Receiving a Collection Call
It is the age of phishing, and you treat requests for personal information very cautiously, even when the request comes from a known entity. Receiving a collection call is no different. You do not know the caller, so why should you discuss your personal finances with them?
A No-Win Situation
There are many potential pitfalls to engaging with a collector on the phone. Collectors are trained to be psychologically aggressive; they will do whatever it takes to keep you on the line until you make a commitment to pay, either in full, or in settlement, or via a new payment arrangement; and all options are likely to result in a poor outcome.
The Risks of Talking
Thousands of people every week make arrangements with collectors to repay debts that are beyond the statute of limitation and past the reporting period limit for the credit bureaus. In many instances deals are made with collectors who do not even own the debt. In some cases this means a total loss, in some cases it means payment in excess of an appropriate settlement amount, and in the case of a new payment arrangement it means a brand new debt has been created with a new statute of limitation and reporting period.
Prior to considering payment to a collector it is essential to confirm the validity of the debt, their ownership and right to collect, and the age of the debt. There is no way to do this on the phone.
Take Informed Action
Simply ask the collector to send you something in writing. Other than that you should not speak with them at all. Treat the call as if it were a phishing expedition; do not even confirm your name or your address. Simply tell them you do not discuss your personal finances on the phone. If the call is legitimate, you should receive a proper collection letter which will include all the information you need to assess the right approach to the debt.
Technique and Patience
The credit bureaus can be very cooperative, and then again they can be downright frustrating. Success with credit bureaus disputes is predicated on two factors: technique and patience, and not necessarily in that order.
Credit Bureau Personalities
Each of the three credit bureaus has their own personality. One of the bureaus is more consumer (and dispute) friendly than the other two. One is downright difficult. And the third is just about right in the middle. The most difficult of the three seems to reject a pre-determined percentage of dispute letters without reading them.
The Wrong Response
Dispute letters are sent, and responses are forthcoming. In the case that the response is not acceptable you cannot give up. The response may include a request for additional identification even when the ID provided was perfect. In many cases, the reporting error is ingrained in the creditors system and is not likely to be cleared up through the basic software system the bureaus use to communicate with creditors. And then there is the very real possibility that your dispute was never even read.
There is absolutely no point in getting upset if you do not get the result you want. There are many aspects of credit repair that are pure science and will deliver expected results every time, but when it comes to credit bureau disputes it make take a couple of shots. No sweat. You just have to work with the system as it is. Go with the flow. Even if a percentage of dispute letters get ignored, the majority do get processed properly. To the extent that it is a numbers game, patience pays.
One of the failings of the many automated credit repair companies you can find on the web is their practice of sending out the same dispute letter over and over. Each verification letter that a credit bureau sends out represents an opportunity. Our credit repair method takes advantage of these verification letters by replying directly to them with a customized re-dispute and a demand for additional research.
Taking the Next Step
If you do not get the response you want after a repeated effort, you can still push the dispute through the system. Assuming that you have the courage of your convictions and want to pursue the issue you can send the credit bureaus a dispute procedure request including the specific creditor contact information where the dispute was verified. The bureaus have 15 days to provide this upon request. Once you have specific creditor contact information you can send your dispute directly to the source. If you are a member of our credit repair service we will manage this routine for you.
Our Friends the Credit Bureaus
In truth, we respect the credit bureaus. They do not do a terrible job. Yes, there are errors. And sadly, errors are most common on the reports of people that have had some genuine derogatory events in their past. But things are what they are, and there are a variety of very effective tools available to correct the mistakes that occur. If you have issues on your credit report, go ahead and sign up for our services today. We will be happy to work with the system to get your credit report back in shape.
The Worst Mistake
The worst mistake you can make when starting a credit repair effort, is to imagine that a derogatory account is accurate just because you recognize it. Recognition alone is not a valid test of accuracy – and the mistake could ruin your score.
