Medical Debt Impacting Credit

Does Medical Debt Impact Your Credit Score?

By | Debt

Medical debt is no longer displayed on your credit report the same way it used to be, but it can still impact your credit if it goes unpaid for too long. With recent changes in reporting requirements, there are new rules surrounding how long you have to pay off your medical debt before it gets reported and starts impacting your credit.

Here’s what you can expect to happen to your credit once you start to accumulate any kind of medical debt.

When Medical Collections Show Up on Your Credit Report

Medical debt doesn’t show up on your credit card until it’s left unpaid and goes to collections. Early on, it’s treated like any other bill in that it’s not listed on your credit report. If it’s a large amount that you can’t pay off in a lump sum, it’s best to try and sign up for a manageable payment plan with your medical provider. However, if you don’t pay on the balance for whatever reason, your account could end up being sold to a debt collection agency.

At that point, the collection agency is likely to report your medical debt to the credit bureaus. Like many other types of negative entries, medical debt is listed on your report for seven years, unless removed by initiating a credit dispute. The seven-year period starts from the first delinquency date associated with your medical debt.

What Happens to Unpaid Medical Debt

On the plus side for consumers, there are some extra restrictions that the credit bureaus must abide by when listing medical debt. Even if the collection agency reports the debt to Experian, Equifax, or TransUnion, the credit bureau must give you a 180-day grace period to pay off your balance. That period starts from the original due date, giving you a full six months to make arrangements to pay the bills.

So even if your health care provider sold the debt three months after your due date, you still have another three months to catch up. This also gives you time to potentially ask your insurance company to help you negotiate. The claims process can be a slow and tedious one, so this extended grace period is meant to make sure your credit doesn’t tank just because your insurance company took too long to pay all or part of the balance. Once the debt makes it onto your credit report, it’s listed as an unpaid collection.

How Credit Scoring Models Weigh Your Medical Debt

If you don’t manage to pay off your medical collections debt within the grace period, it will then likely be listed on your credit report. However, your score won’t suffer as much compared to other types of debt. That’s because the latest scoring models from both FICO and VantageScore don’t weigh medical debt as much as other types of debt, particularly credit card balance. It makes sense why — medical bills don’t generally indicate a pattern of poor financial decisions.

On the downside, not all lenders and financial institutions use the most current scoring models from FICO or VantageScore. Older versions may weigh medical debt equally with other kinds. Still, as companies continue to move forward and upgrade their lending platforms, it’ll be much easier to improve credit related to medical debt.

How Credit Disputes Work for Medical Debt

It is possible to get unpaid medical debt removed from your report so that you can fix your credit score before you reach the seven-year delinquency mark. Check your records for any credit errors. If you find any discrepancies in the debt amount, payment debts, or any other information, you may be able to start a credit dispute and have the entry negated. This entails sending a letter to the credit bureau. Regardless of their findings, the investigation should be completed within 30 days. Be sure to keep copies of all your communications related to your medical debt, both with the collection agency and the credit bureaus.

If you’re trying to fix your credit related to medical debt or any other negative items on your report, it can be helpful to get professional help. You certainly can execute the dispute process on your own, but it can be an extremely time-intensive process. And if you don’t research your rights adequately, you may end up doing more damage to your credit score.

Luckily, a professional firm like Ovation Credit can help. Our team of lawyers has years of experience in the field, plus knowledge of the intricacies of credit and debt law.

Get started with a free consultation today to start the credit repair process.


Pay Down Your Debts: Top Tech Tools to Help You

By | Debt

Thanks to technology, it’s now easier than ever to keep tabs on your financial situation. The major banks and credit cards offer mobile applications, allowing you access to your balance and payment history at any time. You can check your credit score with the click of a button. As much as technology facilitates the act of buying (imagine how much less you’d spend without online shopping!), it also makes it much, much easier to pay down your debts. Check out these top tech tools to keep your debt situation under control.

