Negotiate full debt amount or settlement?

by Ryan

Reader’s Question

Hi Ashley,
I have an unpaid account in collections. But the original creditor is also on my credit report. Which one should I negotiate with to pay and have it removed? Do I negotiate the full amount, or the settlement amount?

Response

Hi [name removed],
Try to stay away from collection agencies at all costs! They are liars and will say or do anything to get you to pay. If you can, negotiate with the original creditor –offer to pay them in FULL (if you can) if they agree to take the bad entry off of your credit report. Get everything in writing and never give out your bank account information. You can read what is likely to happen if you give your bank account number to a collection agency on this article regarding negotiating with creditors. Also, check out the free dispute / negotiation letter section of the site for free sample negotiation letters to get you started.

Hope this helps
Ashley

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Deal with original creditor or collection agency?

by Ryan

Reader’s Question

Dear Ashley,
I’ve have charge offs on my credit report that are about 3 years old, would it be better to try and fix them with he original creditor or the collection agency ?

Thanks (name removed)

Response

Are they paid? If not, are you looking to pay them? If they are not paid, do not deal with the collection agency! Contact the original creditor and negotiate payoff. There is no advantage to working with the collection agency. Unless the account was out right sold to the collection agency, it’s most likely that the original creditor is simply using the collection agency to collect the debt. Therefore, they will also still work with you directly.

Ashley

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Removing late payments from credit report

by Ryan

Reader’s Question

Dear Ashley,
I have 2 paid off installment accounts that have past due in late 2007. should i try to remove those 2 and how do i go about it? or should i leave them on the report.
Thanks for your time and help

Response

Hi [name removed]
Assuming these accounts have an overall good payment history, I would try to remove the late payments on both accounts by sending the original creditor a “goodwill” letter kindly asking them to remove the late payments. Goodwill letters are highly specific to your individual situation, but I suggest taking a look at my sample goodwill letter.

Also, read this article I wrote a few months back on the same subject.

Best,
Ashley

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The Quick and Dirty on Authorized Credit Card Users

by Ryan

I have been receiving a lot of emails from folks asking how authorizing another person (usually a friend or relative) on their credit card will affect both party’s credit score. Well, the news is that the folks over at Fair Isaac (they own the algorithm that generates your FICO score in case you don’t know), have decided to take authorized users out of the FICO calculation. I suppose there were a handful of people who were taking advantage of the system.

Basically authorizing another person on your credit card will have no affect on either person’s credit score, which was usually the reason people did it in the first place –in another words, by authorizing a person with bad credit, the payment history would show up on both credit reports while only the primary account holder would be responsible for the payment.

Authorizing someone on your credit card is risky!

I don’t care how much you trust this person, here is what you are doing by authorizing someone else on your credit card:

  1. You are solely responsible for every aspect of the account –including the payment!
  2. With the new FICO changes, the other person will see NO positive changes in regards to their FICO score
  3. If they charge up a huge balance on the credit card, it’s your responsibility to pay it off.

Sign up for a Joint Account instead!

While creditors may look more closely at a credit score when opening a joint account, setting up one of these accounts can be a much safer bet. Plus, both people will see the positive credit score gains!! And, since it’s a joint account, both people are responsible for the payment and both names are on the account.

Get a secured credit card otherwise

If you are unable to get a joint account with another person, I suggest (as I have suggested many times before) signing up for one of these secured credit cards that I have used myself and been very happy with.

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3 Ways to Get a Late Payment Removed From Your Credit Report

Late Payment

by Ryan

I messed up last month and accidentally forgot to pay one of my credit cards. It was reported on my credit and I saw a 30 point drop! Late payments can be a big deal, and they weigh significantly in your overall credit score calculation.

In my experience, as long as you don’t have several late payments on the same account, it’s really not that difficult to get them removed. Here are three methods you can use to get them removed.

The first thing you should do is make sure you have your facts straight by getting a copy of all 3 credit reports. I use CreditReport.com to stay up-to-date on any changes on my credit report.

1. Request a Goodwill Adjustment from the original creditor to remove the late payment

The idea is simple and it works incredible well. Many times creditors are happy to grant “goodwill adjustments” if your previous payment history is relatively good and you have established a good relationship with the creditor. This is probably the easiest and surest way to get a late payment removed from your credit report. The process involves writing the creditor a letter explaining your situation (why you were late) and asking that they “forgive” the late payment and adjust your credit report accordingly. The easiest way to write a goodwill / forgiveness letter is to use the sample letter I created as a template.

