Archives for "Collections"
Credit Repair Adventures: A True Story
The Journey Begins
Bob and Sue are real people. They are smart and resourceful, but several years ago they made some bad choices. Soon their credit was a mess. So they started their credit repair journey. Here are a few of their credit repair adventures that might shine some light on your own path. Good luck!
Cease Communication Letters Cut Two Ways
Bob and Sue were reading about credit repair and the Fair Debt Collection Practices Act on the internet. They came across information about Cease Communication Letters which would force a collector to stop calling. So one day, after getting a call from an aggressive collector, Sue suggested they send a Cease Communication Letter. They sat down at the keyboard and gleefully wrote a note to the collector demanding that he cease communication. Bob even added some impressive language to convey his knowledge of the law. They went to the Post Office, mailed the letter, and went out to celebrate their credit repair victory. And then it all went bad.
The Cease Communication Backlash
Bob and Sue thought they magically made the collector vanish. Unfortunately, the collection was about to return with a vengeance. One evening there was a knock on the door. Bob answered, and a man handed him an envelope. Bob had been served. The collector who received the Cease Communication Letter had returned the collection to the original creditor. The collection was well within the statute of limitation for collecting through the courts, and the creditor decided to sue. It was their right. Bob and Sue learned the hard way about sending Cease Communication Letters before the expiration of the Stature of Limitation. Credit repair decisions require care.
Falling for a Collection Trick
One day Bob and Sue got a friendly letter from a collection agency. It was an offer to settle an old debt for half price. Even better, Bob and Sue could make three affordable installment payments. They were determined to make their credit repair program succeed, so they called the collector and started the payment plan. It was only later that they realized the mistake. First of all, the collection was many years past the statute of limitation for collection through the courts. Worse yet, in spite of the fact that this account was showing on their credit report, the original default had occurred more than seven years ago…
Credit Repair and Timing
So what did this all mean? It meant that they did not have to pay a penny. The fact that the collection was beyond the statute of limitation for collecting through the courts meant that the collector had no way to enforce the collection. And the fact that the original default date was over seven years old meant that Bob and Sue could have disputed the presence of the account on their credit report with the credit bureaus and it would have been deleted. Credit repair is all about the timing.
Statute of Limitation Knowledge Pays Off
Sometime later, after Bob and Sue had become aware of their credit repair rights, another collection letter arrived. They were not about to be fooled again. First, Bob checked the statute of limitation and found that the original default happened about ten years previously. He had also learned about his right to validate a debt within thirty days of getting a collection letter. So he sent a letter demanding that the collector furnish proof of their legal right to collect the debt along with a true accounting of the amount claimed. Because he knew that the documentation must be objective he also insisted that the accounting come from the original creditor. The collector was never heard from again. The collection was never reported on Bob’s credit. Credit repair success is sweet.
Credit Repair and New Accounts
Bob and Sues credit repair effort was well underway. Their credit reports were really shaping up. Many derogatory accounts had been deleted. They were happy, at least until their trip to the car dealer. The finance manager ran their credit and informed them that their credit scores were too low. The reports were not bad, but the scores were dismal. After doing a little homework Bob and Sue found out about the importance of building new credit. It is not enough to clean up derogatory information. The FICO credit scoring model needs open and active credit. So they each opened two new secured credit cards. They made their payments on time and kept the balances under 20% of the high credit limit. Within a few months their scores were dramatically higher. Soon they were behind the wheel of their new car.
Budget Some Credit Repair Insurance
Bob and Sue were thrilled; their credit repair effort was successful, but they worried about a setback. They wanted to be ready for anything. So they sat down one Sunday morning and worked up a budget. When they were done they had found a way to set aside ten percent of their monthly income for a savings account. Initially they thought of it as credit repair insurance. Over time they realized it was the best thing they could have done. Their savings insured that they could maintain their perfect credit. But better yet, it gave them real inner peace and satisfaction, a new and fantastic experience.