Take advantage of your bank and credit card app features

It helps to download the app connected to your credit card and bank, if available, so you can instantly access your information at any time. Some apps will also notify you when a statement is available or a bill is due (in addition to regular email alerts). These apps also simplify the process of setting up auto-payment every month, so you don’t have to worry about forgetting to pay.

Check out budget and goal-setting tools

You may already choose to use a household budget app, such as the one offered by This site also offers a financial goals feature that allows you to link up your credit card and loan accounts. Once you designate paying down your debt as one of your financial goals, the site will suggest different options for repayment, such as using any available savings or making changes to your budget. This feature also provides a timeline based on the expected date when you will be free of debt.

Track your debts in app form

Debt reduction apps abound in the App Store, and you might want to try out a couple of different ones to see which interface works the best for you. Some of the most popular examples include ReadyForZero, Debt Control Free, and Debt Assistant. (A bonus is that they are all free apps.) The theory behind these apps is generally similar across the board: You link up your outstanding debts and due dates, come up with payment strategies and utilize the built-in calculators to determine the best strategy for payoff. They also allow you to zero in on your progress, which keeps you motivated when you’re trying to repair your credit.

Put money aside without even having to think about it

Some apps aim to take the stress and aggravation out of debt payoff, by doing some of the work for you. Take, for example, Digit, which will analyze your spending habits and come up with an amount to withdraw from your checking account that it thinks you won’t notice (don’t fret – the app guarantees no overdrafts). You can set goals for reaching a certain amount to pay off a debt. Once the app accumulates that amount in an in-app savings fund, you can then use it to pay down a debt.

Another app called Qoins links up to your bank account and rounds each of your purchases to the nearest dollar. It then applies the savings to your chosen debt.

Figure out the best debt repayment method

A free online service known as asks you to enter all of your debts and loans. Based on that information, the service shows you how you can tackle your debt using two options – the debt snowball (where you pay the smallest balance first, followed by the next smallest and so on) method, or the high interest rate method (in which you’ll start paying off the balances that carry the highest interest). Having such a clear, side-by-side comparison of the two debt payment strategies can help you decide which one would work best for your particular situation.

Calculate your debt-to-income ratio

You can find calculators on numerous websites that allow you to determine your debt-to-income ratio and then figure out a plan to pay down your debts in the most financially prudent way possible. Many of these services are free, but you may want to consult with a professional if you have a substantial amount of debt to pay down.

While debt payoff can be overwhelming at times, technology offers plenty of options to make the process a whole lot easier. And at Ovation Credit, we want to give you a hand. Let us know if we can help you work through any credit report issues that arise by contacting us for a free consultation.


Time to ditch debt? There’s an app for that!

Saving Money or Paying Off Debt: Which Is Better for Your Credit?

By | Debt, Save Money

When you’re working on your credit repair, each financial decision you make takes a little more forethought than usual. That’s because you can’t just look at the bottom line for your wallet, you also have to look at the bottom line for fixing your credit.

This is particularly true when you want to improve your credit while better utilizing some of your spare cash. Should you save it in the bank or use it to pay off your debt? We’ll go over the pros and cons of each option so you can figure out a plan that works for you.

Fix Credit by Saving Money

While there are certainly many reasons to pay off your debt, saving money can also have a helpful impact on the credit repair process. The main reason is that it prevents you from having to take on more debt somewhere down the line.

Think about it: if your credit cards are nearly maxed out (which is already hurting your credit score) and a financial emergency hits, what will you do with no extra cash on hand? You’ll probably completely max out the cards, or even worse, apply for new credit cards or payday loans. None of those are ideal choices.

They can, however, be avoided.

Creating an emergency fund keeps you from being forced to make more financial decisions that could harm your future further down the line. Most experts recommend a cash cushion of at least three months of expenses so that you have something to live off of in case you lose your job or have a medical problem that prohibits you from working. If you’re the sole breadwinner for your family or have several children, you might consider saving up to six months of expenses.

Yes, that sounds like a lot of cash. So if you’re just getting started saving up money, try to stash away at least $500. That amount may cover any one-off emergencies, like a sudden vehicle repair or short trip to the hospital.

