My Credit Application Was Denied ... Why?

'Tis the season that a lot of people apply for store credit cards and other forms of credit.... and get denied.

Some have no clue why and simply feel their credit sucks and ponder on where to begin to fix it.  Or conversely, 'My credit is great what is wrong with THEM?'

The answer can be found in the reason codes.  In your denial letter they'll state which credit bureau they pulled your credit information from and the reasons why your credit application was denied.  

The reason listed first is the #1 reason why you were denied credit; followed by other factors that led to the denial as well.  According to FICO, this is to inform us of what we need to do in order to improve our credit over time.

Some common reasons could be: too many inquiries, not enough revolving accounts, serious delinquency and derogatory public record or collection filed, amount past due on accounts, too many accounts with balances, etc.

For example, credit score 500
Reason codes: 40 27 24

Your credit score is 500.  The numbers behind the credit score are:

40 Derogatory public record or collection filed
27 Too few accounts currently paid as agreed
24 No recent revolving balances

This is telling you the reason you are receiving this score is because #1 you have a derogatory public record or collection filed (affecting your score the most), #2 you have more accounts reporting negatively (late payments, etc) than you do reporting positively as Paid As Agreed/In Full; #3 you have no recent open-ended accounts (credit cards, lines of credit).

The reason codes basically explain the factors supporting your score; not why it's so low.  All credit scores have reason codes behind them - from 300-850; it simply lets us and the creditors know the reason why our score didn't get the most points available.  There are usually 3-4 reason codes behind your score that again, tell the lender why your credit information didn't get a higher score.  We as consumers don't automatically get this information, it is relayed to us by the creditor as an educational tool.

Both FICO and VANTAGE have reason codes.  Vantage has a pretty cool website called ReasonCode.org where you can enter your reason codes to find out why your score isn't better. FICOs are typically available with a Google search but I'll warn you there are over 100 depending on the model and credit bureau - they never make it easy do they? :)

Hope this helps!

10 Money Management Tips for College Students

The college years can be the best of times and the worst of times.  It's awesome to finally be on your own, making new friends, getting the education to embark in a career; and to party freely without the supervision of your parents J.  It can be the worst of times as you see your bank account getting smaller, having to manage your financial aid funds, your personal funds and your school work all at the same time.

So, how can you manage your money better as a college student?

ONE:  Whenever you notice you have more month than money it’s always best to track your spending.  Where is my money going?  The easiest and cheapest way is to take a notebook out and start listing everything you’re spending money on; and I mean everything. From every day necessities to small splurges that can often go unnoticed such as coffee, snacks and liquor/cigarettes.  If you have a bank account go ahead and pull past bank statements and see what you've been spending on outside of basic necessities; eating out? Cable? Internet? Expensive cell phone package?  Some budgeting templates can be found under my 'Credit Building' tab.

TWO:  Create a budget. Just as you have an outline of what you must do to graduate in your degree of choice, you also need an outline of how to manage the money that is coming in on a monthly basis.  It should include the total amount of money coming in from all sources – scholarship, part time job, parents, etc; as well as an ‘outline’ on what you should be spending it on.  Necessities come first of course; followed by ‘extras’.  The #1 rule of budgeting is to ensure you always have more income than expenses. So, if you notice those ‘extras’ that you've listed in Step #1, are cutting into your income; you have 2 options:

THREE:  Start cutting.  This is the perfect time in your life to learn how to separate ‘wants’ from ‘needs’.  No matter what stage you are in life, there will always be something you cannot afford; it’s best to learn that lesson now.  This is not to say you cannot have fun; by all means enjoy your college years!  But, do so by eliminating unnecessary expenses that hinder you from truly making this time of your life enjoyable; namely from being broke J.  The key is to save and then splurge. Cutting expenses doesn't always have to involve eliminating; for example: 

• Prior to buying books for the class, wait until you get the syllabus to see if you really need the book.
• Find someone that has just taken the class and do a book exchange. 
• If you’re purchasing your books; rent them instead. 
• Evaluate your meal plan; does it fit your needs or did you get a bigger plan than what you are actually consuming – meaning you’re wasting money each month. 
• Use that Student ID!  There are discounts for students everywhere you go – the movies, the bus, car insurance, health insurance, restaurants, airfare, train, etc  – you name it; make sure you ask before you spend.  Identify the places that will allow you to get more bang for your college buck. If they don’t discount; patronize a business that does. 
• Leave your car at home.  Campus life is all about walk ability; and public transportation is pretty rampant.  Why add on car insurance, gas and maintenance to an already strained budget; you’ll be able to get around just fine. 
• Take advantage of free college events.  Colleges and universities are known to hold a variety of free social events, some even come with free food! 

FOUR:  Earn more money.  This is an option if your schedule permits.  I’d think carefully about this one, as your ability to meet your educational requirements is way more important than ‘living large’.  If it’s necessary to take on a part time job just to meet basic needs, then please make sure it’s one that will accommodate your school schedule.  A campus position is a good place to start. And if you do find a position off campus, see if they offer tuition assistance as one of their benefits; every little bit helps!

FIVE:  Develop a Money Mindset.  This means that once you know what you make, how much your expenses are, you've cut some of your ‘extras’ and/or have taken on a part time job; your mindset should switch from spending ALL of your money left over after expenses, to starting to establish a savings, making sure all of your bills are paid on time.  If you don’t have a bank account, this is the perfect time to open one and actually learn how to balance your account.  Establishing a money mindset is all about being aware of your InCOME in comparison to your OutGO, and making the necessary changes to retain as much of your InCOME as possible.

SIX:  Use credit cards wisely.  Most suggest to avoid credit cards completely, but college is the perfect time to start building credit.  Remember, however, that your credit card is not there to support your lifestyle or extend your income.  Use it for emergencies only and only spend what you can pay back right away or at the very least in 3 months.  Make sure you select the right card; you want one that does not have an annual fee and a relatively low interest rate.  Going back to Step 5; before swiping your card your Money Mindset should kick in and ask:  “Is this truly an emergency?” “Would I go to a bank and borrow money to pay for this?” “How can I plan for this type of expense/emergency in the future?”  The best place to go to find a student loan credit card is www.bankrate.com.  If you’re turned down for an unsecured credit card; check out your bank’s secured credit card option, this is when you have to put down a security deposit that equals the amount of the credit you’ll be extended.  If you’re using a credit union, they’ll often approve you based on the amount you have in your savings account.  NEVER use the cash advance option with your credit cards. The interest rates are horrible and you may be charged an additional fee as well.