2. Negotiate removal by offering to sign up for automatic payments.

I have never actually tried this method myself, but from what I understand creditors frequently offer to remove late payment entries if you, in exchange, agree to sign up for automatic payments. I really like this idea because it works out well for both parties: the creditor can ensure future payments will be made on time, and you don’t have to ever worry about missing another payment. I would love to hear from those of you who have succeeded with this method!

3. Dispute the late payment as inaccurate

While I certainly do not advocate fraud (that is, claiming an entry is inaccurate when you know it’s not), if you find ANY inaccuracies on the late payment entry (dates, amounts, etc), you can dispute the late payment as inaccurate.

Sometimes creditors have a difficult time verifying the exact details of your account history. Therefore, if you dispute the late payment and they are unable (or simply don’t bother) to verify it, the negative entry will be removed.


Got collections to remove?

No problem! Don’t jump into credit repair without knowing the best way to handle collectors. Click the link below to learn how to get the upper hand when dealing with creditors.

Getting Started with Better Credit →

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6 Most Common Credit Myths

Mythbusters

by Ryan

One of the first things I quickly discovered when I began the process of fixing my credit was that many of things I had heard about credit were completely false. Here is a list of the most common myths about credit.

  1. Canceling credit cards will improve your credit score. False!

    This is untrue for the simple fact that one of the largest determining factors of your credit score is age. In another words, by closing credit card accounts, in most cases, you are shortening your average credit account age. Many times this is advised by credit counselors for people who cannot control their spending, however, this does not translate into a credit score improvement by closing accounts.

  2. Paying down installment debt will increase your credit score. False!

    Paying down installment loans such as student loans, personal loans, and mortgages will not improve your credit score. In short, FICO does not care about the amount of the loan –just that it’s being paid on time.

  3. I only have ONE credit score. False

    The fact of the matter is, in most cases, you have THREE credit scores. Yes, there are three major credit agencies and while FICO uses the same method to calculate your credit score between agencies, there are usually minute differences between each credit report you have with these three agencies that translate into three different scores. What does this mean? It means that your credit worthiness partly depends on which credit report happens to be pulled when you apply for credit.

  4. Once a negative entry is put on a credit report, there is absolutely NO way to get it removed until the required 7 years is up. False

    There are several methods that you can employ to remove negative entries from your credit report. In fact, I can say that the worst (credit wise) items on my credit report I got removed by sending off various letters. Try to negotiate with the free negotiation and dispute letters I offer to my readers.

  5. Holding a credit card balance is good for your credit. False

    Actually, it’s the opposite. While it’s good to have credit card activity, the best way to improve and maintain a good credit score is to keep either a very low balance or no balance at all.

  6. When multiple people apply for a home loan, ALL of their credit scores are taken into account. False

    If, for example, you and your spouse are applying for a home loan, the only credit score that matters is the person with the HIGHEST income. Note: This is general practice. Some lenders do take all borrowers into account.

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Guest Article: Discipline In Dealing With Credit Card Debt

by Ryan

Debbie Dragon is a freelance writer for Creditorweb.com, where she writes about credit cards, rewards programs and general personal finance.

Credit Card Debt can be a monster. Sort of like a giant tidal wave coming right at you. The closer it gets, the bigger it grows and when it hits you, total devastation. That tidal wave began as a small ripple somewhere out there in the vast ocean. Credit Card Debt followed the same path. It started out as one simple charge and then one day you have 4 Credit Cards and a mountain of Debt. Don’t feel all alone. Credit Card Debt around the world has grown into the billions of dollars. Too many consumers wake up one day and realize that Credit Cards are easy to use but very hard to pay off. So, what do you do now? There is no easy fix. It will take discipline and plenty of it.

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Remove Collection Account Without Hurting Your Credit Score

by Ryan

Reader’s Question

My Girlfriend just got a letter from a collection agency, with an account number and the amount of $150 dollars that is owed. She never recieved any mail or phone calls regarding this amount from the original creditor, and does not even know the date or original purchase. She believes the claim could be real, because she did cancel a few credit card accounts in the past..but does not know who it could be. Is there a way to pay that amount off without it going to the collection agency or hurting her perfect credit score?
Need help asap, so any advice will be appreciated. Thank You.
Jay

Response

Hi [name removed],
First you need to get your girlfriend’s current credit report and see if the account is being reported as a collection. It’s very possible that it is since she was contacted by a collection agency. Nonetheless, it’s very important to know if it’s on her credit report because it will dictate how the situation should be handled.

If it hasn’t been reported yet, you need to have her contact the collection agency right away via mail. Do not deal over the phone with these people. Write a letter that states you will pay off the collection in full if they agree in writing that the account will not be reported to the 3 credit reporting agencies. Also, in the letter make sure she doesn’t admit the account is hers. Send everything via certified mail.