Improve Credit by Paying Off Debt

Once you have a comfortable savings fund to cover an emergency (or a surprise job loss), you can focus on fixing credit through debt payoff. This can really help improve your credit score in a few different ways.

One way is that paying down debt lowers your debt utilization, which can raise your overall credit score. The more debt you have on each credit line, the more your score suffers. Once you start to pay down your debt, your credit utilization also lowers, which is a plus. In fact, your “amounts owed” can account for a full 30% of your credit score.

Also, if you have a lot of credit card debt, your credit mix can be affected, which is another factor considered part of your credit score. Typically, installment loans like a mortgage, student loan, or even an auto loan are viewed more favorably than credit cards. They’re not as risky since you have more skin in the game when it comes to paying them off. On top of that, having too much credit card debt can place a particularly large toll on your score if you don’t have much of a credit history yet. Either way, it’s a good reason to consider paying down your debt no matter how long your credit history may be.

As long as you’re not at financial risk with minimal cash reserves, paying down your debt can do wonders for your credit. The less you owe, the more you’ll begin to see your credit improve. Plus, early payoffs can lead to substantial savings in interest over the years.

Other Steps to Take for Credit Repair

Saving money and paying down your debt are both smart strategies for repairing your credit. But if you have credit errors on your credit report, your score will only go so high, even with these changes. Credit disputes are a way to get those credit errors permanently removed from your report. However, the process can be time intensive and tedious.

Ovation Credit offers a free consultation so you can find out how our credit professionals can assist you with the credit dispute process. Schedule yours by visiting our site for a free consultation and to get an idea of what negative errors could be removed from your credit report.


Holiday Expenses: Top Ways to Avoid Debt this Season

By | Debt

The holiday season is supposed to be about joy, but for many people it brings a great deal of stress. In addition to organizing and attending multiple holiday events, traveling and hosting visitors, you have to watch your budget. Otherwise, you end up with that January hangover when the bills come in.

Fortunately, you can enjoy all the season has to offer while minimizing stress about your holiday expenses. The key is to make a plan and stick with it. Try to follow some general tips as a family, so everyone is on the same page when it comes to spending money.



1. Estimate Non-Gift Holiday Expenses

Holidays typically mean decorations and food, but also higher expenses you might not think to put in your seasonal budget. Electricity and heating is more expensive because of outdoor lights, home decor and cooking. You may also give to charity at this time of year. Review your expenses from last year to help you estimate how much the holidays typically cost.

2. Identify Gift Recipients

It’s neighborly to give small gifts to almost everyone in your circle, from your child’s piano teacher to the kindly woman who lives across the street. Make a complete list of everyone you plan to remember this year. Even if a gift is only $10, when multiplied by 10 people, that’s $100–plus interest if you slap it on a credit card and don’t pay it off right away.

3. Start Saving Early

Ideally, put aside a few dollars every month throughout the year to build a fund for holiday expenses. But life isn’t ideal, so you may only start saving when the weather begins to get colder. As soon as you turn your mind to the season, start to put money away. If you anticipate coming up short, consider taking a seasonal job or revising your original holiday expenses. You still have time to make changes.

4. Start Buying Early

Check out sales as they happen throughout the year. If there’s a sale on food you’ll eat during Thanksgiving and your holiday meals, double up and put the excess in your pantry or freezer until December. If you see the perfect gift for someone on your list, buy it when it’s on sale, even if it’s several weeks before the big day. Just remember to cross that individual off your budget!

5. Research Pricing

Look online and compare retailers for those few special items. Often flash sales and internet-only deals can get you a break on in-demand items, although you may have to buy early before they sell out.

6. Budget for the Unexpected Holiday Expenses

Set aside a bit of cash for a last-minute invitation or unexpected guest. That way you can get a hostess gift or add a plate for dinner without breaking the budget. Better yet, if you never use the money from this seasonal emergency fund, you can put it toward another priority in January.

