Debt Collection: Dealing with a Collection Agency

It is never fun when a bill gets sent to a debt collection agency. But, sometimes it puts the ball in your court and gives you a chance to achieve true credit repair. Whether you just couldn’t afford to pay your debt or you didn’t agree with it, once it is “in debt collections,” there is power in your hands.

 

Your Rights Against a Debt Collection Agency

There are many things you can do and say when dealing with a collection agency. First, you have the ability to make an offer to pay off the debt for less than the full amount. This could run down as low as 10 percent but it depends on how long the collection agency has tried to get you to pay it and what they paid for it.

It never hurts to make an offer. You can also negotiate a “pay for delete,” which means you clear the debt and get it taken off your credit report. With the help of a credit repair agency, this uncommon tactic becomes much more possible. It appears that the smaller agencies are more likely to agree than the larger ones.

Making Contact with a Debt Collection Agency

The debt collection agency will likely contact you before you realize you need to contact them. Or, the creditor you defaulted on will notify you first. You can send a cease and desist letter to force an end to any communication if you do not wish to deal with the agency. You also have the right to dispute the debt through the credit bureau(s) that list it on your file.

You should always start the communication off by confirming the amount you owe and requesting a written copy of these details. If the debt collection agency reports a different balance — a credit repair company can push for it to be removed from your file.

Making an Offer to Pay Off Collection Debt

In most cases, your main course of action is making a flat offer to pay off the debt. Agencies usually pay in the 25-50 percent range when purchasing your debt from the original creditor. Keep this in mind when making your offer. Make sure to only communicate in writing and start with a lower offer to see how they counter.

What you want to avoid is making a payment plan with the agency. This is actually bad for your credit report and score. It means that you will have an entry to bump the bad debt to the top of your report every month. You want the agency to report the debt as “paid as agreed,” as soon as possible as it can take two years before the damage wears off.

Differentiating the Types of Collection Agencies

There are two types of collection agencies that exist, the ones that operate in-house and the external companies that buy your debt. You have more leverage when working with an in-house agency. In some cases, it is even possible to restore your credit line once you cover your debt which looks better on your credit report.

Always confirm whether you are dealing with a first or third-party collection agency. This will tell you how much negotiation room you have when making an offer to pay off the debt. It also indicates whether you can do a “pay for delete,” or if you are better off approaching as someone unable to pay in full. Paying for a removal normally requires you to pay 100 percent of the initial debt.

How Collection’s Agencies Report Debt

You need to be very careful with how a collection agency handles your credit report. The balance, payment date, settlement terms and everything else must be accurate and timely recorded. You can dispute the debt with the respective credit report agencies if the information supplied by the collection agency doesn’t match the details of the debt on your credit report.

Your goal is to pay off any debt you truly owe and obtain a “paid as agreed,” comment on your credit file. This results in the lowest impact possible to your credit score and looks better when future lenders pull your file. You will notice a bump in your FICO score if you pay off a debt in collections that sat for a while.

You want to avoid having it show as anything else. You should also avoid paying off very old collections debt if possible. These entries only show on your file for seven years after the last delinquency date. You make the debt a new factor in your credit score calculation if it already stopped having an impact. Just send a cease and desist to stop further communication and wait for it to drop off your report.

Conclusion

Dealing with a collection agency is not all that bad. Even when you get the odd rude and aggressive one, it’s possible to stop the harassment. The key is to keep to written communication and log each interaction you have while watching for chances to dispute the debt.

A professional credit repair service can help you deal with collection agencies. If you need help removing a collections debt or paying it off cheaper, feel free to consult with Ovation Credit Repair to learn your options (complimentary consultation).

Sources:

www.creditcards.com/credit-card-news/pay-for-delete-shady-credit-report-cleanup-1264.php

www.nerdwallet.com/blog/finance/how-to-deal-with-debt-collectors/

www.wikihow.com/Deal-With-Collection-Agencies

www.gocleancredit.com/how-many-points-will-a-collection-affect-your-credit-score/

Bankruptcy: Rebooting Your Credit Life

For many people, bankruptcy is a scary concept, something to be avoided at all costs. However, the truth is that legal bankruptcy can relieve you of major financial burdens and allow you to begin planning a debt-free future.

