According to FICO the creator of our current credit scoring model, maxing out credit cards can reduce you credit score by as much as 45 points.

Tags: credit, Credit Education, Credit Scoring, credit tip, Empowerment, Fair Credit Reporting Act, Fair Debt Collection Practices Act, FICO, FICO score, finance, home purchase, money, Money Tips, Wealth

I know you are wondering how in the heck can paying off an account lower my credit score. Yes, I know it sounds backwards that by trying to do the right thing you get penalized. Here is he scoop. I have long taught that 35% of your credit score is past delinquencies. Obviously, paying your accounts in full and on time has the greatest positive impact on your score. So why would paying a collection potentially lower your score?

Here’s why, the last 24 months of activity has the greatest impact on your score. The newer the item the more impact it has. The credit scoring model uses the date of last activity to determine when the 24 month countdown starts. (Note: accounts older than 24 months still have an impact on your credit score). If you have an older collection that has not had any activity on it and you make a payment, you have restarted the clock because you have moved the date of last activity.

Many times collection agencies will try to contact you in order to have you make a payment so that they can keep the account on your credit bureau longer. Per the Fair Credit Reporting Act, collections can stay on your report up to 7 years plus 180 days from the date of last activity. Do not fall for it!

I am not suggesting that you not pay your debts. I am letting you know that there is a strategic way to handle past collections. Here are 3 simple steps:

1. Begin with accounts reporting in the last 12 months.
2. Before you pay anything, write to the credit bureaus and request validation of the debt. Validation is not verification. Federal law specifies what is considered validation. See Fair Debt Collection Practices Act for more information.
3. If debt comes back verified, contact the collection company and negotiate for a lower payment. We suggest that you ask for a pay for delete. A pay for delete is a request that the collection company deletes the entry from your credit report when payment is received. Pay for deletes are becoming increasingly more difficult to get. But, a paid collection is better than an unpaid one.

If you are applying or going to apply for  a home, we suggest you wait until you are instructed by your lender to pay off ANY collections. If your lender tells you pay off a particular account, then they have prepared for the impact it may have on your credit score.

There is nothing anyone can do for you that you can not do for yourself when it comes to your credit. However, if you want guidance and education about credit please contact us at info@intcredit.net.

Tags: budget, collections, credit, Credit Education, Credit Scoring, credit tip, debt collection, Fair Credit Reporting Act, money, Money Tips, Real estate, savings

It’s 8:00am on Saturday morning and you are looking forward to sleeping in. Suddenly you are awakened by the telephone ringing. You answer the phone only to be greeted by, “Is this….”  it is a debt collector. As you wipe your eyes, the debt collector begins to telling you “This is a an attempt to collect a debt, any information obtained will be used for that purpose.”

Most debt collectors are very good at informing consumers that they are attempting to collect a debt, how much the alleged debt is, and telling you to pay up. But there are things you need to know that a debt collector won’t tell you. Knowledge is power. A debt collector won’t tell you:

1. You do not have to disclose personal information such as place of employment, banking information, and  sources of income.
2. You can prevent debt collectors from calling you by notifying them in writing to stop calling you. Once the debt collector recieves written notice they can only contact you to tell you they won’t call you anymore or to notify you what actions they may take such as filing a lawsuit.
3. You may be “judgment proof” or “execution proof”. If you are unable to meet your current living expenses or you recieve certain types of income they cannot collect from you.
4. They are attempting to collect on a debt that is past the statute of limitations. If you make a payment, you renew the debt.
5. They may not report to the credit bureaus. Not all collection companies report the credit bureaus.
6. Debt collectors cannot call you before 8:00am or after 9:00pm,. This time is based upon your local time not theirs.
7. Debt collectors cannot use profane or abusive language.
8. You can report any problems you have with a debt collector to your state Attorney General’s office (www.naag.org) and the Federal Trade Commission (www.ftc.gov),
9. It is imparative that you familiarize yourself with the Fair Debt Collection Practices Act (FDCPA). This federal law protects consumers against unfair debt collection practices.
10. That you may be able to settle with the debt for pennies on the dollar.
11. That medical collections should not appear on your credit report due to current privacy laws. Your medical information is protected under the Health  Insurance Portability and Accountability Act (HIPAA).

Knowing your rights is the first step to dealing with any debt collector. Familiarize yourself with the FDCPA and other consumer protection laws by visiting www.ftc.gov,

This article is also posted on http://www.examiner.com

Tags: collections, debt collection, Fair Debt Collection Practices Act, FDCPA, HIPAA

If you received a discharge in bankruptcy and believe that you had errors on your credit report, you could get benefits from a class action settlement.

A settlement has been proposed with Trans Union, Experian, and Equifax (“Defendants”) in a class action lawsuit about whether they violated the Fair Credit Reporting Act (FCRA) and state laws when reporting debts that had been discharged in bankruptcy as not discharged and whether consumers were damaged as a result of  this.

The settlement will provide payment of damage awards from a $45 Million Settlement Fund. The lawsuit alleges the the Defendants violated the FCRA and state laws by failing to employ reasonable procedures to assure maximum possible accuracy in reporting debts discharged in bankruptcy or by failing to properly investigate disputes from consumers regarding such debts.

You are a class member eligible for benefits if you received a Chapter 7 Bankruptcy order of discharge and your report issued by defendant between March 15, 2002 and May 11, 2009 (or for California residents in the case, of Trans Union between May 12, 2001 and May 11, 2009) reported debts as due and owing which were discharged in your bankruptcy.

To see if you qualify for benefits and to get more information, call toll free 1-866-237-3432 or visit www.BankruptcyDischargeSettlement.com. Claims are due by November 30, 2009.

This post has also been published on Examiner.com