     Shylock (Shylock) | Tuesday, August 01, 2000 - 07:49 pm 
I'm pretty good at this credit-fixing thing, but there's always room to improve. With that in mind I learned a couple of things lately.
1. If you don't want the item deleted, but you do want the item corrected it's always best to permit the credit bureaus extra time to handle your dispute. Recently I had to dispute an item because a closed account with 0 balance suddenly showed up with a $968 balance (well over the credit limit). Thirty days after they received my dispute they (Equifax) send me a letter telling me they'd deleted the item. Not really what I had in mind.
2. NEVER PAY A COLLECTION OFF. It doesn't help. If you really feel like you need to pay a collection and those people really won't delete it for you just pay it down. Here's why paying down is better than paying off:
Many times collection accounts are coded as a 'revolving account' -- just like a credit card. In these situations you are getting hit by a double whammy. Not only do you have negative credit information, but the collection will usually show something like $500 owed, $500 past due, $500 high-credit. That's just like having a $500 maxed out credit card. And maxed out credit cards are bad for your score.
Paid off this item doesn't count. It'll show as closed, or a paid collection or whatever. That's no less negative than an unpaid one.
But paid DOWN is another story. Sure it's still negative and sure it's still going to show an amount past due -- you can't help that. But when it shows $500 high credit and let's say $10.00 owed it suddenly looks like you are keeping your 'revolving balances' within 'reasonable limits.'
This could mean a gain of a hundred points or more.
Of course negotiation for and obtaining DELETION of the collection is the best course so always aim for that first. |
| Christine Baker (Admin) | Wednesday, August 02, 2000 - 04:40 pm
Thanks! Very good advice. |
| John Shimmer (Jshimmer) | Friday, August 04, 2000 - 06:25 am
Collection accounts are reported differently, coded differently and (on a physical report) show up in an area reserved specifically for collection accounts) - very different from normal, revolving trade line activity.
You'll never "fool" anybody who's looking at your report with a marginal score making a decision that's not totally score driven.
A partially paid collection account will not improve your score over a fully paid, zero balance collection account. Other than time passing, nothing short of removal of the collection account will improve your scores.
Actually, if you make payments, it will re-age the account and cause it to remain for 7 years from the date of your last "partial payment" - and it will STILL be coded as WAS COLLECTION. |
| jack e. schluckbier (Jschluck) | Friday, August 04, 2000 - 06:52 am
I am so tired of people spouting-off about things they know absolutely nothing about. I really think that this is a bad thing since everyone here is visiting this site for the same purpose, which is to obtain, share and otherwise LEARN about this esoteric "thing" called credit. jshimmer, you really should read the letters posted on the FCRA website addressing the very issue you are advising about! LEARN before you preach, please! |
| Christine Baker (Admin) | Sunday, August 06, 2000 - 04:55 pm
I think that everybody could be right here.
John seems to forget that a collection agency can CHANGE how and what they report. It's not about fooling anyone, but about changing the way the account is reported. Right?
And I love that name "Schluckbier," can't help but wonder if it's real. Definitely beats another "anonymous." |
| Shylock (Shylock) | Sunday, August 06, 2000 - 08:55 pm
Well one thing is for certain: Paying on a collection does not entitle the company to leave the collection on your record longer. The seven year limit legally starts 180 days from the date of first delinquency and nothing can change that.
Jshimmer does have a point that some collections (although certainly not all or even most) are reported in a different section. I certainly don't mean to say that people should just start paying on collections as the best method to increase your score.
Some collections are coded as revolving accounts and those collections are more negative than others because they can generate the impression that you are maxed out on your 'credit cards.' That's all I was trying to get at. |
| Lynn Whealer (Lynnwhealer) | Wednesday, August 09, 2000 - 09:05 am
I hate to be ther bearer of bad news, but making a partial payment *can* re-set the 7 year clock. (note that I said "can", not "does"). I've read an FTC opinion letter on this, and have "heard" on boards of this very thing happening in real life.