Bankruptcy-Reboot-Your-Credit

Two Types of Bankruptcy

In essence, declaring bankruptcy is a way of telling the United States court system that you can’t currently pay your debts. There are two main kinds of bankruptcy for individuals (as opposed to businesses). A Chapter 13 bankruptcy lets you negotiate with your lenders and come up with new payment plans that you can manage. In most cases, people must make all of their payments within five years.

If you don’t have much in the way of disposable income, a Chapter 7 bankruptcy may be the option for you. Unfortunately, it will require you to sell or cash in some of your assets in order to pay certain bills. On the bright side, this measure will eliminate some of your debts ― medical bills, for instance ― so you can forget about them entirely.

The Procedure

If you’ve decided to file for bankruptcy, your first task is to find a lawyer you can afford. That attorney will explain all of the details of the process. She’ll also supply you with the forms you’ll need and help you to complete them correctly.

Later, you’ll have to appear in court at a 341 hearing, which some or all of your creditors may attend. There, you’ll discuss your debts and assets. If you’re going through a Chapter 7 bankruptcy, your debtors’ official representative, who’s known as the bankruptcy trustee, will help figure out which of your possessions you’ll be required to liquidate.

As part of your bankruptcy responsibilities, you’ll need to take a class that will review methods for handling your personal finances. In addition, you should know that, under the law, your boss isn’t allowed to fire you merely because you’ve declared bankruptcy.

Next Steps

Once your bankruptcy is behind you, a good first step is to carefully prepare a budget for yourself. Make a thorough list of your monthly expenses and compare it to your monthly income. Of course, you should be spending significantly less than you’re making so you can grow your savings and build up an emergency fund. If you’re spending too much each month, do whatever you must to reduce your expenditures, increase your income or both.

For example, you might look for a job that pays more, or even get a second job. You could move to a cheaper apartment, or you could sell your home and buy one that’s smaller and more affordable. Why not give up golf, forego cable TV or start using less smartphone data? Whatever you can think of to get on solid financial footing, take that action at once.

If you obtain a secured credit card with low fees, using it in moderation should help you to raise your credit score.

Especially important, make sure that you pay every bill on time. It’s worthwhile to set up as many automatic electronic payments as you can. That way, you’ll be less likely to forget to pay a bill. Also, keep checking the bank accounts from which your automatic payments come. Obviously, you don’t want to overdraw from one of them.

When it comes to the bills you can’t automate, try using an app or an old-fashioned calendar to remind yourself of due dates. Moreover, make each of those payments several days before they’re due. You don’t want unforeseen circumstances to somehow prevent you from paying on time.

The services of an excellent credit repair company can likewise enhance your credit report. Such a firm will scrutinize your credit history, find mistakes that are hurting your score and contact the proper credit reporting agencies to get them erased.

As time goes by, keep reviewing copies of your credit reports. If you ever spot a sudden drop in your score, you could get in touch with a credit repair company to see if an error was involved.

A Tricky Decision

It probably goes without saying that bankruptcies aren’t entirely positive. This legal process will damage your credit score, and a bankruptcy notice will stay on your credit record for a full 10 years. And, even though there’s no reason to, you may experience some lingering feelings of failure or shame after you file for bankruptcy.

However, these days, lenders tend to be more lenient with those who’ve declared bankruptcy than they once were, especially people who’ve only gone bankrupt one time. Thus, you shouldn’t expect that you’ll have to pay enormous interest rates for all of your future loans. In some cases, though, you might be required to explain to potential creditors why you chose to declare bankruptcy.

In the final analysis, bankruptcy is certainly a serious and consequential action. At the same time, it can be a uniquely valuable tool for those who find themselves in difficult financial situations. Many people are able to turn their lives around as soon as they take this step.

Sources:

https://www.aol.com/article/2011/06/03/life-after-bankruptcy-5-steps-to-rebuilding-your-credit-financ/19955927/

http://blog.credit.com/2014/12/5-things-to-do-after-bankruptcy-103308/

http://www.businessnewsdaily.com/3973-bankruptcy.html

http://www.huffingtonpost.com/curtis-arnold/how-to-rebuild-your-credi_b_5790860.html

http://www.nytimes.com/2012/09/16/realestate/mortgages-life-after-bankruptcy.html

https://www.thebalance.com/how-to-repair-credit-after-bankruptcy-960380

 

Can a Credit Repair Service Really Fix Your Credit?