Copyright © 2007 Sky Blue Credit Repair. All Content. All Rights Reserved.
Credit Repair and the Collection Puzzle
You Can Take Control!
Collectors use both law and psychology in the practice of their craft. Many collectors operate legitimately, while others cross the line daily. Do you know your rights? Here is the correct way to deal with a collector – and maybe even come out ahead.
Getting the Collection Letter
Many people in credit repair programs have received collection letters. Sometimes the credit repair effort itself can attract a collector, but you can turn the situation to your advantage. Collection letters are designed to intimidate, and include enough threatening legal language to upset anyone. Many recipients of collection letters opt to ignore them. This is a mistake. You have an important right when contacted by a collector, but it only lasts for 30 days.
Debt Validation as a Credit Repair Tool
The Fair Debt Collection Practices Act (FDCPA) is the body of law that governs the collection industry. Under the FDCPA, if you receive a collection letter you have a powerful legal right called debt validation, an excellent weapon in the credit repair process. Upon your request, a collector must provide proof of their right to collect, as well as an accounting of the amount claimed. Further, an internal memorandum reiterating the information provided in the collection letter does not satisfy the obligation. Documentation must be solid and objective. If the collector cannot provide the requested proof, they must cease all collection efforts. But you must request this documentation within 30 days.
Collector Do’s and Don’ts
Under the FDCPA collectors face a long list of prohibited behaviors. Many of these rules are ignored, bent, and often broken. Here is a sampling of behaviors which collectors are prohibited from engaging in:
- Contacting consumers by telephone before 8:00 AM or after 9:00 PM
- Calling the same consumer in a repetitious manner
- Threatening to make embarrassing contacts with an employer or other person
- Contacting a consumer at his place of employment after the consumer has advised the bill collector not to do so
- Inquiring about personal property, and implying that these items may be confiscated to satisfy the debt
Cease Communication Letter
You have the right under the FDCPA to demand that a collector cease all communication with you. But like many credit repair tools this must be used with caution. If you choose this course of action, just put your demand in writing. A cease communication letter will not prevent collectors from filing suit against you, but it will stop telephone calls and collection letters. Be aware that 5% of all complaints received by the FTC about FDCPA violations in 2007 related to collectors ignoring cease communication letters. If the calls keep coming you should send the letter again, only this time send it certified and copy the FTC.
Problems Before Statute of Limitation Expiration
Credit repair requires knowledge; you must understand the possible consequences of your actions. If you send a cease communication letter to a collector prior to the expiration of the statute of limitation (SOL) you may push them to file suit. The SOL for debt is state specific and debt-type specific. You can find the information on the web. But be careful. A collector may apply the SOL from the state where the contract originated or your current state of residence, so check both. On the other hand filing suit can be expensive and is not always the best move for a collector. Many collectors return the debt to the original creditor upon receipt of a cease communication letter. This may mean that another collector will be in touch soon and your credit repair efforts may need to be renewed.
Getting to Know Your Statute of Limitation
If you get a collection letter you should check your SOL. The SOL clock starts with the date of original default on the original debt. Collectors are notorious for “accidentally” resetting the clock. Many people starting a credit repair program discover how frequent this practice is when they examine their credit reports. The date of original default is the first time you were late in the sequence that led to the charge-off or collection status. Also note that the SOL for collection has nothing to do with the reporting limit on your credit report. The SOL for debt is usually far less than the normal seven-year limit for credit reporting.
Credit Repair Solutions After SOL Expiration
If the SOL on the debt has expired you are home free. Here is a bit of credit repair magic. A collector can attempt to collect beyond the SOL, but since they can’t get a judgment they have no way to enforce their efforts. A cease communication letter will put and end to their presence in your life. You have other options as well. Remember that the SOL is different from the reporting period limit on your credit report. The collector may have no way to enforce a collection, but it can continue to show on your credit report. If you would like to negotiate the debt, now is the time. Any money a collector gets past the SOL is a gift, so start your offer as low as you wish. You may even be able to negotiate for complete removal from your report, a perfect credit repair outcome.