7. Use Credit Sensibly

When you’re trying to budget, credit cards are not the enemy as long as you use them sensibly. Your credit card may offer cash back or valuable rewards points. If you want to use credit for this reason, consider using the card and immediately transferring the amount of the charge out of your bank account and onto the card.

As with any debt, awareness is crucial. If you put money on a card, write it down and post it on a bulletin board at home so you don’t forget. The more you are conscious about what you’re putting on credit, the more control you have.

Enjoy the holidays the way they are supposed to be: with friends, family and good food. In terms of your holiday expenses, all it takes is a little planning and strength to stick to the budget over the season.

5 Ways to Pay Off Credit Card Debt

By | Debt

Pay Off Credit Card Debt

Paying down credit card debt is one of the best methods for repairing credit and improving your credit score. Here are easy and painless ways you can pay off your credit card debt:

1. Pay More Than the Minimum

With most minimum payments, it can take years to pay off credit card debt. Paying the minimum will not only hurt your credit score, but it will cost you a ton of money in interest. If you can afford it, you should pay more than the minimum.

If you can’t afford to pay more than the minimum, keep in mind that as you pay the principal down, your minimum payment will go down as well. However, you should keep paying the same amount you were paying before in order to pay down your debt faster. Eventually, you will be able to pay more than the minimum and repair your credit.

2. Find Extra Money

If you can’t afford to pay more than the minimum payments, try and find extra money. You don’t have to get a second job to pay down debt. For example, if your minimum payment is $40, be conscious of the fact that only $40 more per month will double your payment. You may have extra money in your budget or you may be able to earn cash. Here are some tips:

  • Fill out surveys
  • Use apps like Ibotta to get cash back from shopping
  • Use coupons
  • Try a no-spend challenge
  • Reduce your spending by just $10 per week

3. Use the Snowball Method

For multiple credit cards, the best and simplest way to pay them off is to use the snowball method. With this strategy, you pay off the card with the lowest balance first. Then, you put the money you were using for that card toward the card with the next lowest balance, and so on. Here’s a step-by-step example:

  1. You have three cards. One has a balance of $300, the 2nd a balance of $1,000, and the 3rd has a balance of $1,500. You’re paying the minimum payments on all three, but you have an extra $50 you can use toward the debt.
  2. Take the extra $50 per month and apply it toward the 1st card; then, pay minimums on the others until they are paid off.
  3. Take the extra $50, the 1st card’s minimum and the 2nd card’s minimum, and apply to the 2nd card until it’s paid off. Continue paying the minimum on the 3rd card.
  4. Apply the $50, the 1st, 2nd and 3rd card’s minimum to the 3rd card until it’s paid off.

You will be debt-free relatively quickly without having to put a lot of money toward your credit cards.

4. Make the Most of Unexpected Cash

The fastest way to repair credit and pay off debt is to pretend extra money doesn’t exist. If you get a raise, bonus, overtime payment or cash gift at work, apply it toward your credit cards. You should budget as if overtime or bonuses don’t exist. That way, when you get the money you can use it to pay off debt or build savings.

5. Pay Twice

Some credit cards calculate interest based on average daily balance. If your credit card is one of them, remember that the easiest way to pay off the balance is to pay twice per month. Before you panic, you don’t need to pay twice the minimum payment each month. Instead, take your payment and divide by half. Pay that amount every two weeks. This will reduce your average daily balance, which will reduce your interest so you can pay off debt faster.

You can repair your credit score and pay off debt by following these strategies. Credit card debt may seem daunting, but you can unbury yourself and improve your credit.


Debt after Death: 10 Things You Need to Know

By | Debt

When a loved one passes away, one of the last things you want to hear is debt collectors calling to try to take their money. Unfortunately, dealing with a loved one’s debt is a chore your family will have to take care of. Here’s what you need to know.

Debt After Death

1. Debt Isn’t Inherited

Debt does not pass on to family members. If an account is in one person’s name, creditors can’t make anyone else pay off the debt. If someone dies with debt and no assets to pay it off, the creditors take the loss.