SEVEN:  Only borrow what you need.  Discuss your financial aid with your F.A. officer so that you’re aware of any scholarships or grants you may be eligible for.  Find out what type of aid you are receiving – free or those that have to be paid back – and what requirements are needed to keep receiving those free aid funds; find out what interest rates are tied the loan portion of your financial aid.  Find out how close you are to your aggregate loan limits to ensure you have enough money available to complete your degree, declining your ‘refund’ check so that those funds are available to you in the future.  Do everything possible to learn your loan obligations.

EIGHT:  Now that you have everything mapped out, the next step is to automate it.  There are some great apps that allow you to stay within your budget, track your spending, and alert you when your bank accounts are nearing a $0 balance;

• My favorite one happens to be YNAB (You Need A Budget). It works on both your desktop and your mobile device, which can be synced together and is super easy to use.  They offer live classes on everything from creating and sticking to a budget, how to properly use your credit cards, and more! (Note: it’s not free at $60 for the desktop software). 
• My next favorite is Mint.com/Mint Bills; it’s free!  One of my favorite features on Mint.com is Cash vs Credit. It lets you compare your credit card balances to the amount of cash you have to pay them off; how cool is that?! Mint Bills is a payment and bill tracker app that alerts you when bills are due, when they have been paid and if they are past due. It allows you to make payments via the app as well; used together with Mint.com they’re a powerhouse. 
• For assistance with finding the cheapest textbooks around, check out TextbookMe.  It allows you to search for your textbooks at various retailers to find the cheapest price out there. So, if book swapping or book renting is not an option this definitely comes in handy. 
• For assistance in paying off your student loans I have two options:  Debt Payoff Planner (Android) or Tuition.io.  Debt Payoff Planner is for any type of debt and assists in helping to find the best method to pay off your debts; providing the dates the debt will be paid off based on your monthly payment amounts.  Tuition.io is specifically for organizing your student loan debt.  It allows you to view all of your loans – both federal and private – in one place; view your balance and payment history, determine alternative repayment options that may be available to you and providing the pros and cons of each.

NINE:  Monitor for continued success!  Very rarely do our income and expenses remain the same month after month; year after year, especially on a college budget. Monitor your budget often, especially when unexpected money is received or unexpected expenses arise to make sure your dollars are working in your behalf.

TEN:  Ask for help!  There are tons of free resources available from your parents, the financial aid administrator, your resident adviser, your local member of the National Association of Credit Counselors (nacc.org) If you find yourself in financial duress, reach out and speak with someone.

Hope this helps!  If you have any specific questions on budgeting during your college years; feel free to contact me.

4 Alternatives to Debt Consolidation

HAPPY FRIDAY!

It is a beautiful afternoon here in Chicago, we've gotten our first sticking snow (sticks to the ground) today and it is cold!

I was asked about how to consolidate loan/credit card debt on your own this morning, so here you go!

Debt Consolidation is when you get a new loan (or line of credit) to pay off your credit card(s) or some other debt. The benefit is that you have one debt to pay each month and it's usually at a better interest rate. There's also a benefit credit-wise. If you have used more than 50% of your credit limit, your credit score is taking a major hit. By switching the type of credit from a 'revolving' line of credit to an 'installment' credit, you are getting your debt utilization back, which is 30% of your credit score.

Here are some ways to consolidate debt on your own:

1. Obtain a new card and transfer the balance. Example:

A client of mine had a 643 credit score. Two of her cards were almost maxed out and the interest rates on them are 16.99 and 24.99. She spoke to her current credit card provider to see if she qualified for another card and they gave her 2 options - one of which was a 12.99% credit card with 0% interest until 2015, 0% on balance transfers until the end of 2015 and the credit limit was higher. She was able to transfer the balance of the 24.99% card over to the new card, saving money, interest and her credit rating. The other card? She decided to just put more money towards it each month so that she can quickly pay it off.

2. Another Option is a personal loan or Home Equity Line of Credit (HELOC).

Obviously the HELOC only applies if you own real estate. I'm not a fan of using the equity in your home to do anything other than make other investments that will bring in a better rate of return. 

Some of my clients have had success with personal loans via their personal bank or credit union and I am a fan of this, especially with credit unions. Honestly this is the longest option because the process from application to funding can be in excess of 30 days. However, the attractive interest rates and the opportunity to strengthen the relationship with your bank makes it a strong option.

3. Peer to Peer lending. This is the 2nd quickest and a very viable choice if obtaining a new credit card is not an option. Again, I'll provide an example:

My client has 3 credit cards at interest rates of 13.99, 24.99 and 22.99. She got a peer to peer loan from Prosper and was able to get a $10,000 loan to pay off all of her credit cards at a 13.75% interest rate. See the benefit? One loan. One monthly payment. Lower interest rate. Other peer too peer companies include Springleaf and LendingClub. Another plus is that the application to funding process can be less than 10 days.

4. A more labor intensive but FREE option is to create your own DIY Debt Pay Off Plan. The other options above require credit approval and have merely allowed you to move your debt from one place to another in order to pay lower money on interest rates and to create an ease of monthly payment. But, the debt itself is still there. At the end of the day, if you are still in debt and you still owe the debt whether you use a HELOC, a peer to peer loan or a balance transfer. So, let's discuss actually paying it off.

~First you'd need to list all of your creditors along with their interest rates, balance, minimum amount due.
~Next negotiate with your creditors on lowering the interest rates, which will save you money over all. I would like to tell you that all of them will lower your rate but that would be completely misleading. Depending on your payment history, the longevity of your relationship as well as other factors, you're looking at a 20-60% chance of getting your rates lowered. 

~Now you need to create a Pay Off Plan. If paying more than the minimum monthly payment seems daunting, you need to stop here, create a budget and find some things to cut in order to put more money towards your debt (switch cable for Netflix, HULU or some other company, downgrade cell phone package, increase your insurance deductible, etc). 

~Next decide which method of payment you'll use. Some advise starting with your higher interest rate debt first and working your way down to the lowest one. Others advise starting with the lower debt first and working your way up to the debts with a higher balance. Honestly it's up to you. I've noticed that the higher interest rate cards typically have the lowest balance anyway; but do what is going to keep you motivated. For me, it's seeing something eventually get paid off and crossing it off of my account list; thus I went with starting with the lowest balanced cards first. The key to either strategy is making sure you use the funds from the paid off card to add to the next card on the list. For example, let's say you have 3 credit cards:

Visa $3000, 13%, $25 minimum monthly payment required, the amount you budgeted to pay per month is $125
Visa $5000, 10%, $50 minimum monthly payment, the amount you budgeted to pay per month is $50
Master Card $8000, 7%, $75 minimum monthly payment, the amount you budgeted to pay per month is $75

Once you pay off the $3000 Visa you put that entire $125 payment amount towards the $5000 Visa, increasing your minimum payment you make to $175. Get it?! So, whether you start with the lowest balance or the highest interest rate, 'snowball' the payments to get out of debt faster.

