are the only ones who can remove the charge-off.
- Be kind and respectful. Creditors are less likely to help someone who is combative.
- Explain why they should remove the charge-off, whether it be a mistake or you plan to pay an amount.
- Do not make excuses as to why you didnt pay the account in the first place.
- Be direct. The creditor may not have time to read a long letter.
- Get a return receipt to be notified when the creditor gets your letter.
- Have someone proofread the letter.
- Do not send original documents.
- Be clear about which charge-off you wish to remove.
If you are using the charge-off letter template, be sure the letter meets your unique needs. An original letter may have a better chance of being answered.
Negotiate With The Creditor
Negotiating with the creditor usually still involves paying some of the debt. In a pay for delete arrangement, you pay them to remove the charge-off, and the Fair Credit Reporting Act states that this is legal.
A paid charge-off eliminates your leverage, so arrange your pay for delete before making payment arrangements. If you dont have enough to pay back your debt entirely, offer partial payment and have the charge off removed.
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What If The Charge
Check your credit report to see if the details of the record are accurateif some of the information is wrong, you can dispute it. Incorrect information can include the dates related to the debts or missed payments, the total amount owed, the account number, the creditor name, the borrower name and more.
When you dispute inaccurate information with a credit bureau, they typically pass along the dispute to the company that initially reported the data. That company usually has about 30 days to prove the details or the dispute can be settled in your favor and the charge-off can be removed from your credit report.
You can file a dispute yourself, but many consumers choose to get professional help with the process. Credit repair companies like Lexington Law know what information to include in a dispute to increase its chances of being approved.
A charge-off can have enormous consequences for your credit for many years. If youre dealing with a charge-off, you need to act quickly to resolve it. The sooner you start discussions about settling the problem, the less impact it might have on your overall credit.
Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. by Lexington Law.
How To Determine If You Have Collections Or Charge
Before you can start doing, youll need to assess the damage and gather some information that will help you deal with it. To do that, youll need a copy of your credit reports.
Notice that word is pluralized. There are three major credit bureaus that maintain files on American consumers — Equifax, Experian, and TransUnion. While all three should theoretically contain the same information, in practice they are rarely exactly the same. In short, you need all three to do the best job of assessing your damage.
Fortunately, youre entitled to a completely free copy of your credit report from each bureau once per year, according to federal law. There are many free credit report websites out there, but these generally a.) dont give you all three reports, b.) are designed to sell you some sort of service, c.) will end up spamming you with emails if you sign up, or d.) all of the above.
The place to claim your truly free credit reports is at www.annualcreditreport.com. You have the option of requesting just one, or all three of your credit reports. For the purposes of damage control, its a good idea to request all three.
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How Many Points Will My Credit Score Go Up When A Derogatory Item Is Removed
The impact of an item deleted from your credit report depends on whether the item was negative, such as inquiries, late or missed payments, write-offs, collections, bankruptcies, settlements, liens, and foreclosures.
The impact of these deletions can range from a credit score increase of a few points to hundreds of points . Deleting a negative item is like removing weight from your score, allowing it to rise.
The impact on your score as a result of removing a negative item depends on the severity and the age of the item. Inquiries are not severe problems, so removing them will have, at best, a minimal impact on your score. Other items are more severe, so removing them could add dozens of points to your score.
The other factor is the items age. The impact of removal will always be greater if the item is relatively recent.
Even severely derogatory items begin to lose their bite after a couple of years. The impact of an item aging off your report will be muted because the negative effects have already eroded over time. Nonetheless, you should see your score rebound whenever a negative item is removed.
File A Dispute With The Credit Reporting Agency
Once you have your report, look through each account and see if there are creditors or accounts you dont recognize. Its also important to check whether older derogatory items are still being reported.
If you do find errors in your reports, dispute them directly with the reporting bureau through its website or by mail. This will prompt an investigation on the bureau’s part.
Bear in mind that you have to dispute the entry with each agency to make sure the removal is complete across the board.
How to file a dispute online
Each bureau Equifax, Experian and TransUnion has a section dedicated to walking consumers through the online dispute process. Once you create an account, you can file as many disputes as you need and check their status for free.
How to file a dispute letter
You can also send a dispute letter to the bureaus detailing any inaccuracies you’ve found in your credit file. When writing your letter, provide documentation that supports your claim and be precise about the information you are challenging. The Consumer Financial Protection Bureau recommends enclosing a copy of your report with the error circled or highlighted.
Depending on the information being disputed, these are some of the documents you can provide to help aid the investigation:
- Copies of checks
Include this dispute form with your letter.
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