2. Co-Signers Become Fully Liable

One common point of confusion is the responsibility of co-signers to an account. Many people don’t realize that co-signing involves much more than helping with the credit check.

When you co-sign a mortgage, credit card or other loan, you’re saying that you will pay in full if the primary account holder can’t. This includes if they can’t pay due to death, and creditors will coldly enforce this provision.

You should also be aware that some loans may contain a provision that they become payable in full immediately upon either the primary account holder’s or the co-signer’s death. This could require the survivor to refinance the loan, raid their retirement account or take a negative hit to their credit when the original loan defaults.

3. Spouses May Still Share Liability for Individual Accounts

One more exception to the debt isn’t inherited rule is spouses. Some states hold spouses liable for the other’s debt even if the account wasn’t a joint account.

One way this can happen is in community property states where any debts acquired during marriage become marital debts regardless of whose name was on the account.

Another is where courts decide who’s responsible based on who benefited from the debt rather than who signed for it. If debt benefited both spouses or the household as a whole, it becomes the responsibility of both.

4. Creditors Will Still Ask You to Pay

Just because creditors can’t make you pay doesn’t mean they won’t ask you to. Often, they’ll try to guilt you into it by saying things like it would harm the deceased’s honor or that you should do the right thing.

Not only do you not have to pay them, but by agreeing to pay in part or in full — even if you’re just trying to get them off the phone — you could be assuming legal responsibility for the entire debt. Simply tell the creditors to never contact you again, and they must honor your request.

5. Creditors Can Make a Claim Against the Estate

Debt may not be inherited, but it can reduce your inheritance. Creditors get first rights to any property in the estate up to the amount of the outstanding debt.

This applies even to family heirlooms left to a specific person in the will. For a mortgage, creditors can foreclose and take the family home.

If you want to keep a specific piece of property and the estate doesn’t have enough cash to cover outstanding debts, you will have to buy it from the estate at its fair market value.

6. Both You and the Creditors Need to Give Notice

Creditors only have a set period of time to make a claim against an estate. After that, they forfeit any claims.

At the same time, you can’t try to avoid creditors by keeping them in the dark. Depending on your state, you may need to file in probate court, notify creditors directly or take some other action. Failure to follow the rules could extend the creditors’ time to make a claim or leave you personally on the hook for the debts.

7. Don’t Use Credit Accounts

It’s illegal to use a loved one’s credit accounts to pay for things like funeral expenses even if the entire family agrees. Because the account isn’t in your name, it’s considered fraud.

Additionally, you shouldn’t use a loved one’s accounts to pay any bills they owed. Again, you technically don’t have legal authorization to do so. Instead, notify anyone you receive a bill from to cancel the account and contact the estate’s executor.

8. You Should Tell the Credit Bureaus

You should promptly notify the three major credit bureaus of a loved one’s passing. This will prevent identity thieves from trying to assume their identity and open new accounts in their name.

At the same time, the executor can request a copy of their credit report to identify debts that will need to be paid.

9. You Will Need Copies of the Death Certificate

Every time you work with a creditor or go to close an account, you will need to provide a copy of the death certificate. This lets the company know that you have legal authority to take action on the account and that your loved one isn’t faking their death to try to skip out on the debt.

10. The FDCPA Still Applies

The Fair Debt Collection Practices Act and other consumer protections continue to apply after death. If creditors harass you or lie about your responsibility for the debt, you may be able to sue them. If creditors wrongfully report your loved one’s debt on your own credit report, you have the right to have that information removed.

To protect yourself during this difficult time, you may wish to sign up for credit monitoring or other services to keep you one step ahead of identity thieves and unscrupulous debt collectors.



7 Tips for a Debt-Free Summer Vacation

By | Debt

Taking a vacation with your family should be a pleasant thing – a rare treat in a schedule that is otherwise consumed by soccer practices, school recitals and working too many hours. Don’t let debt get in the way. It is possible to have a debt-free summer vacation and still have an amazing time with these seven tips.