The deal is that the ORIGINAL debt *cannot* be re-set, as stated above by posters. What is legally fuzzy, and open to interpretation, is that the ORIGINAL debt, upon a partial payment, can be arguably CONSTRUED as a BRAND NEW DEBT, that is an implied *re-negotiated* contract. YEs, shadey, schlocky, completely unethical, but what else would you expect from the sorry sons-a-bitches who run this type of scam. While it is CLEARLY not right, it would put one in the postion of having to sue in order to get relief. Depending upon the quality of the arguements and the judge, you might win, you might lose.
In dealing with collectors, some will have had success with this re-setting, and some will not have....it goes without saying that, if they have had enough success to make it profitable, then they will continue to do so. For example, if they strong-arm 30 debtors, using this tactic, for every 1 that they lose (in court for instance), then they probably have made many thousands of dollars for a few hunderd that they "lost". In a business sense, it is great to keep up with this, since the "new debt" argument is not obviated *specifically* in any statutes of the FCRA, FDCPA, or FCBA (at least to my knowledge).
I do not purport to be a legal expert, but this is information that I have pieced together from quite a few sources in my over 2-years of studying the credit game.
But just know that this is a vague area, where the "weakest" side (consider it a game of "chicken" or "who blinks first") will probably lose. |
| Shylock (Shylock) | Wednesday, August 09, 2000 - 04:28 pm
If what you say is true then there's nothing to stop them from considering ANY communication they have with you as a renegotiation of the debt. They could just say, "Oh we called them and they agreed they'd pay. Accordingly we wiped out the old derogatory and set them up on a new payment plan of 10% per annum payments of $20.00 a month, but they defaulted again."
Brand new debt, brand new clock, brand new everything. They chase 30 borrowers, etc., etc...
Likely to happen? Absolutely not. Likely to draw the wrath of the FTC? Absolutely. |
| Lynn Whealer (Lynnwhealer) | Wednesday, August 09, 2000 - 05:06 pm
TAken to extremes, it seems to be as you say. This little niche, though, seems to be an area where some of the more unscrupulous collectors ply their trade. My suspicion is that only the REAL pricks of the biz tread these admittedly murky waters. I'd bet that there are few cases where this actually is intentionally done, but I'd bet an equal amount that there are some real schmoe collection agencies out there who make this a sizeable part of their activities.
Taking it to its logical conclusion, as long as you do things by phone, it will always be your word against theirs. Now take the flip side of sending in say $500 on a $5,000 debt. They can then make the arguement that, "Hey this guy said we would re-do a new deal, and here is the $500 check he sent to prove it." See the difference? There is now some concrete evidence that you have resumed some sort of fiduciary relationship. Again, I surmise that the quality of opposing arguments and the propensity of the judge would let you win sometimes, but also cause you to lose sometimes. Murky...very murky. |
| Christine Baker (Admin) | Wednesday, August 09, 2000 - 09:48 pm
I wouldn't make payments if not sure about paying it all of. I thought the idea here was to get the collection to show as a revolving account. |
| Shylock (Shylock) | Thursday, August 10, 2000 - 04:09 am
Lynn:
On the other hand you could say, "Well they agreed that in exchange for my payment of a portion of the amount due that they'd wipe the debt off my credit and that's why I sent the money and they assured me that they had a deal worked out with an affiliated company that would give me a $500 credit card at 18.9% with a $90 annual fee. It sounded like a great deal, but they defaulted on their end." Again the point is that companies that do this are going to have a lot of complaints leveled against them with the FTC. The FTC has limited resources but they're going to think, "Company A has 50 complaints but Company B has 150 complaints. Which should we go after?"
Christine:
Let's say, for the sake of argument, that you have a $400 collection unpaid collection that's 4 years old, three student loans paid on time and a $200 secured credit card through with a $50 balance.
And let's further say that you are in the market for a house and you've found one that you like and you want to go for Fannie Mae conforming financing with FHA insurance 3% down. Let's also say that the loan officer has already warned you that you'll be required to pay off all unpaid collections on your report in order to get the loan. Let's also say that you've already contacted the collection agency privately and offered to settle the debt for $300 and deletion and they've told you to go f* yourself.
