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Charge Off Archives | Ovation Credit Repair Services

Nov 22
0

Repair Your Credit – “Waiting It Out” Doesn’t Work

By | Credit Repair

Repair Your Credit Now

You ran into a few problems with credit and now you have negative accounts listed on your report. Derogatory information no longer appears after seven years, so you may be tempted to wait it out as a way to repair your credit. However, you run into several major issues when you take this approach.

1. Creditors Reselling Debt

Once you miss a few payments on an account, a creditor typically claims a loss on the debt through a process called a charge-off. They may sell the account to a collection agency. This company attempts to get payment for the delinquencies. If they’re unsuccessful, the debt may pass to other debt collectors. These accounts may linger on your credit report, particularly if you make a payment to one of the businesses. You may get stuck waiting several additional years past the seven-year limit due to this activity and debt reselling.

You also get into a position where it’s difficult to keep track of the agency holding your debt. Some scam companies may act as though they are the responsible party, but they’re simply trying to get your personal information. With identity theft on the rise, you put yourself at risk.

2. Delayed Drop-offs

Why repair your credit when the negatives will just go away in seven years? Well actually, your bad debt doesn’t disappear from a credit report when the account reaches seven years in total. It’s calculated based on the date of the first delinquency, which is when you began missing payments. If you skipped several months then attempted a payment plan with the company before the charge-off, you may end up adding months or years to the predicted drop-off rate.

3. Multiple Listings

Another issue with waiting out seven years instead of repairing your credit, is the number of negative account listings you end up with on your credit report. You may only have one charge-off, but you can have the original listing, plus another one for every collection agency that purchased the debt. Waiting it out actually causes you to accumulate even more bad debt. Time is of the essence when you need to repair your credit. These entries bring down your credit report and can make your credit-worthiness look worse than it is.

4. Legal Consequences

You are legally liable for the debt you incur, even after the original creditor charges the amount off. The company has a certain statute of limitations in which they can take legal action against you for the account. This period varies from state to state but lasts for several years. You can get served with a lawsuit for the full amount, plus legal costs. Not only do you need to go to court, but you get a judgment against you that also ends up on your credit report.

5. Financial Consequences Costing You Thousands

Bad credit does more than stop you from getting credit cards. You end up with higher interest rates on mortgages, personal loans and car loans, if you can even qualify for them at all. Insurance companies use credit scores as part of their risk profiling, so you get a higher premium when you pick up vehicle or home insurance. Some creditors may place a wage garnishment or bank account lien on you after winning a judgment. You get money taken out of your paycheck or directly from your checking account, which can have disastrous consequences if it happens at the wrong time.

If your delinquent accounts come from the same company that holds your checking or savings account, it may end up pulling money from your accounts to cover these costs.


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6. Career Consequences

Government contracting often requires a security clearance for employees. If you have significant debt, you may not qualify for the right level to get the job. Many companies, particularly those in the financial industry, also look at your report as part of the hiring process. They may feel that many collection accounts show a lack of responsibility. To think you could be fully qualified but not get the job because you didn’t repair your credit.

7. Personal Consequences

Finding a place to live becomes difficult with bad credit. Landlords look through credit reports to determine whether you can afford to live in the apartment and whether you would be a good tenant. If they see a lot of charged-off accounts, you could get passed over for other applicants. Most professionally managed properties look at this information, so you would have to search out a private landlord instead.

The stress associated with bad credit is also significant. You have to worry about constant application rejections, wage garnishments, lack of access to credit products and an inability to get good rates on anything. In an emergency, you can’t turn to a credit card, which leaves you at the mercy of predatory lenders.

Since you can’t get credit cards, you don’t have access to incentives such as cash back, rewards points, roadside assistance and travel insurance. If you do qualify, you may have to pay an annual fee to keep the card open or secure the credit limit with your own money.

Sitting back and waiting for everything to blow over works well in a natural disaster, but it’s not a great tactic when you need to repair your credit. You face legal action, personal consequences and financial instability when you aren’t proactive about your credit health. Start looking into credit repair assistance, so you don’t have to put your life on hold for seven, 10 or even 15 years.

Sources:

http://www.myfico.com/crediteducation/creditscores.aspx

http://www.experian.com/blogs/ask-experian/when-negative-information-will-be-removed-from-your-credit-report/

http://www.rd.com/advice/saving-money/5-smart-ways-to-reduce-stress-around-personal-debt/

http://www.forbes.com/pictures/eegk45gidm/credit-scores-dont-stop-with-credit/#54e166fd44c6

Nov 28
0

3 Credit Myths Debunked

By | Credit Repair, Credit Reports, Credit Scores, Your Credit

There have been a lot of great movies in recent years based on mythological characters: Percy Jackson & the Olympians: The Lightning Thief (2010), Clash of the Titans (2010), Immortals (2011), and Thor (2011). Myth-based movies are great entertainment, but myths about your credit score can be expensive. The following three myths about your credit score can end up being very costly.