Copyright © 2007 Sky Blue Credit Repair. All Content. All Rights Reserved
Credit Repair Essential Guidelines
Let’s Get to Work!
We speak with people all day long about their credit reports. Here is a review of the most common questions that we encounter about reporting periods for derogatory information, as well as guidance on resolving the related issues. These details, if properly understood and acted on, can make a significant difference in your credit score.
A Point of Caution
The following information involves the reporting periods for derogatory information on your credit report. In all cases, creditors are responsible for recording the commencement date of the reporting period. This date is coded in the credit file that is furnished to the credit bureaus, and eventually will tell the credit bureaus when to cease reporting. This commencement date is supposed to be inherited by subsequent collectors as well. In actual practice, neither creditors nor collectors are completely diligent in reporting or maintaining these important dates, hence the need for credit repair. Consumers are well advised to monitor old derogatory information to insure that it ceases reporting on schedule.
Chapter 7 Bankruptcy
A discharged Chapter 7 bankruptcy will show in the Public Records section of your credit report for 10 years from the initial filing date – please note that the filing date is different from, and prior to, your discharge date.
Debts that are discharged in a bankruptcy can continue to report for seven years. Handy credit repair tip! Once a debt is discharged it should not report with a past due balance, or as a charge off, or in a collection status; this derogatory information should be removed.
Dismissed Chapter 7 bankruptcies will report for ten years. A dismissed bankruptcy is a bankruptcy which was filed and thereafter canceled or disallowed.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy which has been completed will continue to report for seven years from the initial filing date, rather than the discharge date.
A Chapter 13 bankruptcy which was not completed will continue to report for seven years from the initial filing date.
Bankruptcy and the Fair Credit Reporting Act – A Legal Note
It may be of interest to note that the only reference to bankruptcy in the Fair Credit Reporting Act is a blanket rule that limits the reporting time to 10 years following the filing date. See § 605. [15 U.S.C. §1681c] (a). The credit bureaus, however, voluntarily make exceptions for Chapter 13 bankruptcies as noted above.
Collections – Overview
Collections are unique for the reason that they typically change hands, often several times during their lifetime. Important credit repair tip! Please note that only one collector at a time can legally report the debt; and only the collector that owns the debt can legally report it. All duplicate collection accounts for the same debt should be deleted from your credit report.
Collections can report for seven years plus 180 days from the original default date. The original default date is defined as the first time that you missed a scheduled payment prior to entering into a collection or charge off status. The original default date always begins with the original creditor and cannot be reset, nor can the reporting period ever be extended by subsequent collectors.
Charged Off Credit Cards – A Tip
Once a creditor has passed a charged off account to a collector they cannot report a past due balance. The balance should report as zero; the charged off amount may report on a separate line.
Unpaid Judgments
Unpaid judgments can continue to report for seven years or until the governing state statute of limitation has expired, whichever is longer. You need to check your state statute of limitations to know for sure. State statute of limitations for judgments range from 4 years (PA) to 21 years (OH), and in some cases may be renewed one or more times.
Paid Judgments
Paid judgments can report for seven years from the initial filing date. This is handy to know if you are in a credit repair program; you may quickly remove a judgment from your report if you are willing to pay it, as long as the original filing date is seven years old. For legal support see FTC Official Staff Commentary § 605(a)(2): “Paid judgments cannot be reported for more than seven years after the judgment was entered, because payment of the judgment eliminates any “governing statute of limitations” under this subsection that might otherwise lengthen the period.”
Tax Liens
Paid tax liens may not report more than seven years beyond the date of payment. Unpaid tax liens may report as long as they are in effect. If you are in doubt consult a CPA or tax attorney.
Student Loans
Late payments on your student loans will cease reporting after seven years. Defaulted student loans are another story…
A 1991 amendment to the Higher U.S. Department of Education Act lifted all time limits for collection of student loans. The reporting of defaulted student loans on your credit report can now go on forever. In addition, a 1998 change in federal law made it virtually impossible to discharge a student loan in bankruptcy.