I have both a budget template and a dept pay off template listed here. If you'd like a customized debt elimination plan that will allow you to factor in all of your debts - car, home, credit cards, etc - contact me about our DebtZero program.

Here's to being Debt Free!!!

Where Should I Pull My Credit Report From?

People ask me this all the time. I can honestly say the most accurate ones come directly from the three (3) credit bureaus. Another option is the one that the credit bureaus support in which you get 1 free one a year: www.annualcreditreport.com.

If you want a score, the most accurate scores will be the FICO score at www.myfico.com (no it's not free).

Any other score is either a Vantage score (another scoring company started by the 3 major credit bureaus) or a consumer educational score.

Then there are the 'others'.

Since the Equifax report on Annual Credit Report is always 40+ pages (waaaay too long) I always recommend getting an Equifax report at www.quizzle.com instead - its FREE!

There are other free sites such as CreditKarma.com, which offers great tools and provides you with your Transunion and Equifax reports with Vantage Scores but honestly, the data is not always accurate.

Next are the credit monitoring websites that offer a free report(s) and a version of a credit score (there are several). It's either free or $1 for a limited time (7 days to 30 days) and then you have to cancel or be charged anywhere from $12.95 - 29.95/mth.

The ones I've had the most success with are:

1. Credit Score Pro:  They offer all 3 credit reports for $1 and the monitoring service is free for 7 days.

2. Credit Check Total:  Same info as above and the same score, - PLUS score created by Experian - the advantage of this one is that if you call and cancel before the 7 day limit they'll reduce the monthly fee as low as $12.95. They offer all 3 credit reports for $1 and the monitoring service is free for 7 days.

3. Identity Guard:  Free for 30 days, reports are ok but not as good as credit score pro and credit check total

4. Privacy Guard:  Similar to Identity Guard, I actually like their reports little a better BUT it's not free for 30 days. Their offer is $1 for 14 days.

5. My IQ Report:  I like the easy to read reports given, data is average they don't have a free or $1 for limited time offer, it's just $16.95 per month.

Hope this helps!

It's The Most Wonderful Time of The Year... For Credit Repair!

Holidays are such a pleasant time: extra days off, time well spent with family and friends, and great food!

Being that we take off so much time from our jobs, companies find the holiday season challenging as far as ensuring coverage for work duties.

The same can be said of creditors, debt collectors, courthouses and credit bureaus.  Therefore:

THE HOLIDAY SEASON IS A GREAT TIME FOR CREDIT REPAIR!!!

Many wait until after the holidays, but this is a big no-no.  The big 3 credit reporting agencies - Experian, Equifax & Transunion - will be working hard to meet work demands and to meet deadlines, particularly the 30 day deadlines associated with credit report disputes.  By starting your dispute now, you'll have an advantage as credit bureaus will be understaffed and focused more so on holiday activities.  

Another reason the holiday season is such a great time to start repairing your credit is thanks to the credit card companies.  Have you reviewed your junk mail lately?  I guarantee you've seen an increase in credit card offers as many are providing holiday specials with eased credit guidelines.  This means increased credit applications that require more credit checks.  To add, credit card companies, creditors, debt collectors and specialty consumer reporting companies are understaffed as well so that chances of them responding in a timely fashion is reduced is greatly reduced.  

This is why more deletions occur from credit reports this time of year than any other time.  So, from the end of November until the 2nd of January, dispute away!  Take advantage of the fact that credit bureaus have issues with productivity due to their staffing being cut as much as 40%. This is the ONLY time I would advise sending in a dispute letter for EACH item that you want removed.

If you need assistance, please do not hesitate to contact me!

10 Steps To Rebuilding Your Credit After A Chapter 7 Bankruptcy

Life after a Chapter 7 bankruptcy is not as daunting as many would have you think. In fact, most of the negative information out there is spewed by the credit card companies that loose out when you file for bankruptcy protection.

The truth is, life after bankruptcy (BK) can be a rewarding experience. Think about it, you have been given a fresh start - free from debt - to start over. The most important thing to remember is ' Don't screw it up!' Have a strategy in place and commit to to it. It will take time but it's not impossible.

In fact, there are several lenders that specialize in post-bankruptcy lending, the interest rates, fees, and terms may not be the greatest, but considering you won't be able to file for bankruptcy again for another 8 years, you're worth the risk in their eyes. Now it is true that a bankruptcy can stay on your credit for 10 years. However, your credit re-building process should begin immediately after discharge. For example, it typically takes 90 days to be discharged from a Chapter 7 BK, you can and should start rebuilding on day 91.

Here are the 10 Steps To Rebuild Your Credit After Bankruptcy!

First, take a moment and reflect on how you got here in the first place - namely why you had to file bankruptcy. Could you have saved more? Spent less? Planned for emergencies better? What did you learn? Self reflection is key so that you do not end up here again. I do know 'things happen' such as illnesses, job loss, etc but often times I meet with clients who just really over extended themselves and lived above their means. Even if it was a tragic event that led to the bankruptcy; taking a moment to learn from this experience is very significant. In my personal situation, I knew that I needed to invest in better health insurance, have a larger emergency fund, and rely on cash a heck of a lot more than credit.

Second, create a budget. This is so important! Now, more than ever, you need to get serious about having and sticking to a budget. This is your personal spending plan that tells your money where to go and how to work for you each and every pay period. This means making an effort to live below your means, not at your means. It is also good at preventing frivolous spending and determining ways to keep more money in your pockets/ bank account. If you have pinpointed your 'learning lesson' from step one it should be implemented here, in step two. Thus, your budget should include money set aside for your Emergency Fund/Savings Account that is funded prior to paying any other bills. This is the 'Paying Yourself First' practice. Being dedicated to paying yourself first and having a fully funded Emergency Fund for emergencies only will ensure that when 'life happens' you'll be better prepared financially. How much should you set aside? Well, how much can you afford? I typically suggest starting with 10% of your monthly net income or $200, whichever is more feasible, and increasing it from there.