Knowing the Rules Pays Off
Credit reporting accuracy is a matter of compliance with reporting rules. The credit bureaus, often blamed for our problems, are actually quite good at compliance. The vast majority of reporting errors originate with reporting entities (original creditors, collectors, etc.) The credit bureaus report the data they are given, and if a reporting entity provides out-of-date or otherwise erroneous information the bureaus include it in their reporting – at least until you challenge it.
Time Will Not Cure Your Ills
It is up to you to police the accuracy of your own reports. Credit repair requires a realistic and proactive effort. The passage of time will not cure your ills. Reporting errors, if ignored, are more likely to compound than they are to correct. Even the seven year reporting limit is likely to be a meaningless mile-marker for most errors which have a way of living on for decades.
John Defaults on a Credit Card
If you have ever looked at your credit report and seen more than one collector reporting the same debt, you are not alone. Here is an example of a typical sequence of events that affects millions of consumers:
John defaults on a credit card. Six months later the credit card issuer (the original creditor) charged off the debt and sold the account to Collector “A”. Six months later Collector “A” re-sold the account to Collector “B”. Four months later Collector “B” re-sold the account to Collector “C”.
Fourteen months after the charge-off, the credit card issuer (the original creditor) is reporting a past due balance, Collector “A” is reporting the collection, Collector “B” is reporting the collection, and Collector “C” is reporting the collection. Here is how it looks:
- Original Creditor: Charge Off with balance reporting as past due
- Collector “A”: Collection with balance reporting
- Collector “B”: Collection with balance reporting
- Collector “C”: Collection with balance reporting
John’s credit score is 150 points lower than it would be if the reporting entities were in compliance with reporting rules. To be in compliance, the Original Creditor would have updated the past due balance to zero when they sold the account to Collector “A”. And Collector “A” and “B” would have withdrawn their reporting entirely when they sold the debt. Here is how John’s credit report should look:
- Original Creditor: Charge Off with zero balance
- Collector “C”: Collection with full balance reporting
The correct version eliminates the past due balance with the Original Creditor and two of the collection accounts in their entirety. A world of difference.
FICO De-Stresses the Past
There is an unprecedented opportunity to restore your credit score and minimize the impact of the errors of the past. FICO, the creator of the credit score used by the vast majority of lenders, seems to have revised their formula to put less emphasis on the past and more on the present. This means that credit repair efforts made today may be surprisingly effective. If you aspire for better scores, act now.
Rocket Booster for Your FICO Score
One of the most powerful things you can do to boost your score is to open new accounts after the date of your last derogatory event. FICO puts major positive weight on new accounts (managed properly) with post-derogatory open dates. The logic is that you are showing your ability to get back up on the credit horse and ride again! A bit of advice, do not imagine that your old accounts are good enough to do the job just because you have brought them current. Open a couple of new accounts today and show that you are back in the game.
Rebound from Bankruptcy
How many people file for bankruptcy and then stick their head in the sand for years, believing their credit life is over? On the contrary! As far as your credit score is concerned bankruptcy really is a fresh start. Once your bankruptcy is discharged, clean up all of the errors on your credit report (or hire a credit repair company), rebuild your credit following the advice in the paragraph above, and watch your scores bounce back. Take the right steps and your post-bankruptcy scores can be over 700 within a year.
Recover from Foreclosure
Another new and exciting FICO behavior we are seeing is the speedy disregard of isolated negative events. Consumers with otherwise good credit now find that even major derogatory issues, like foreclosures, are forgiven within a year. For FICO forgiveness the derogatory issue must be resolved and cannot continue to show a past due balance, so once you wrap up your foreclosure, check your credit report to insure the lender is reporting properly!
What is Happening?
To shine a little light on the issue, there is good reason for FICO to be moderating their algorithm to favor forgiveness and reward good behavior. In fact, FICO is entirely statistically based and simply reflects the changing relationship between consumer credit and default rates. The recent formula adjustments are not intentionally charitable, but merely indicate that the positive correlation between past derogatory credit and default is decreasing. In fact, credit default nationwide is decreasing apace, thereby driving FICO to reduce risk measurements accordingly.