If the account has already been reported to the credit agencies (more likely) then she needs to do two things.
First she needs to write a debt validation letter to the collection agency. These letters should be very simple. Simply ask that they verify the following information:

  • The name and address of the original creditor.
  • Detailed information showing how the “Balance Owed” has been calculated.
  • Proof that the statue of limitations as defined by the State of [your state] has not expired.

Now, this next step is very important and needs to be done right after the letter is sent (like the next day). Dispute the collection account with ALL 3 of the credit agencies. Dispute it as “no knowledge of this account”. Search for “dispute” on my blog to see my post on how to do this.

The reason why you want to dispute it right after you send that letter is because the Fair Debt Collection Practices Act forbids the collection agency from responding to any requests regarding the debt while you have requested that the debt be validated. Therefore, when the credit agencies contact the collection agency to verify the account that was deputed, by law, the collection agency can’t respond and the credit agencies will be forced to remove the account from your girlfriend’s credit report.

This technique works extremely well.
Good Luck
Ashley

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Want a Collection Entry Removed From Your Credit Report? Try Asking.

Asking

by Ryan

Simply asking a creditor to a remove bad credit entry is probably something not too many people think would render any positive results. You might be even more skeptical if the debt is paid. After all, you have already paid the debt, what reason do they have to dedicate their resources to removing a bad entry from your credit report? Well, they don’t have any reason, but that doesn’t mean it can’t be done.

When I finished college I forgot to turn in my dorm room key. A couple of week later I received a bill in the mail for $70. My response was something like, “Screw you, I have given your institution over 20 grand for a semi-lousy education –most of which I could have learned on my own.” Their response was something like, “Okay, we’re sending this to collections.” Now I don’t know how the debt got paid, because I never paid it (for I vowed never to do so). Perhaps in the chaos of wrapping up everything, my parents paid it?? I cannot be for certain, but still, it showed up as ‘paid’ on my credit report.

Forward 3 years

The entry still showed up as ‘paid collection’ on my credit report and was therefore hurting my credit score 50+ points. Here is how I got it removed: I kindly asked them to remove it out of goodwill using a little known method called ‘writing a goodwill letter’.

If memory serves me correctly, my letter went something like this:

Dear Sir/Madam,

Following college graduation, I accidently forgot to return my dorm room key. The university sent me a bill for $70 which I was unable to pay. I had very little money and was trying to get on my feet, and therefore the $70 dorm room key charge was sent to your collection agency. The collection has since been paid. I am now on my feet and attempting to purchase a home for my family, but am unable to receive decent mortgage rates due to having a collection on my credit report. I am kindly asking that perhaps out of goodwill, your agency would consider removing this collection from my credit report and thus helping me purchase a home.

Best regards,

Ashley Lynch

I didn’t expect this to work, but three weeks later the collection was completely removed from my credit report.

Many people have small paid collection entries on their credit report and probably don’t realize how much these little bastards are hurting their credit score. In all sincerity, you’d be surprised how well goodwill letters work. They work best on small collection accounts, and the key is to make them feel sorry for you.

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How College Students Are Taught Personal Finance by Credit Card Companies

by Ryan

If you have attending college in the past 10 years, it’s likely you keenly remember receiving about 20 pre-approval credit card offers your first semester. And gauging by the numerous emails I receive daily on the subject of credit card debt due to college, it’s likely you applied and received a few of those credit cards. In fact, it was the credit card debt I accumulated in college that served as a catalyst for my credit disaster.

College Student with Bad Credit

Credit card companies, like cigarette companies, are smart when it comes to luring in potential lifelong customers when they are young and vulnerable. They cleverly setup booths on college campuses, give out free stuff like t-shirts and book bags, and mail students letters aimed to create a subtle hint of pride within. The statements usually say something such as, “You’re in college now! It’s time to start building you’re credit history!” How kind of them to notice and look out for my future. It’s quite alluring.

Students are obviously a good target. They are likely far away from their caution-invoking parents, don’t have a full-time job, need money for food and beer, and may or may not be financially educated. I could name a dozen more logical reasons why students are good targets for credit card companies, but I want to put at least some restraint on your ability to write, “duh!” in this article’s comments.

Universities are banning credit card companies from marketing on campus

There are has been some progress to limit credit card companies ability to market directly to student on campus. An article over at Bankrate says that some 300 universities have banned it altogether. While this is mildly encouraging, it doesn’t address any real plausible solution –again, clever marketing folks will find an equally successful way to grab students.

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