If you are in default on a student loan you are well advised to address the issue, sooner rather than later. Fortunately, there are excellent rehabilitation and consolidation programs now available to everyone. These programs offer affordable repayment options and can even erase the default status from your credit report! This can prove to be a painless and powerful step for anyone in a credit repair program. Explore your options today with the Student Loan Ombudsman Office at (877) 557-2575.
Copyright © 2007 Sky Blue Credit. All Content. All Rights Reserved.
Credit Repair and Your Life in 2008
Now is the Time!
Good credit has never been so important. The entire credit landscape has changed over the last year. And 2008 brings new and unprecedented challenges. How did this happen? What can you do to adapt and even thrive in this new environment? Here is some insight!
A Little History
In the late 1990s real estate values begin to increase at an unexpected pace. In response to the healthy market, lenders eased their credit guidelines. Mortgage money was plentiful. Default rates on mortgages were minimal. Home values continued to rise and lenders perceived little or no risk to their collateral. Borrowers with adjustable rate mortgages could easily refinance if faced with an interest rate adjustment. As the party continued, new lenders entered the market to capitalize on the opportunity. And as competition among lenders increased, credit guidelines eased even more…
The First Signs of Change
In mid-2005 the real estate market was peaking. A record number of Americans owned homes, and millions were supplementing their income by speculating in the real estate market. The shift began slowly at first. Alan Greenspan, expressing concern about the U.S. Housing market said that, “at a minimum, there’s a little froth in the housing market, and it’s hard not to see that there are a lot of local bubbles.” The media picked up on the phrase, and before long we were all hearing about the real estate bubble. Could the meteoric rise in home prices last? Would real estate values slowly stabilize? Or would the bubble burst?
The Big Shift
Behind the scenes lenders were becoming concerned. The balance in the real estate market was changing. Homes were no longer selling in a matter of days and inventory levels were increasing. Soon, credit guidelines were tightening. As lenders began to withdraw from the market the real estate market slowed further. And as the real estate market slowed further, lenders tightened more, many shutting their doors and withdrawing entirely.
A Whole New World
As 2008 gets underway, signs of stability are showing. The credit market has fully reinvented itself. The days of creative financing are past, and ripples from the mortgage market have spread throughout the entire financial world. Credit issues, once easy to work around, must now be addressed and overcome. Now is the time to become pro-active. Now is the time to insure that your credit is as good as it can possibly be. Now is the time to begin your credit repair effort!
Getting Started
What are the facts? Where are you now? Get copies of all three of your credit reports. It is essential to identify every item on your credit that may be having a negative impact on your credit scores. Knowledge is power. Successful credit repair is all about the details. I strongly suggest that you set aside enough time to take a close look at your reports. The investment of your time in this project will pay dividends beyond your imagination.
Give Yourself the Benefit of the Doubt
Credit reports are full of errors. You should examine your report with a critical eye. If you see anything at all that you do not recognize it is important that you question it. It is not enough that an item look familiar. Don’t speed-read your credit report; credit repair requires patience. Do you see late payments? If you are not 100% certain that the information is correct, you should question it. Are their collections? Unless you are in communication with the collector and you have received full and satisfactory proof that they have the legal right to collect the debt, question it! Does it look like derogatory accounts are reporting more than one time? Question them!
A Great Collection Tip
When an account is charged-off, the debt is normally sold to a collector, and just as often, re-sold again. If a collector does not currently own the debt, they have no legal right to report the collection. Most collectors do not bother to cease reporting when they should. When it comes to your credit report, you should not always believe what you see. Remove these obsolete collections and watch your credit scores go up.
Check Those High Credit Limits
Most people know that the relationship between their credit card balances and their high credit limits can have a major effect on their credit score. Did you know that many credit card issuers fail to report the high credit limit properly? Track down any underreported high credit limits and correct them. This type of reporting error may not be as easy to spot as obvious derogatory items, but your patient credit repair effort will pay off.