Myth One: If I Pay Off the Debt, They’ll Report It

One of the biggest myths about your credit score is believing that the company to whom you’ve paid a debt will properly report it to the credit agencies. People often believe that as soon as they’ve paid off a debt, the company will immediately report that to the credit agencies and their score will improve. Unfortunately, depending on the company’s reporting practices, they may wait three months to report the payoff, or they may never report it at all.

What you actually owe a lender and what’s reporting on your credit report are often two different things. It’s crucial to review your credit report regularly and take charge of making sure it stays up to date if you really want to improve your credit rating.

Myth Two: If It’s Not on the Report, I Don’t Owe the Debt

Another myth that hurts consumers is the assumption that if something does get removed from your credit report that you no longer owe the money. For example, let’s say you really do owe $4,000 on a charge off, but we’re able to get it removed from your credit report because it isn’t being accurately reported. That doesn’t mean you don’t still owe the money.

Myth Three: Paying Off Debt Fixes Everything

Many consumers believe that the minute they pay off their debts that their credit rating will increase significantly. But if you’ve had a history of late payments and delinquencies, companies can still report all the late and missed payments for seven years. It can take that long for your credit to fully recover.

Paying off your debts and bringing payments current will help your overall credit score. Making the debt go away, especially if it is in collection, helps in two ways: one, it shows paid instead of still owed. Two, it stops the date of last activity, which means seven years from that date it goes away. Otherwise, it just keeps being a current reporting, and the seven years keeps being seven years in the future.

Jun 15
0

How Long Can Information Be Reported On Your Credit Reports?

By | Bankruptcy, Collections, Consumer Rights, Credit Cards, Credit Laws, Credit Repair, Credit Reports, Fair Credit Reporting Act, Your Credit

One of the first credit repair steps involves removing information that is outdated.  The problem is that many consumers cannot tell when information is outdated.   On the surface, it seems like a simple exercise – just compare some dates.  While that is correct, the more difficult part involves determining which dates to compare.  The answers are provided in The Fair Credit Reporting Act, section 605.  According to section 605, the following items may not be reported on your credit reports:

  1. Bankruptcy: Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
  2. Civil suits, civil judgments, and records of arrest:  Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period.
  3. Paid tax liens: Paid tax liens which, from date of payment, antedate the report by more than seven years.
  4. Collections and Chare Offs: Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years.
  5. Other Adverse Items: Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years.

So What Are The Exceptions?

There are exceptions to these general rules.  Most of the exceptions are based upon the use of the report.  The general rules are not applicable in the case of any consumer credit report to be used in connection with the following:

  1. Credit transactions involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more;
  2. Underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or
  3. Employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.

If you have ever wondered why there are so many different credit scoring models, this is one of the primary reasons.  The information that is permitted to be included on the credit report can vary depending on what the credit report is being used for.

So When Does The Time Period Start?

In regards to bankruptcy, the 10 year period starts at the date of entry of the order for relief or the date of adjudication.   In regards to the other items, the 7 year period begins, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.   Clear as mud, right?

So What Does This Mean?

In order to understand if items on your credit report are outdated, you need to understand how the dates are calculated.  Remember, you should review your credit reports frequently for errors and signs of identity theft.  It is not uncommon that dates are incorrect.  In fact, in the case of debt collection, errors in the proper dates are very common.  These errors may result in negative items being reported longer than necessary.  Check the dates on your reports and verify that the information is correct.  If you need help, give us a call – we would be happy to assist you.

 

Nov 09
0

When I pay off a collection or charge off account, will it start reporting as paid in full and as a positive account?

By | Ask a Credit Expert, Collections, Consumer Rights, Credit Cards, Credit Laws, Credit Repair, Debt, Payment, Personal Finance, Your Credit

When you pay off a collection or charge off account on your credit report that is great. It is always in a consumer’s best interest to pay off their debt. However, a lot of consumers think that once the account is paid that it is no longer negative and has actually become positive. That would be great, unfortunately that is not the case, and it is still a negative account. The creditor should update your account on your credit report to show that it is paid in full or paid collection/charge off.  By updating that information it will have a positive impact on your credit report and more importantly on your credit score. The amounts owed on your accounts is 30% of your credit score, so as you pay accounts off it will help to raise your credit score. By paying accounts off they no longer have such a bad impact on the credit score.

Your credit scores will improve when you pay off accounts because your reports will show you owe less money to creditors, it will stop the account from updating every month that it is not paid and it’s late, and it will keep the date of last activity as when it was paid.  When the account is paid off it stops the activity on the account so that it will fall off of your credit reports 7 years (for most items) from the date of last activity.  All collection, charge off, and late payments should come off your reports 7 years from the date of last activity. If you have accounts that have not updated as paid or have not come off your reports when they were supposed to, then give us a call.

If you have any other questions about items on your credit reports, how items are reporting, and when items will come off your credit reports, please call one of our Experts at Ovation Credit Services.  Call 1-866-639-3426 and schedule a FREE credit consultation! Check out http://www.ovationcredit.com/howItWorks/howWeHelp.php to see other ways we can help! We are here to guide you to a BETTER Financial Future!

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