Third, Pay ALL of your current bills on time. I cannot stress this enough. The worst thing you can do is to file bankruptcy and have a past due utility bill or cell phone collection pop up on your credit report months or even a year afterwards! Haven't you learned your lesson? This is what future creditors and your credit score will say when your report is further damaged by the reporting of negative information; in fact your score will be penalized twice as bad by the credit reporting scoring system.

If you have done a good job with number two - creating a budget- you should have no problem paying your bills on time - if not early. Probably the easiest way to pay anything on time is to set up automatic payments around your pay day. You set it once, and monitor it from there.

Now it's time to build! 

The fourth step is to check your credit report. You want to ensure your bankruptcy is reporting accurately - courthouse information, amount, the type of bankruptcy filed, etc. And if you find an error, legally you can dispute for a deletion.

You also want to check the other accounts that were discharged in your bankruptcy. They should state they were discharged in Ch7 bankruptcy, the amount should be $0 owed/due and the all collection activities should stop, which includes any updates on your report about the debt. If you see any errors, dispute for deletion.

Fifth; re-enter the world of credit. Namely, apply for a credit card. You may be a little apprehensive, but if you plan on purchasing a home, opening a business, and rebuilding a positive credit profile, this is a MUST! How the credit scoring model works, any positive information that you have posting on your credit report will outweigh the negative information reported in the past. Therefore you have to put some positive information on there to boost your scores and strengthen your credit profile.

Where should you begin? Well, they may start to solicit you first. Review all offers carefully, interest rate, repayment terms, fees - all fees because with one particular card (First Premier) there are several so you want to be prepared. Don't accept just anything! If you have not gotten any offers try your personal bank or your local credit union. If all else fails seek out popular, secured sub-prime credit card providers: Credit One, Capital One to name a couple. You can try obtaining an unsecured credit card but immediately following a bankruptcy I doubt if you'll be approved. Further, the inquiry and rejection will further damage your report. Make sure you select a secured card that reports to All 3 Credit Bureaus - after all, you are rebuilding right? Reporting to only one or no bureaus at all is not going to help you in any way. You want all of that new positive credit information reporting into your score. I've explained secured credit cards in detail here. If are rejected for a secured credit card, then you can view the link I have posted under the 'Credit Building' tab for no credit check secured cards that report to all 3 credit bureaus.

Sixth, use your card wisely. Spend less than 20% of your credit limit, 30% maximum. That means if you have a $300 credit limit, do not spend more than $90; for $500 do not spend more than $150; $1000 credit limit do not spend more than $300; get the picture? Low balances, good payment history, more available credit than utilized (spent) credit is key. I don't advise keeping a balance because of the high interest rates, but I have seen that some companies - Capital One in particular - will give you an increase faster by keeping a balance for 2-3 months. If you do this, please pay on time, keep it under 30% of the credit limit, pay it off no later than 3 months and include it in your monthly budget.

And, don't create an additional bill for yourself. What do I mean by this? The easiest way to factor credit cards into your monthly budget is to set up automatic payments for a utility, cell phone or some other monthly bill that's already in your written monthly budget; charge it and just pay it off right away the following month. This way you are not creating an additional bill and the expense is already included in your budget, you've just changed your method of payment from auto-debited withdrawals from your bank account to automatic credit card payments.

Seventh, increase that limit. Most people start off with a $300-500 credit limit, which doesn't do too much for building your score, so you want to get it to $1000+ as soon as possible. If purchasing a home is on your short term list you want it over $2000. Why is this important? The lower the credit card limit the less it will count towards increasing your score. If you're with a good secured credit card company, this means increasing the amount of your security deposit. If you're with a less than stellar secured credit card company that still reports to all 3 credit bureaus but doesn't offer incentives such as switching to an unsecured credit product in 6-12 months; then you may want to use the less than stellar secured card for 6 months, and then re-apply for another card with a more reputable company. By then you may be eligible for one of Capital One's or Credit One's unsecured products.

Eighth, get more than one card. Two to three should suffice. Using the above example, let's say you got a $500 secured card, paid it well for 6 months and applied for an unsecured card and was approved for $500. DO NOT CANCEL THE SECURED CARD. Increase the deposit to $1000, if you can, but do not increase your spending. The increase of available credit will eventually factor into your credit score and give you a nice little boost. After all, 30% of your credit is based on your debt utilization and 35% is based on your payment history. By increasing your credit limit, adding on additional credit card that you will use just as wisely, keeping your balances super low, and paying on time; you are well on your way to good credit again! With six more months of positive payments on both of your cards you can ask for a credit limit increase with the unsecured credit card and apply for one more at that time as well. You're 12 months in at this point and should have substantially better credit than when you started this journey.

To experience an even bigger jump, see if you can have a close friend/family member add you on as an authorized user to their credit card account. This account should have stellar payment history and super low balances and be 3 years or older in age. By becoming an authorized user, all of that good payment history will be placed on your credit report boosting your score even more!

Ninth, mix up that credit. This basically means adding an installment loan. This is usually feasible at month 6, 9, 12 and/or 18 depending on your situation. This is easier to obtain when you are an active member of a credit union; if you're not, another option would be through a company such as Springleaf or Prosper. People with federal student loans that they are paying on a regular monthly basis won't have to do this right away, but those that only have the credit cards they've recently acquired on their credit report will. This can be in the form of a personal loan/line of credit or a car loan. Your interest rate will be less than stellar but make sure the loan is affordable and can be paid off relatively easy. Namely, don't put a strain on your budget. When I got my first personal loan I didn't even spend it. I put it in my checking account with my credit union (who I got the loan through) with a few hundred dollars extra for interest and set up auto-payments for 3 months. I did this 3 times; paying the loan off in 3-6 months, until I saw a nice little jump in my score. I never did get a car note after my BK because living below my means with as little debt as possible was my 'lesson learned' from the whole experience. If you need a car after a BK, check out this article on Edmond's.

The tenth and final step is to monitor your progress and pinpoint areas of improvement.  I personally signed up with a credit monitoring service that monitors all 3 bureaus, however, signing up with a free service, such as CreditKarma.com is fine.  It only monitors Transunion and the credit score is far from accurate but the data is usually okay - not great, but okay.  Your main objective is to see how you're doing; is your score moving up or down? Is your credit utilization rate okay? Could you do more to boost your score and strengthen your overall credit profile?  