Travel Debt-Free


1. Start Small

Keep in mind that small savings can add up to big amounts. Try tucking aside a couple dollars each week. Within a year’s time, you’ll have enough money saved to afford a family vacation (if not two!). The best part about this method is that you won’t feel it in your wallet or pocketbook and it can be fun for the whole family. Imagine a family piggy bank with a savings thermometer. Even small children can get involved with contributing change to the family vacation savings.

2. Research Your Destination

Next, spend some time researching your destination. You might find that some weeks or seasons are more expensive than others. Take New Orleans for example. Try booking a vacation during Mardi Gras or one of the city’s many jazz festivals and you are going to spend comparably more for a hotel room than if you plan your trip for an off-season month. Likewise, look at the location. You could save money by staying in a high-rise hotel on the city limits, but there won’t be much to do around you and you will have to pay for transportation into the city proper. Instead, pay a little more to book a hotel along a public transportation route or reserve a room in a small city located nearby. You will likely save money on the room rate as well as parking, and your transportation costs into the city proper may not be that different.

3. Look at Hotel Locations

You might also find that you can get the exact same experience for less at a nearby spot. Hotels are often cheaper on the outskirts of popular destinations than at the center, and sometimes the savings can be significant. Choosing a hotel 25 minutes away from your target destination could save you hundreds of dollars over the course of your vacation.

4. Compare Amenities

Comparing amenities is smart as well. Variables like whether breakfast is included, the price of parking, the proximity to local attractions, the necessity of taking public transportation instead of walking everywhere and the presence of a pool or other recreation can make a real impact on your wallet. Let’s say you are considering staying at the ABC Hotel and it costs $100 per night but includes breakfast and parking. It might cost more for the room than the XYZ Hotel that is charging $80 per night, but if XYZ charges $15 per person for breakfast and $20 per night for parking, ABC is a better deal.

5. Prioritize Your Vacation Goals

You may want to take the family paragliding, visit museums, see a popular show and eat out for every meal at nice restaurants, but wouldn’t you rather come home from your vacation and not have a credit card bill to face? The same way that your time is finite, your money is too. Create a budget for what you can afford to spend on your holiday and prioritize those activities the family wants to enjoy. The tradeoff could be something as simple as eating doughnuts for breakfast instead of a fancy brunch so that you can afford ice cream and bicycle rentals later.

6. Book in Advance

Booking your travel in advance is almost always cheaper than trying to get a last minute flight or hotel reservation, but did you know that activities can be as well? Purchase your lift tickets, museum passes and tours in advance. Sometimes you may have to agree to a schedule and book a specific time, but the savings can be considerable. Plus, when you book in advance, you pay for parts of your trip as you go, which can make affording the whole thing much easier because you can see the cost outlays.

7. Think Outside the Box

Finally, when it comes to planning a debt-free summer vacation, don’t be afraid to think outside the box. There are wonderful destinations just about everywhere, as long as you aren’t afraid to think differently – and these more unusual activities, destinations and appointments can be a good bit cheaper than their more popular counterparts. Major cities have lots to offer, but so do small towns. A family vacation to a major amusement park could be lots of fun, but you could also have a good time exploring a National Park, camping on the beach or on a road trip to silly attractions. It is the same with your hotel. You don’t need a four-star suite; you could be just as happy in a cheap hotel with adjoining rooms or an Airbnb. Try coming up with more novel ideas to spend your vacation time together and see the savings add up.

Keep in mind that the purpose of your family vacation is to do things together as a family. It doesn’t matter if you fly halfway across the world or drive to the next state. What matters most is that you are together outside the distractions of everyday life. The conversation, the laughter and the memories can be had for pennies on the dollar when you abandon the idea of a large-scale vacation and focus instead on how to make your family vacation one to remember.