Charge-off Pointer
The statute of limitation for reporting a charged-off account is seven years plus 180 days from the date of your original default. The date of your default is the date of the first missed payment that led to the charge-off. Collectors cannot restart the clock. Collectors often illegally re-set the clock, and collection accounts may linger for years. If you see a collection on your report for an account that went into default more than seven years plus 180 days ago, question it! It will be removed.
Copyright © 2007 Sky Blue Credit. All Content. All Rights Reserved.
Credit Repair and the Power of Debt Validation
Debt Validation – A Powerful Tool
Have you received a collection letter? The law provides consumers with a powerful tool for dealing with collectors. Here is our explanation of the power of debt validation and how to use it to your benefit.
The Letter of the Law
The correct way to respond to a collection letter is with a written request for debt validation. This is your right under the Fair Debt Collection Practices Act (FDCPA), and if done in a timely and correct manner can produce fantastic results. Let’s start with the law: FDCPA § 809. Validation of debts [15 USC 1692g (b) “If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.”
Timing is Everything
Please note that there is only a 30 day window of opportunity to request your debt validation. Collectors must abide by the laws spelled out in the FDCPA, but these laws only mandate a response for the 30 days following the date of the initial collection letter. Beyond the 30 day window collectors have no obligation to provide the documents that you request and you have lost the opportunity to force compliance. Don’t procrastinate. Your credit is too important.
Why Validate the Debt?
Why request validation of a debt? There are two good reasons that you should request debt validation on every collection letter you receive, even if it looks legitimate. First, how do you know that the collector has the legal right to collect? You don’t! Debt is regularly sold, and just as often re-sold. You may have incurred an obligation with the original creditor, but you don’t know anything about the party that is currently demanding payment. So exercise your rights and ask them to prove that they own the debt. Secondly, how do you know that the amount of the debt is correct? Is the interest calculated properly? Are there other fees added? You deserve to know. As with any other credit repair tool, it’s about exercising your rights!
The Debt Validation Letter
Let’s get to work. Write a letter to the collector. Make it neat. Reference the debt using the identification they provided in the collection letter, such as collector account number, creditor account number, creditor name, etc. Clearly state that you dispute the collection and that according to the FDCPA you demand that the collector provide proof that they own the debt and have the right to collect, as well as proof of the amount owed by providing a copy of your signed credit agreement with the original creditor and a complete accounting of the amount in question. Attach a copy of the collection letter, and send it certified mail. If you are not comfortable doing this yourself contact a reputable credit repair company. Most legitimate credit repair businesses offer debt validation as part of their arsenal and will be happy to do this for you.
The Response
What happens next? Once you have sent a debt validation letter to a collector they must satisfy your request with adequate documentation. Ownership of debt may be proven with a contract or purchase agreement transferring the debt to them. The amount owed may be documented with account statements from the original creditor, or a copy of the original signed loan agreement and an accounting of the total. It is never sufficient for the collector to provide their own internal itemization of the debt. In all cases, the documentation should be clear and provide definitive proof of the collectors claim.
Say Goodbye to the Collector
What happens if the collector cannot (or does not wish to) provide the documentation that you request? If they can’t comply …they can’t collect, they can’t contact you, and they can’t report the collection to the credit bureaus. It’s that simple. And it is likely that you will never hear from them again.
An Important Note
Our credit repair clients occasionally express concern that if the collector is pushed too hard they will send a summons and attempt to get a judgment. It is not legal for a collector to take any additional steps to collect, including getting a judgment, until they have satisfied their obligation under the FDCPA. If you receive a summons after challenging a collector with a debt validation letter you will need to appear in court with proof that you requested validation. Going to court is not an attractive option, but if you kept proper records and appear with your certified mail receipt you will prevail.
Copyright © 2007 Sky Blue Credit. All Content. All Rights Reserved.