Monitor your budget on a bi-weekly or monthly basis. Could you be saving more? Are there ways to cut some more spending from your budget? Do you need to find a way to bring in more income to cover your necessities (food, shelter, transportation, etc)?  Make changes/improvements based on your assessment.

Following these 10 steps consistently should put you well on your way to an excellent credit score! If you need assistance rebuilding and managing your credit more efficiently; feel free to contact me!

Residential and Tenant Consumer Reports - Specialty Reports Series

When thinking of the term 'consumer reports' rarely do people associate it with landlords or tenants; but any type of report used to screen tenants are in fact consumer reports regulated by the terms laid out in the Fair Credit Reporting Act (FCRA).

The definition of "consumer report" according to 15 USC Sec. 1681(a)(d) is: "... any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for (A) credit or insurance to be used primarily for personal, family, or household purposes...." 

Landlords often have a rental application that asks potential renters to give personal, employment, credit and previous landlord references on their rental applications. Whether verifying such items is covered by the FCRA depends on who does the verification. A reference verified by the landlord's employee is not covered by the Act; a reference verified by a Consumer Reporting Agency hired by the landlord to do the verification is covered. If a landlord pulls credit from any credit reporting agency, they are automatically held to the restrictions of the FCRA.

Below is a list of Specialty Reporting Companies that focus on the Residential/Tenant industry.  The list also includes information on how to obtain a copy of your report with them, if applicable.  Most consumer reporting companies are required to give you a free copy of your report if an 'adverse action' was taken against you - namely you were denied something because of what they found in your report; in this case it would be an apartment rental.

Further, under the Fair Credit Reporting Act, some consumer reporting companies must provide you with a free copy of your report every 12 months; if the report is not free, all consumer reporting companies must give you a copy of your report for a nominal fee (the current maximum is $11.50).

Again, not every consumer reporting company will have information on you. 
If, upon review of your consumer report, you believe there is information that is not reporting 100% accurately, you can exercise your right under the Fair Credit Reporting Act to dispute that information with the reporting agency directly and the company providing the derogatory information. 

LexisNexis Screening Solutions Resident History Report contains information related to your tenant history as well as other information regarding your background. Call toll-free (877) 448-5732 or visithttps://personalreports.lexisnexis.com/index.jsp to obtain a copy of your report.

Experian RentBureau receives rental payment data from its national network of property management companies. This data is accessed by resident screening companies for use during the application process for prospective residents. Consumers may order their Rental History Report by using the form athttp://www.experian.com/assets/rentbureau/brochures/request_form.pdf or by calling (877) 704-4519.

CoreLogic Safe Rent may have criminal and/or landlord-tenant records as well as rental performance history. Consumers may obtain a copy of their consumer file by calling (800) 815-8664.

Tenant Data Services provides the rental industry with a variety of reports including rental performance history, bad check reports, and criminal history reports. Consumers may order their free report by completing the form athttp://www.tenantdata.com/downloads/AuthorizationforFileDisclos_new.pdf or by calling (800) 228-1837.

Contemporary Information Corp. (CIC) provides property management software that provides landlords with the ability to screen applicants and apply their information to easy to use leasing forms. Consumers may order their free report by filling out the online form at http://www.cicreports.com/consumer-disputes/ or by calling (800) 288-4757 and selecting Option 5.
First Advantage Resident History Report conducts background screening services. The company will provide one free report every 12 months by visiting www.fadv.com or by calling (800) 321-4473.

Leasing Desk (Real Page) provides data for tenant screening. The company will provide one free report every 12 months by visiting www.realpage.com or by calling (877) 325-7243

Hope this helps!  If you know you'll be in the rental market soon, it is a good idea to see what your report looks like ahead of time.

What Happens When A Co-Signer Files Bankruptcy?

A co-signer is someone who agrees to repay a loan in the event the primary borrower fails to make payments on the loans. In a lot of cases, a co-signer is needed in order to obtain the loan in the first place this can be due to the primary borrowers insufficient credit history, or poor credit rating.

Most people know that if the primary borrower files for bankruptcy, the co-signer will be solely responsible to pay back the loan, but what happens when the co-signer - the seemingly 'stable one' - files for a bankruptcy(BK)? Will the primary borrower's credit be affected?

Answer:

The primary borrower's credit won't be affected. Credit reports are tied to an individual, so what your husband, co-signer or joint account holder has done to their credit has no bearing on your credit.

I will say that I have see some lenders report the bankruptcy for the entire tradeline. The reason being, the co-signer is the person who agreed to pay your debt if you defaulted (think joint account). So, both parties are responsible for debt so to speak. If the cosigner filed for a BK the lender sometimes reports the tradeline as if both of you filed. That is inaccurate, the BK won't be in the public records under your name of course, but the way the lender reports the tradeline on your credit will state the BK. You can dispute it for updating, especially if it's current. If it's not current dispute it for deletion since it's reporting inaccurately; you'll still be responsible for paying the debt, however.

If you dispute for updating it should read: "Bankruptcy Joint Debtor" this lets everyone know the co-signer filed and not you. However, you are still responsible for the debt as far as paying it off.

Now, if it is a car or house... things may change based on the terms of the loan and state laws, so I'm hoping you're current on payments if this is the case. I know with mortgages filing for a bankruptcy by a co-signer is considered a default of one of the borrower's mortgage covenants. This can viewed on the mortgage documents under the subheading Covenants/Defaults.

As far as auto loans, again look at your contract/finance agreement. Most finance documents I've seen lists the BK of a co-signer as a breach of contract; or a default. I would suggest refinancing, if you qualify, to pay off the original loan that was co-signed for, so as to avoid any negative repercussions that a lender can enact for the default of the original terms of the finance agreement.

Consult with a BK attorney and Google your state's BK laws to see what debts can and can't be discharged there and possible legal options your lender can take. It doesn't hurt to make them aware early on to protect yourself.


Hope this helps!!!

List of the 10 Best Credit Unions Anyone Can Join

Credit Unions are the #best! I love mines and I always suggest my clients sign up for an account with one as well. A) they provide credit building loans that are phenomenal when rebuilding your credit, B) the rates on auto and home loans are #GREAT!

I've had a few people tell me their not eligible to join a credit union or were denied, so here are a list of credit unions anyone can join as long as they meet a few simple requirements from Go Banking Rates

ENJOY!

1. CommunityWide Credit Union

While CommunityWide Credit Union supports Select Employer Groups (SEGs), in addition to close relatives of those who work with eligible companies, it keeps its field of membership relatively open by allowing people to join by making a small donation to one of the institution’s partner charities. A contribution to either the Michiana Goodwill Boosters or Marine Corps League is all it takes to join the ranks of the credit union’s 39,000 members.

