Carreon and Associates Blog

Posts Tagged ‘third party’

Will paying off a debt remove it from my credit reports

November 2nd, 2009

Well that depends on you. Yes you. If you have a debt in collections and you’ve decided to pay it off because someone advised you to do so- perhaps a mortgage lender, then you’d be surprised to know that that may be a very bad idea.

If an account has been placed on your credit reports that is negative such as a charge off, collection account or repossession, simply paying the balance will NOT improve your credit. Here’s why.

A bad account status like a charge off, collection account, repo, foreclosure etc is considered negative and as bad as it gets. The rating is commonly referred to as an R-9. To put this in perspective, an R-1 is a perfect credit rating. An R-9 is negative and unfortunately if you pay an R-9, its still an R-9. Its simply paid now, which has released you from financial liability but your credit reports are still left in ruin.

The best route to take is to NEGOTIATE THE RATING IN EXCHANGE FOR THE PAYOFF. It’s done everyday- believe it or not. Sure an original creditor may not agree to these terms but a third party debt collector will. Most negative accounts past 180 days delinquent are sent to third party debt collectors. Once that process happens, you are in a better position as far as negotiations of the credit rating go.

A third party debt collector will often settle the account and delete the credit rating because all they are concerned with is getting paid. An original creditor will not approach a debt this way, but a bill collector will.

By getting the debt collector to agree to settle the debt for this exchange, you will gain something from the payoff as well. Keep in mind there are a few instances where you will want to pay the debt off even if the collector refuses to improve your credit rating.

For example, a collector has absolutely refused to remove the rating, you’ve received validation that the debt is accurate and you need this account to show paid because either you are being forced to by a lender before they issue you a loan, or you want the collection agencies to leave you alone and are worried about being sued. This is when you need to pay the debt if negotiations have fallen through.

When dealing with a collection item you must always attempt to negotiate the rating before you pay a dime. Not doing so is a very bad financial move because chances are, you will get your way. Can you imagine having an item completely wiped away from your credit reports from just a little effort? It’s definitely worth your time.

Article written by credit expert, Kristi Feathers. Kristi can be contacted via her website at www. KristiFeathers.com

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Tags: credit rating credit repair help credit repair tips credit reports creditor dealing with bill collectors debt collectors debt settlement tips financial liability fix your credit how to settle a debt with collection agencies negotiations settle debt for credit rating third party validating a debt validation

Original creditor settlement tips

February 19th, 2009

If your account has yet to be turned over to a collection agency theres still time to make the best with the original creditor. Original creditors have their own in house collection efforts but usually after 4 months, the account will be turned over to a third party debt collector.

If you have issues with the account, its best not to hide and hope for the best. You can negotiate with the original creditor to avoid the account being turned over to a collection agency.

Communication is key. The OC is not going to go away. They aren’t simply going to wipe away your balance because you’re hiding. You need to call them and explain your situation.

During these difficult times with our economy, OC are bending more and more. Where they used to refuse specialized payment terms and negotiating credit ratings, they now realize it’s in their best interest to work with you.

OC response varies from creditor to creditor but the simplest way to know where you stand is to pick up the phone and get a hold of your account manager. Everyone is hurting right now, people have lost their jobs all across the country so this needs to be relayed to your creditor.

Explaining your situation will get the ball rolling on working together. The OC may agree to cease late fees and put you on a payment plan to help you temporarily. They understand that you have the right to file for bankruptcy or go into a credit counseling program so they are willing to help the majority of the time.

By contacting the OC you may be able to stop the collection process. They may agree to freeze the account or even lower your interest to make the debt affordable. They want to be paid and they also want to hold onto the debt if possible. It costs money to give the debt to a collection agency.

If the debt is secured such as a mortgage or auto loan, the options may be more limited but banks are doing loan modifications right now on secured loans, so make the effort to see what can be done. If the debt is unsecured like credit card debt, the creditor knows they have no collateral on the loan so they will be more flexible in working with you.

You may be able to set up a 12 to 24 month plan with them for reduced interest, no late fees and smaller payments in addition to avoiding the dreaded turn over to a collection agency.

The OC may also be more willing to freeze the reporting to the credit bueaus while your on a modified plan. Your credit rating is an important part of the negotiation process to keep in mind. Again, it cant hurt to ask.

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Tags: auto loan bankruptcy counseling program credit card debt credit counseling credit ratings creditor dealing with original creditors debt collector debt negotiations difficult times economy late fees secured loans settlements third party tips

Dealing with collection accounts

July 29th, 2008

I’ve seen it all with credit reports. Judgments, tax liens, charge offs and collection accounts. Those are the tougher items. You probably assume that a 30, 60, or 90 day late is much easier to remove than a collection account. Not so and here’s why.

An original creditor, say a Capital One, isn’t going to alter your payment history. They simply do not negotiate and alter credit ratings unless they’ve made a mistake, then they’ll update it.

A collection agency however, is much easier to deal with because they are a third party collecting the debt, so their sole purpose is to get paid. If that means negotiating with you, they’ll do it. Collection agencies are all about quotas. They deal in the masses of accounts and every penny adds up.

So, if you have a collection account on your credit here are some tips to deal with it.

Validation of debt. First, you should use the FDCPA (Fair Debt Collections Practices Act) to validate the debt. If the collection agency doesn’t have appropriate records then it will be removed with no need to pay anything.

When agencies buy accounts, they buy them in bulk. So your account may have been assigned with just basic information like your name, address, account number, and balance. if you send a letter requesting to verify the debt and the records are either too old from the original creditor or the agency never received any supporting documentation when they bought it, then presto chango! Deleted.

Negotiate the rating. This technique is often used because a collection agency wants to be paid at any cost. You can negotiate with them to remove the bad mark in exchange for payment. If they agree, get it in writing FIRST. Once you have the approval letter from the agency that they AGREE to delete the mark in exchange for money, then send in your payoff with a copy of the letter. Give them 30 days to update your credit history and then request a copy of your credit reports.

If the mark is still there, send a copy of the letter certified mail to the collection agency except this time, look up the Registered Agent online of the collection agency and send the copy to them demanding that the item be removed immediately as per your agreement. Send a request for investigation at the same time to the credit bureaus. That will trigger a dispute being sent to the collection agency which may speed up their reporting. Keep that letter as if your life depended on it. You will probably need it again in the future if the item somehow pops back up.

Settlements. If the balance is quite large you can negotiate with the collection agency to settle the debt for pennies on the dollar. If the debt is quite old, your odds are even better BUT be careful. Before you promise anything in writing make sure you have checked the debts statute of limitations. If it has expired then legally nothing can be done to you. You may still want to settle it to remove it from your credit reports, BUT, check that statute of limitation as well. If it’s nearing the 7 year time frame then why bother?

While you’re at it, feel out the agency for the removal method as well. You’ll have less leverage in this situation because they are already agreeing to take much less for the debt, but it cant hurt to add that request, especially if the agency thinks they have one shot at money from you.

And finally. NEVER EVER pay a collection account without attempting one of the above. If you do, you will simply end up with a paid collection account which is still very negative.