Let's further say that you get someone to run your credit score ahead of time and you score 605. Since you need to score 620+ to get that loan this is a problem. Let's also say that the four reasons you didn't score better are:
A) Serious derogatory, collection or public record
B) Amount owed on revolving accounts too high compared to limits.
C) Amount past due.
D) Insufficient length of credit history.
You look at the credit report and you see that the collection is classified as a revolving account. This is not uncommon. That means the FICO system is thinking: Mr. Borrower has 2 revolving accounts, one with a $400 high credit and one with a $200 limit. Altogether he owes $450 that means he has only 25% of his revolving limits available and that's unacceptably high (see denial code B).
What I am suggesting is that the person may profit by sending in a $300 check to the collection agency before applying for the loan (coupled with a dispute with the three credit bureaus saying the amount owed is wrong) for the following reasons:
1. He's going to have to pay the collection off anyway in order to get the mortgage loan.
2. With the collection paid down he is going to show as $150 total owing with a $600 total high credit amount that's 75% of total available and a score improvement.
3. He will show a lower "past due amount" which might help his score.
Now this is not the ideal situation. The ideal would be to negotiate for deletion of the item entirely in exchange for a partial payment but not every creditor will agree to that. |
| Anonymous1 (Anonymous1) | Thursday, August 10, 2000 - 03:05 pm
What if a creditor offers to settle for $250 of a 1000 dollar debt that was charged off by the original company? I want to pay it, if it resets oh well at least it shows a paid on my credit. |
| Shylock (Shylock) | Thursday, August 10, 2000 - 04:47 pm
1) It does not reset the clock.
2) Paid collections are just as negative as unpaid collections. Don't kid yourself.
3) Settling a $1,000 debt for $250 is a good deal only if you're within the statute of limitations and a creditor could still sue you to reclaim the money or if you can negotiate removal of the item in exchange for the payment.
4) Don't forget the new lending laws, effective 1/1/2000 require a creditor to issue a 1099C for all debts cancelled that are $600 or more dollars. Settling your $1,000 debt for $250 would result in a $750 1099C and Uncle Sam would want his 28% of that $750. |
| Lynn Whealer (Lynnwhealer) | Thursday, August 10, 2000 - 05:25 pm
Yeah, to clarify my posts above, I was referring to a partial payment on an old account. IF you are completely settling a $1,000 account for $250, the presumption is that ANY person who takes advantage of the TONS of info on this board, knows to get such a settlement and its terms IN WRITING IN WRITING IN WRITING!!! Thus, there is no argument that can be made about any kind of implied renegotiation. |
| Anonymous1 (Anonymous1) | Friday, August 11, 2000 - 07:10 am
I tried to negotiate a removal or the wording, "Paid In Full" as opposed to "Settled..." and he felt that wouldn't be fair. The guy was cool and I told him to send me the settlement offer IN WRITING on company letterhead before I send him a DIME. He agreed. So I will wait for the letter and go from there. If they try to get me for the rest via Uncle Sam, I will get them with the SETTLEMENT agreement on their company letterhead. Also I doubt they will because Circuit City finally sold the account to this guy's company called Omnia Collections or something like that. |
| Mieko (Mieko) | Friday, August 11, 2000 - 07:33 am
Okay I have a clarification question. You all are discussing situations that would be applicable for an individual who has not filed bankruptcy chp 7, and who has collection accounts on there credit report which fall out of the statue of limitations, and they would like to have the account deleted or updated to a zero balance.
If I understand correctly, once you file bankruptcy and if your history is updated correctly you wouldn't have this issue for accounts that were included within your bankruptcy discharge, because the owing balance will be zero and it should state included in bankruptcy. and also they would not (creditors) be able to continue to sell the debt to collection agencies, am I right or wrong? |
| Shylock (Shylock) | Friday, August 11, 2000 - 03:53 pm
Right -- if you've filed CH7 bankruptcy there is nothing to negotiate/settle about. |