2. GTE Financial Credit Union

Another open-charter credit union that serves specific businesses, employees’ families and select organizations is GTE Financial Credit Union. Gaining access to the institution’s impressive financial products is made simple with a $10 fee requirement to join CUSavers, a nonprofit financial education club. This is a one-time charge that opens the doors to great savings rates and a more personal banking experience.

3. Self-Help Credit Union

Self-Help Credit Union’s branches are centralized in North Carolina, but that doesn’t mean its membership is restricted to those within the state’s borders. In fact, depositors can activate their memberships by donating to the credit union’s founding charitable organization — the Center for Community Self-Help — with a one-time minimum $20 donation. To make things financially feasible for low-income individuals, the minimum donation requirement is adjusted to $5.

4. NuVision Federal Credit Union

It’s possible to find a credit union that anyone can join that also cares about members’ personal goals. NuVision Federal Credit Union is just one financial institution that offers its services to those who pledge themselves to the credit union’s cause. Those who are interested in joining NuVision, but who do not meet traditional eligibility qualifications, like its regional Arizona-resident requirement, can join the credit union’s sponsored educational group called the American Consumer Council.The institution adheres to the “once a member, always a member” policy, which means that regardless of members’ future status with the American Consumer Council, he always has a place with NuVision Federal Credit Union.

5. America’s Credit Union

A few of the best credit unions anyone can join directly support a greater national effort. One such credit union is America’s Credit Union, with an open criteria for membership that encourages citizens to support the Association of the United States Army (AUSA). By joining the AUSA organization with a membership fee as low as $14, members receive the benefits of America’s Credit Union products.

6. State Department Federal Credit Union

Members of the State Department Federal Credit Union include those who have an affiliation with the institution’s expansive employer and organization group, along with their immediate family members. However, those who otherwise would not qualify for membership can still take advantage of the credit union’s benefits by joining the American Consumer Council. With such an easy way to become a member, there’s no reason to not enroll into the credit union and join the more than 67,000 Americans who already have.

7. Alliant Credit Union

Another common misconception about credit unions is that they offer limited services. Alliant Credit Union is breaking through this falsehood by offering a full array of products and services to meet anyone’s needs. And it’s clear the institution supports everyone, seeing as just a $10 donation to Foster Care to Success, a nonprofit organization which supports those aging out of the foster care system, is depositors’ ticket into Alliant Credit Union membership. Just one contribution leads to a lifetime membership with the credit union, which is currently over 270,000 nationwide.

8. Pentagon Federal Credit Union

Pentagon Federal Credit Union might sound like a top-secret club, but this assumption is far from the truth. PenFed’s low loan rates and great credit card rewards are just a few of the perks members can enjoy. While the institution was designed to help those within the United States military and uniformed services, the credit union also opens its membership to individuals who join the National Military Family Association with a one-time $20 contribution, or the Voices for America’s Troops organization with a $15 membership fee.

Presently, the Pentagon Federal Credit Union is one of the many credit unions anyone can join that has grown its membership to astronomical figures. The credit union’s membership count is 

approximately 1.18 million nationwide, which translates to greater resources for its members.

9. NASA Federal Credit Union

Like other local credit unions listed above, NASA Federal Credit Union permits the public to join its organization just for joining its sponsor, the American Consumer Council, with a $5 one-time membership fee. While the institution first offered its services exclusively to employees of NASA and their immediate relatives, it now extends its benefits to over 80,000 shareholders and counting.

10. Consumers Credit Union

Illinois-based Consumers Credit Union achieves the broader credit union objective of helping people who need it most. Its membership requirements are basic, demanding that applicants simply contribute a one-time $5 contribution to its sponsor, the Consumers Cooperative Association, in addition to depositing an opening amount of $5 into a share savings account.

Hope this helps! And if you're in the process of restoring and building your credit and would like some assistance, give us a call! We'd love to partner with you.

How An Individual Development Accounts (IDA) Can Help You Purchase A Home or Expand Your Business!

I had never heard of this account until last January and I was immediately intrigued as a Realtor and even more intrigued as a professional in the credit management field - after all we stress budgeting and saving all the time!

So, what is an IDA?  An Individual Development Account is a special matched savings account that helps families and individuals with limited financial resources to establish a pattern of saving, building assets, furthering their education or job training, or to start/expand a small business.  

When you save in an IDA your money is matched with donations dollar for dollar (or more).  You will also be enrolled in financial education classes covering topics in budgeting, saving, banking and more.  The idea is to encourage others to invest in assets.  Your take-home pay will cover food, clothing, bills and other necessities, your saving dollars that are matched are used to help you purchase a home, invest in a business, or seek higher education.

Matched dollars are provided by the government, private companies, churches and local charities.  

How do they work?

You contact an IDA program sponsor to enroll.  The sponsor will provide you with all of the financial education classes, one-on-one counseling and training.  You will open up an account with a partnering bank or credit union that will handle all transactions to and from IDA.  Each month, IDA participants will receive a statement tallying their personal savings, matched savings, and interest accrued!  Most IDA programs that I've heard of are 2 years.  There are some that provide accounts as short as 6 months and as long as 5 years.

This is phenomenal for students seeking help for room, board, tuition and/or books; individuals and families in need of assistance in saving for a down payment or closing costs; and aspiring business owners.  

Program sponsors provide additional training based on participant's goals. For example, those seeking to start a business are taught the necessary skills to be successful in starting and growing their business.  Those that are seeking to purchase a home are provided home ownership tips and guidelines. 

It's important to note that each program sponsor's requirements and offerings are different.  Some will allow you to use your matched funds for other goals such as housing repairs, a car, and retirement; others only focus on one goal such as Housing IDAs or Small Business IDAs.  

The key is to ask questions, review all paperwork and requirements and ask about fees.  Yes, not all IDA accounts are free.  All costs are put towards participant benefits though - classes, one on one counseling sessions with an expert (i.e. assistance with building your business plan).

So, how do you know if an IDA is for you?  Investigate!  I will say that if you are paying off a lot of loans or have a lot of credit card debt, this may not be for you right now.  Some have been denied participation due to their credit history. Take care of that first.  When your savings goal has been reached, you want to be able to jump on it right away.  

To find an IDA program nearest you visit www.idanetwork.org. There is a directory on there that lists program sponsors by state. Simply contact them to find out their particular program and how you can apply.  The Federal Office of Community Services also has a directory of about 200 companies across the country that have IDA programs; you can view them at www.acf.hhs.gov/programs/ocs/afi/states.html.