Dave Ramsey, “Debt-Free Vacation Planning Advice from Dave Fans.” [Accessed:]

Dave Ramsey, “15 Insider Tips to Enjoy a Debt-Free Vacation.” [Accessed:]

Living Well Spending Less, “How to Plan a Debt Free Vacation,” April 22, 2017. [Accessed:]

Penny Pinchin Mom, “How To Plan A Debt Free Vacation,” Penny Pinchin Mom, May 2, 2014. [Accessed:

Debt Collection: Dealing with a Collection Agency

By | Collections, Debt

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.


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).


Student Loan or Credit Card Debt Which Is Worse?

By | Debt, Uncategorized

Credit cards and student loans are two major debt lines plaguing American households today. It’s said that the average American family carries $16,061 in credit card debt and a whopping $49,042 in student loan debt.

The latter statistic is worth looking into further.

Student Loan and Credit Card Debt

How Your Student Loan Impacts Your Credit

Your student loan is as real as any credit card or loan on your credit file. It’s not anymore “forgiving” than any other type of installment debt. This means every delinquency will hurt your credit score.

The worst case scenario comes from defaulting on your student loan debts. This is something you absolutely want to avoid. It can send even the strongest credit scores down 100s of points. The road to recovery will be long, and the damage will stay on your credit report for seven years.

You can usually negotiate with your student loan provider. If you’re in financial distress, try to work out a payment plan for the near future. Even avoiding a delinquency entry on your file can save you an 80-point drop after your first 30 days of being delinquent.

Your student loan reports both good and bad. However, it’s the bad that does the most to your credit rating, while good efforts have little reward. You need to avoid the penalties to your FICO score to have a chance to repair your credit effectively.

How Credit Cards Differ from Student Loans

Credit cards are a type of “revolving” debt, which means there’s an open credit line at all times. You will be able to borrow up to your max amount so long as the minimum monthly interest payments are paid.

It’s imperative to stay up to date on your credit card debts. Defaulting will cause extensive damage to your credit. You can typically pay a very small payment to keep your card alive. Meanwhile, the minimum payment for your student loan might be a bit more difficult to sustain.

Your credit score’s second-biggest factor is your utilization rate. This is the amount of debt you carry versus the amount you’re able to borrow. The higher it is the worse it says about you as a borrower. You want to keep it low (below 30 percent) for as long as possible; your payment history is another calculation variable and it considers your previous utilization levels.

Pay Credit Cards or Student Loan First?

It’s quite the dilemma. Paying your student loan helps with offing a major outstanding debt. However, paying off your student loan will not impact your credit utilization rate for the better in any way.

If you have a substantial amount of credit card debt, it makes sense to tackle that first. Each $1,000 you knock down will have a bigger impact on our credit rating, but keep in mind if your student loan runs into default it will be all for nothing.

Your payment history still remains the number-one factor in your FICO score calculation. Thus, it’s a good idea to see how you can improve it. This would mean maintaining payments on your student loan while reducing other debts.

You want to use any extra cash to tackle your overall credit card debt. The goal is to bring your utilization rates down as much as you can. This can be done from accepting credit limit increases too – so long as you avoid using the newly available funds.

Using Tax Refunds to Pay Off Student Loans

You will not want to make the mistake of using your tax refund as a way to pay off your student loan. Everyone thinks it is hard to take care of, so using your taxes is a sensible way to get the debt under control.

The truth is, your student loan will not hurt your score if the debt remains on your balance sheet. Trouble only arises when you run delinquent or if you default the loan. This means you can leave this particular installment loan for last while focusing on paying off higher-interest debts.

You are endangering your creditworthiness by putting your tax refund to use to pay off your student loan. The large lump sum can go toward your credit cards and have a much greater impact. Remember, credit cards accrue interest month after month as you fail to pay them off; it won’t take long for your debts to pile up if these are left unchecked.


At the end of the day, the worst type of debt to carry is the one you fail to pay off. It’s important to prove you are a good, trustworthy borrow in every sense of the term. Therefore, you must maintain positive status with your accounts (including your student loan) even if you only pay the minimum.