A Word of Warning
In spite of all of the clear signals that FICO is paving the way for consumers to recover their credit score pride, there is still one area in which they are resolutely inflexible. High credit card balances can still kill your credit score. If your credit card is reported to the bureaus with a balance in excess of 60 percent of the available line, you will lose points. How many points? A credit card balance in excess of 80 percent of the account limit can knock 100 points off your score. The less you use, the less the impact, but do not get caught by surprise when you need your score to be good.
Clean Up Your Credit Report
In spite of all of these new opportunities, if your credit report is loaded with erroneous accounts, duplicate collections, or any type of misreported information, all of your good efforts may be in vain. Now is the time for credit repair. Check your reports super carefully. Do not miss a single thing; just because an item is small does not mean it is not killing your score. And remain vigilant. Credit reports have errors and they do not fix themselves. Need help? Give a call.
Don’t Trust Your Credit Report!
On February 11, 2013 the FTC released the results of a study on credit reporting accuracy. Their conclusion is that consumers cannot afford to trust the accuracy of the information assembled by the credit bureaus – and provided to lenders, landlords, insurance companies, etc. in the form of credit reports. The importance of credit repair has never been more clear.
“These are eye-opening numbers for American consumers. The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly. If they don’t, they are potentially putting their pocketbooks at risk.” – Howard Shelanski, Director, FTC Bureau of Economics
The Big Picture
In brief, 26 percent of the study participants found errors on their credit report; specifically, “One in four consumers identified errors on their credit reports that might affect their credit scores.”
Our Take on Credit Report Accuracy
As dramatic as these numbers sound, it gets worse. The odds of reporting errors increase dramatically if you have had credit problems in the past. In other words, once you have had legitimate derogatory events, your accounts are often moved into an exception status, increasing the odds of reporting mistakes.
The most common instance is the case of a charge-off (of a defaulted account) by a creditor who sells the account to a third party collector, who may resell the account, and so on. Each of these entities can report the account to the credit bureaus. While there are rules meant to protect consumers from experiencing a multiple score impact from a single event, the odds of errors in this chain of events increase with each reiteration of the debt.
Credit Bureaus Frustration Revealed
Also of interest, the study provided fascinating insights into consumer interaction with the credit bureaus. Only 37 percent of the people who disputed information with the credit bureaus said that all of their concerns were addressed, while 63 percent of the people who disputed information were not satisfied with the response and unable to fully correct their errors.
Our Take on the Credit Bureaus
The credit bureaus have a daunting job. They receive billions of bits of data from millions of entities, including creditors, collectors, and public records repositories. The accuracy of a credit report depends on all participants in the system. Many of the errors on credit reports originate with creditors and other reporting entities and are not automatically caught by the bureau software. This fact underlines the importance of consumer vigilance and the need for a clear path to dispute and correct errors.
There is More to Come
Underlining the enormous importance of this issue, there has been another major investigation launched by the Consumer Financial Protection Bureau (CFPB) into the practices of the credit bureaus and their dealings with consumer disputes.
Reporting accuracy is only half the issue. Resolving errors with the credit bureaus is as important. As noted above, 63 percent of the participants in the study were unable to correct their reporting errors. Whether this is due to systemic inadequacies, or the result of illegal actions designed to ignore and discourage consumer attempts to rectify errors on their credit reports, is not clear, but the CFPB investigation should provide some interesting results.
The Moral of the Story
The message here is that consumers need to look out for themselves. It may seem like an odious task on top of the other stress in your life, but it is necessary to check the accuracy of your credit report on a regular basis – and to dispute the errors you find. Proofreading a credit report is not for everyone. To do a proper job you must have some knowledge of reporting rules, reporting period limits, requirements of reporting entities, and the patience to examine everything. Credit repair companies, like Sky Blue, are here to assist consumers who do not have the time, knowledge, comfort, or patience to manage this task themselves or who are concerned with the downside of missing a critical error that may impact their financial life.