And if credit is holding you back from participating in this program; please feel free to reach out to me, I'd love to help!

~ Netiva

Insurance Consumer Reports - Specialty Reports Series

The Fair Credit Reporting Act protects more than just consumer credit rights; but rather reports about our overall financial health. Reports that detail information on consumers for purposes other than credit are called Nationwide Specialty Consumer Reporting Agencies. These companies are industry specific and compile information geared toward certain industries. Their reports may be pulled by employers, insurance companies, banks, and landlords/property management companies. This post will focus on companies geared toward the insurance industry. And just as you're able to obtain a free credit reports from the three major Credit Reporting Agencies once a year; you can obtain a free report from these companies every 12 months as well.

MIB Group Inc. (formerly The Medical Information Bureau) is a nationwide specialty consumer reporting agency that collects and stores information about consumers regarding their individual life, health, long-term care, and disability insurance. Typically, if you have an MIB file, you should have applied for one of the insurance types mentioned within the last 7 years as an individual, not as a member of a group (think employer).

Therefore, if you have not applied for insurance as an individual, you should not have a report with MIB. The information in the report mirrors the information you would have inputted on the insurance application. It will also have information from your healthcare provider that lists medical conditions you may have. This report is used by insurance companies. Now, the law states that an insurance company cannot deny coverage or increase premiums to an applicant with pre-existing conditions, but having this report available definitely makes it difficult to abide by that law; namely the Affordable Care Act. Insurance companies state they use this report to see if applicants would be eligible for other types of insurance products they market. To see if you have an MIB report you can contact them directly; (866) 692-6901); you can also view their website: http://www.mib.com/request_your_record.html.

Prescription Drug History Reports are another form of nationwide specialty consumer reports used by the insurance industry to see the history of what kind of prescription drugs were purchased by consumers. The two companies that compile and store these records are IntelliScript and MedPoint. Prescription drug reports are kept for 5 years and details the drugs purchased, the dosage prescribed as well as refills given.

Armed with this information, insurers can determine the medical condition of an applicant, as well as determine the risk of insuring them. If a persons is denied insurance for any reason, they can request their specialty consumer report from both IntelliScript and MedPoint for answers. You can request a copy of your MedPoint report by calling (888) 206-0335; an IntelliScript report can be obtained by calling (877) 211-4816. Callers will have to provide their full name, date of birth, last four digits of their Social Security number and current zip code.

It is important to note that just as there are errors in our credit reports; there may be errors in our Medical Consumer Reports as well. We are, under the FCRA, allowed to dispute information reported by any of the companies mentioned above.  The instructions to dispute any information found in your reports are provided by the companies both over the phone and on their websites.

Can A Collection Agency Continue to Charge Interest & Fees?

When a debt has been charged off, more than likely the original creditor will sell the debt to a collection agency soon after. You'll start to get letters and calls with their attempts to collect on these recently purchased debts. If you bother to look at your statements, you'll notice something else --- the increase in the 'Amount Owed' section.

Is this legal? Well.... yes; under certain circumstances.

Section 808(2) of the Fair Debt Collection Practices Act states "A debt collector may attempt to collect a fee or charge in addition to the debt if either:

(a) the charge is expressly provided for in the contract creating the debt and the charge is not prohibited by state law, or

(b) the contract is silent but the charge is otherwise expressly permitted by state law.

Conversely, a debt collector may not collect an additional amount if either:

(a) state law expressly prohibits collection of the amount or

(b) the contract does not provide for collection of the amount and state law is silent."

Section 808(3) goes on to state that state law determines what is considered to be a reasonable fee or even if fees are legal

To summarize, a collection agency would need to abide by the terms in the agreement you signed with the original creditor - which most of us don't read. Don't fret. One of the things you ask for when you send the collection agency a validation letter is a copy of the original contract with your signature on it. That way you can determine if the amount they are charging is legit. It's also noteworthy to point out that if additional fees and interest are allowed it starts at the time the collector owns the debt, not at the time it was charged off.

This is because when a creditor charges off a debt they typically stop charging interest. If they continued to charge interest they would need to send you monthly statements, according to the Truth In Lending Act. If they continued to charge interest, this would increase their losses. To avoid wasting paper and manpower putting it on their books every month, they'd rather just be done with it, charge it off and sell it to a collection agency.

Once the debt is sold, the collection agency can charge interest, without sending you monthly statements, because they are not held to the Truth In Lending Act.

Let's put this into perspective: You default on your credit card. They charge it off after 6 months of non-payment and stop charging interest and stop all collection activity at the time of the charge off.

They then sell the debt to a collection agency. Your credit card contract/agreement specifically stipulates that if your account falls into collections due to lack of payment, your interest will continue to accrue. The interest will start to accrue when the collection agency purchases the debt. They cannot back date it from the time of charge off. To add, if the amount specified in the contract is larger than what your state allows to be charged, state law prevails. The collection agency will only be able to charge what the state allows.

So, how do you know if the collection agency has charged you the proper amount of fees and interest? Well, again, you want a copy of the contract. Then you want a full accounting, meaning a full explanation of how they arrived at the 'Amount Due' total.

That's just to start. A lot of experts claim that when a debt collector purchases a debt; all the rights, title, and interest that the original credit has gets transferred with the purchase. However, there are other laws that state differently. In the US law encyclopedia, American Jurisprudence, 73 Am Jur 2d. Sections 90-93; it says that one cannot subrogate onto a contract that they were not originally on, did not have any interest to protect, and then claim successor in rights and interests. Thus, when an original credit sells the debt, they give up their rights to collect on the debt, BUT they do not give those same rights to the collection agency. The collection agency cannot act as a substitute for the original creditor.

Confusing right, that's how our laws work! One law gives them permission, another takes it away.

No matter the argument, the addition of fees and interest benefits only the collector; this is why they can settle a debt for such a steep amount and still make a nice chunk of money. You didn't think it was your stellar negotiating skills did you? :)

Just remember, before you pay anything VALIDATE VALIDATE VALIDATE!


Hopes this helps!

If you need assistance tackling collection accounts on your credit report, give us a call! We've been successful in permenantly removing over 480,000 at the time of this posting.


~ Netiva

Debt Collection Attorneys - How to Deal With Them

You’ve gotten a letter demanding payment on an old debt in the mail. This one is different from the other letters, because... it’s from an attorney!  There, in big, bold letters are the words "Law Offices!"  You're shaking in your shoes right about now.  It's inevitable, you have to make payment arrangements now, right?  The last thing you want to have is a professional law firm trying to sue you for a debt!