Are you facing issues from your past that are weighing your credit report down? If so, a repair service might be of some assistance. However, many Americans are still unaware of what these companies actually do. So before you draw any conclusions, it is important to understand how these services can help you fix your credit.

It’s also important to educate yourself on what a credit repair service does not do. That is, they don’t focus on building your credit rating, nor do they help with consolidating debts. It is all about fixing erroneous credit reporting issues. While there may be adverse effects (maybe your score goes up), this is not the main purpose of a credit repair service.

Fix Your Credit

What Do Credit Repair Companies Do?

A credit repair company will try and fix any damage on your credit report. This is done by collecting a copy from each bureau for analysis. The service provider will carefully comb through and try to identify errors. It could be anything, such as HR reporting errors at work or signs of identity fraud.

The FTC reported that one in 20 American consumers have credit report errors. Of that group, one in 20 saw a 25-point or more score increase by fixing the error. A further one in 250 saw a 100-point or higher change afterward.

Fixing any negative items on your credit report can be very profitable. A shift in your score could result in thousands (or more) in interest savings. Just think when it comes time to buy a home, how much could you be losing to negative items?

Fixing Negative Items the Right Way

Credit repair companies are experts at managing credit report errors. This hands-off solution leaves you not having to worry about the outcome. It also means saving endless time on handling the issue. After all, the average amount of time spent to fix an identity theft issue is 30-60 hours.

By hiring a company to do it for you, the entire process becomes painless. Here are the steps that are typically taken to repair your report:

1. Request a copy of your Equifax, Experian and TransUnion file

2. Compare data with you to see if there are any inconsistencies

3. Point out any errors which should be reported and removed

4. Report such errors to the respective credit bureaus

5. Follow up and work with the bureaus till its resolved

What Types of Credit Report Errors?

Every error should be taken care of as it is found. Failing to do so can increase your risk of becoming an identity theft victim. It could also prevent you from qualifying for a credit card or loan — particularly if your score is suffering from the error.

Some items a pro might dispute in order to repair their credit include:

•    Information that is no longer current

•    Inconsistencies between each bureau’s file

•    Reporting errors from your work’s HR department

•    Non-updated information after a divorce

•    Wrongly reported late payments and charge-offs

Credit repair services also help with bankruptcy procedures and post-bankruptcy recovery. There are many things that come into play when making sure your file is clean and up-to-date. For example, sometimes discharged debts are reported incorrectly. They should always have no balance and a reference to why.

Can You Fix Your Credit Errors Yourself?

It is always an option. However, the best credit repair companies have spent many years doing this every single day. It will take you longer and the chance of success is a little or lot lower, depending on the circumstances. You will have to learn how to dispute credit report errors from scratch — which takes even more time.

The easy thing is finding the errors. You can help a credit repair agent with that process. From there, it becomes clear what the path forward will be. Some errors just require an update of your information (i.e., address changes). But others are more serious and require negative item removal.

Furthermore, there are many things you might not be aware of that are actually errors. One such example is if you close an account yourself and the entry says that it was closed by the grantor. This can hurt your credit score as it appears that there was a reason for them to stop doing business with you. Removing the “grantor” label would potentially increase your rating and it makes you look better.

Of course, there are some situations you can handle without help. For those that already know their errors, try contacting the credit-reporting company that caused it in the first place. Sometimes you can mitigate the issue right away. But definitely hire a professional if you have a lot of errors or if the damage goes back years.

Conclusion

Credit repair services offer legitimate solutions. However, too many borrowers are unaware of what these businesses provide. It is something that you should seek out after bankruptcy, credit fraud or identity theft. Sometimes it is even necessary once you go through a divorce — especially if you carried extensive joint debts.

The bottom line is, don’t let errors on your credit report hold you back, fix your credit. Hiring a professional credit repair service will save you time, money and may even improve your credit score along the way.

Sources:

https://www.ftc.gov/news-events/press-releases/2013/02/ftc-study-five-percent-consumers-had-errors-their-credit-reports

http://www.experian.com/blogs/ask-experian/debt-discharged-in-bankruptcy-continues-to-show-in-credit-report/

https://www.ftc.gov/sites/default/files/documents/reports/federal-trade-commission-identity-theft-program/synovatereport.pdf