If you ever feel unable to pay your student loan payments, consider one of the three payment plans they offer. You can arrange to pay as you earn, based on your income or contingent on a certain amount of generated income.

If you fail to come to a deal then missing your payment will result in a late payment entry on your credit report. The damage will be irreversible; now that you know what’s at stake, make sure you sort your debt repayments accordingly.


Good Debt vs. Bad Debt

By | Debt

Good Debt vs Bad Debt

If you’ve been trying to improve your credit score, you probably already know that “debt” can be a scary word. As such, you’ve likely been trying to avoid it as much as possible. But according to many credit experts, not all debt carries the same weight when it comes to how it affects your credit score. In fact, some types of debt are considered good debt — or at least not likely to harm your credit score. Here’s a look at how certain types of debt may affect your credit rating.

What Separates Good Debt From Bad Debt?

The first thing you should know is that any type of debt that is considered an investment tends to be good debt. This means if you’re taking on debt to buy an item or service that will improve your net worth in the long run, it’s likely good debt. In short, common examples of good debt include mortgages, student loans, business loans or anything that will save you money in the future.

On the other hand, bad debt won’t make you wealthier or help you save money. Most people who rack up bad debt do this by using credit cards to buy items they want and then make minimum payments on those cards so the interest continually accumulates. Basically, if you’re just using credit cards or taking out loans to buy disposable items, you’re collecting bad debt and will likely lower your credit score.

Types of Good Debt

Mortgage Loans

One of the best types of debt to take on is a mortgage because houses usually increase in value over time, unlike most other items you might buy. You will likely recoup the costs of your house and then some when you sell it, so taking on a mortgage loan is considered a good investment for most people. And even though you pay interest on this type of loan, it’s far lower than most credit cards, and you can deduct it on your taxes.

Student Loans

If the career you have in mind requires a college degree, you shouldn’t be afraid to take out student loans to pay for it. Of course, getting free money in the form of scholarships and grants is even better, but it’s not realistic for everyone to pay their entire college tuition this way. This is why student loans don’t tend to have a negative effect on your credit score, as long as you pay them back according to your payment plan once you graduate.

Business Loans

If you have a solid plan for a business, you shouldn’t be afraid to apply for a business loan to cover your startup expenses, including equipment and advertising. After all, you stand to make it all back and also support yourself if you have a stable business. This is why business loans are considered good debt when it comes to your credit score.

Expenses That Will Save You Money

Some types of debt are good because they will save you money over time, even though they cost money right now. For example, buying solar panels for your home is often considered good debt, since this addition will save you money on utility bills and improve your home’s value. Another example of taking on good debt is when you refinance via a loan with a low interest rate so you can pay off a loan that has a high interest rate. This move could save you hundreds or even thousands of dollars, so it’s usually worth taking on more debt.

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Types of Bad Debt

Credit Cards

The No. 1 type of bad debt is the credit card. The average U.S. resident who carries a credit card balance has more than $5,000 in credit card debt, so it’s not uncommon to have this type of debt. But it can easily affect your credit score in a negative way, especially since you’re probably using credit cards to buy items that are depreciating rather than increasing in value. If you have credit cards and want to improve your credit score, you should stop using them and start paying more than the minimum, particularly on the card with the highest interest rate.

Payday Loans

If you’re low on money until you get paid, it may be tempting to get cash today by taking out a payday loan. But in the end, you’ll pay much more than you borrow because the fees and interest rate can be very high. In fact, the interest rate is often three times the amount you borrowed, making payday loans bad debt. If you need money fast, your best option is to borrow from a friend or family member who won’t charge much or any interest, and then work on building up your savings account to help you in times like this. That way, your credit score won’t suffer even when you have unexpected expenses.

Overall, if you’re going to have any debt on your credit report, it’s better to have good debt than bad debt. So if you’re trying to improve your credit score, you can start by focusing on paying off credit cards and any other high-interest debt. As long as you stay current on your good debt — such as your mortgage, business loans and student loans — your credit score should start improving.


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