SLOW DOWN! Just because the collection letter/threat came from an attorney’s office does not mean you can’t treat it the same way you treat any other collection attempts from a collection agency. After all, they’re help accountable under the same federal laws that govern collection agencies and 3rd party debt collectors – The Fair Debt Collection Practices Act (FDCPA).

Further, most times these letters are generated from an internal department from the same collection agency that has been trying to collect from you in the first place. Reports have shown that by placing the “Law Offices of…” on the letterhead of a debt collection mailing gets significantly more results than a regular 'this is an attempt to collect a debt' mailing that consumers normally receive.  People are more agreeable to making some form of payment arrangements to settle or satisfy the debt in full if it comes from an attorney's office.

Please note, I am not negating the fact that most times the person listed on the letter is an attorney. I am stating from experience that in most cases these attorneys do nothing more than lend their name and license number to the collection agency in an attempt to scare consumers into paying. Which is why the letters from law offices typically include verbiage threatening a lawsuit.

Will they sue? If you’re worth the pursuit sure, but this will happen whether the threat comes from a collection company or an attorney. My point is you can still demand validation the same way you demand it from a collection agency/3rd party debt collector.

I would also recommend taking it a step further. Google the attorney’s name on the letterhead. Verify if he/she indeed is a separate entity from the collection company or merely an employee of the collection agency. I remember an ‘attorney’ was attempting to collect on a debt I settled with the county I reside it (no statute of limitations on it) and when I googled their name all types of fraudulent posts were listed. I merely demanded validation and they came back with a letter saying I owned a little under $100 more than originally requested. Do you think I paid that? I sent a follow up letter demanding a full accounting and proof and they never contacted me again.  So, demand validation!

Legal Department Within the Collection Agency

You will probably get threats prior to the collector transferring your account to their legal division, in which they’ll state that a suit for judgment is eminent. From what I’ve seen, there is usually only one attorney and a small staff of non-paralegals that will merely sign the same letter the collection agency has been sending out in the first place but meaner. these attorneys do not generate the letter themselves, nor do they personally review your account – they merely sign it.

Now, if you’re dealing with a smaller company, they usually hire real attorneys who are in your local area, the attorney will have an actual office/address in your state, and will be able to respond to your validation letter according to the law, and are therefore more pleasant to deal with (at least in my personal experience). You can, however, and should still request validation and do not, under any circumstances, fold if they are unable to provide you with everything you’ve requested.

So, if collection attempts come from an attorney, don’t freak out. They are still collecting a debt, they are still held to the FDCPA, and can still be told to stop all collection activities if they are unable to provide you with a full accounting, copies of contracts with your original signatures, and proof of assignment (among other things).

As always, if you have any questions or would like assistance fighting collection activities on your credit report; give us a call!

Pay For Delete - Does It Really Work?

If you look on any financial website on how to remove a negative item from your credit report you’ll more than likely see the ‘pay for delete’ option listed. Pay for delete is a negotiation strategy to get a negative listing or trade line removed from your credit report. You negotiate a full or partial payment in exchange for a complete removal.

Do they work? It really depends on who you ask! Some will state they know from experience that it works and they’ve been able to get from under their debt while simultaneously improving their credit from the deletion. Others will vehemently deny its effectiveness saying the creditor will get their money and leave you hanging. To add, if you look at one of the credit bureaus website; they’ll even hint that it is illegal to remove a negative item via this method (go figure, huh).

Honestly, it has worked on occasions yet I would be lying if I stated it works all the time. I can also state that I have not found anything in the law that flags the practice as illegal; the reason credit bureaus are against the practice is because it cuts into their profit. Bad credit is big business. Of course, they’ll state that the integrity and authenticity of the report is ruined by this practice, but so is their inability to accurately report true and authentic information on a credit report so that theory is out the window. I will admit, I personally am not a fan of the pay for delete method. And I’ll share why.

First and foremost, it really only works with collection agencies or 3rd party debt collectors. So, if you have negative information on your report from an original creditor the chances of them deleting anything for payment is pretty slim. They’ve more than likely already charged off your account, have gotten their tax and insurance claim benefit from the write off and sold your debt to a collection agency, so their cool. Why make your life easier?

So, what you’re really doing is negotiating with a company that purchases bad debt to make a profit. You’re offering to pay them money to delete the negative item from your credit report.  Let’s say they accept. You get their agreement to delete in writing and send them the money. Now you wait, and wait and wait. Hmm, they haven’t deleted anything! You have it in writing so you send a dispute letter to the three credit burueas with a copy of the agreement that they promised to delete for payment and…. the credit bureaus refuse to delete as well. There’s nothing you can do about this. Collection agencies can revoke their ability to access or report any information with the credit bureaus if they delete what’s believed to be accurate information from your report. Further, by giving the credit bureaus proof that you paid the debt, you pretty much have admitted the debt is yours and can forget about disputing it with them for removal. Now, if it’s in writing you can sue them for violating the Fair Debt Collection Practices Act; which states that a collector cannot lie or use deceptive practices in order to get payment for a debt. But, as one of my clients stated: “Who has time and money to go through that?”

The goal is to rebuild your credit and to restore your score. If you settle a debt with a company, they legally have the right to send you a 1099 tax form for the remaining balance; the IRS views the amount you did not have to pay as income; which you have to pay taxes on. Thus, you’ve just created another bill.

Another thing to mention is that if your debt is being reported by the original creditor and by the collection agency, paying for a deletion will not remove both debts; just the collection. Your score will still be negatively affected by the charge off that is reporting.

If you do decide to go ahead and offer a Pay for Delete, please do so after you have asked them to validate the debt. What you are asking them to do is prove that you owe the debt and that they own the debt and can provide documentation to back it up. If they can’t provide this, they have to delete it anyway. In addition, check your state’s statute of limitation to see if they can legally collect from you according to your state laws. The time frame for a creditor or collector to enforce payment of a debt is limited, if you pay less than the full amount you risk restarting that time limit to day one. You also want to see when the debt will be deleted from your credit report. If it’s going to fall off why pay anything towards it?  By paying, you risk them adding an additional trade line to your credit report that details the payment received and a negative 'Paid Collection' notation on your report. Lastly, send everything certified mail return receipt and keep copies of everything!

I hope this helps! And as always, if you have any questions please do not hesitate to contact me.