My Debt Has Been “Charged Off.” What Now?

“Michelle, last year I lost my job and was unable to keep up with my credit card payments. The credit card accounts have been closed and the accounts are being reported as “charge offs” on my credit reports. I don’t know why, but the accounts are still showing outstanding balances. Since the accounts have been charged off that means that I don’t owe the debt anymore and the balances should be zero, right? What gives?!”

A somewhat common misconception which consumers may have is the idea that if a bill is charged-off then the debt is no longer owed. Unfortunately for the consumer, that is a myth. A charge off does not equal forgiveness of a debt.  Charge off is simply a classification or a category that creditors give to debt which they will be writing off as a loss for tax purposes. When a charge off notation appears on a credit report, it does not mean that the consumer no longer owes the balance. The balance may still be very much owed to the creditor or collection agency.

When a debt is charged off by the original creditor (typically once the account has become around 6 months past due), it is often sold or turned over to a collection agency. If you can afford to pay the debt before it is reported to the credit reporting agencies, you should do so. You can save yourself a big headache in the future by paying the account now.

It is also important to be aware of your rights concerning charged off debt. Take a look at the list below to protect yourself from “credit bullies” who are employing abusive or illegal collection tactics.

Know Your Rights

1. FDCPA (Fair Debt Collection Practices Act) -

Collection agencies are not allowed to harass you. They cannot call you excessively, threaten you, or call you at all hours of the night. Collection agencies cannot call your friends and family members in an attempt to embarrass you. There are a lot of other protections afforded to you under the FDCPA. If you have been called or harassed by a collection agency, it might even be in your best interest to speak with an attorney who specializes in FDCPA cases. In fact, feel free to contact us if you would like a referral to a reputable attorney in your area. If you have been harassed then there is a chance your attorney will even represent you on contingency with no upfront funds coming out of your pocket for attorney fees.

2. FCRA (Fair Credit Reporting Act) –

A. Re-aging is illegal.
Derogatory accounts are allowed to remain on your credit reports for 7 years from the date of default (when the original account became 6 months past due). If a collection agency changes the date of default on the original debt in an attempt to manipulate the date when an item is purged from your credit reports, that is known as re-aging and it’s illegal.

B. You have the right to dispute inaccurate, questionable, unverifiable, and outdated accounts.
If you believe that a collection account on your credit reports has been re-aged, you have the right to dispute the account with the credit reporting agencies. You can file disputes on your own, or with the help of a professional like HOPE4USA. You also have the right to dispute any accounts which you believe to be inaccurate or unverifiable. 

The best thing that you can do for your credit scores is, of course, to keep all of your payments on time. However, anyone using a little common sense can realize that most people never set out not to pay their bills. It’s not like consumers with credit problems just wake up one morning and say, “I think I’ll stop paying my bills today.” No, most people who get into credit and financial trouble do so due to unfortunate circumstances like job loss, illness, family emergencies, etc. Bad credit happens to good people every single day.

If you have made credit management mistakes in the past, there is good news. Bad credit does not have to last forever. CLICK HERE to download our free HOPE4USA Credit Report Toolkit for some expert advice on how to get started on your road to recovery today!

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Michelle Black is an author and leading credit expert with over a decade and a half of experience, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars across the country. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.

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Is a Debt Collector Violating Your Rights?

Dealing with a collection account is never any fun. In fact, it can be extremely stressful and embarrassing. However, if you are in the unfortunate situation of having collection accounts on your credit reports and receiving calls or letters from debt collectors you are certainly not alone. Your situation is not even unique. According to the Central Financial Protection Bureau (CFPB) nearly one third of consumers, or around 73 million people, currently have at least one or more collection accounts being reported on a credit report.

Yes, debt collectors have a job to do. Some of them even do their job well - that is to say they do it ethically and legally. However, there are many debt collectors who ignore the law, trample over your rights, and will harass you in an attempt to extort payment.

Do you know your rights when it comes to debt collection? The Fair Debt Collection Practices Act (FDCPA) has a strict list of "Do's" and "Don'ts" which debt collectors are required to follow when contacting you in an attempt to collect a debt. Debt collectors are not allowed to simply do anything they please. Here are 5 of the most important rights which are afforded to you under the FDCPA.

1. Limitations on Calling - Debt collectors are not permitted to call you before 8:00 AM or after 9:00 PM. Furthermore, these calling limitation are based upon YOUR time zone, not the time zone of the debt collector.
2. Restrictions on Sharing Personal Information - Debt collectors are not allowed to share your personal business with others. Yes, they can call your job, your family, and even your friends to request your contact information. However, they are prohibited from mentioning your debt and they are only permitted to call each person once. Period.
3. Harassment Is Prohibited - Debt collectors are not allowed to threaten you with violence, they are not allowed to use foul or obscene language when speaking with you, and they are not allowed to call you excessively.  
4. Restrictions on Calling You at Work - If you request that a debt collector stop contacting you at work then they must honor this request. You can make the request in writing or verbally.
5. Lying is Off Limits - Debt collectors are not allowed to lie to you or to misrepresent themselves in any way while attempting to collect a debt. They cannot, for example, pretend to be a government agency in order to frighten you into paying a debt. They are not even allowed to use a fake name. In fact, dishonestly of any kind is a big no-no.

Free Debt Collection Letter Review Service

Many debt collectors will often contact you via mail in an attempt to collect a debt from you. Unfortunately, these collection letters are notorious for violating your rights under the FDCPA. If you receive a letter from a debt collector then we highly recommend taking advantage of our FREE Debt Collection Letter Review Service.

As part of HOPE4USA's free Debt Collection Letter Review Service we have partnered with an attorney who specializes in the Fair Debt Collection Practices Act. When you forward your debt collection letters to our team we will have an attorney to review your letters and search for any violations of your rights. If a violation has occurred then you may even be entitled to a settlement. The best part is that this service is available to you at absolutely no cost, whether you are a current member of our program or not.

CLICK HERE or call 704.499.9696 to request a free review of your collection letters now. 

Free Collection Letter Review

We help you protect your rights when debt collectors contact you. If you rights are violated, you may even be entitled to a settlement. 

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Michelle Black is an author and leading credit expert with over 13 years of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here. 

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How to Negotiate a "Pay for Delete" Settlement

Most consumers unfortunately do not realize the truth about collection accounts and how these accounts impact their credit scores. Collection accounts of any dollar amount (even $0) have the potential to cause severe credit score damage. The truth is that once a collection account worms its way onto a consumer's credit report then that account is probably going to have a negative impact upon the consumer's credit scores to at least some degree as long as the account is present. Furthermore, paying off a collection account usually will not have the impact of raising a consumer's credit scores.

Paid Collections Usually Remain on Credit Reports

When a consumer pays or settles a collection account the collection agency is responsible to notify the credit bureaus that the consumer's account balance should be updated to $0. (Note: collection agencies often drop the ball and do not update paid/settled collection accounts properly. When this occurs it is ultimately the consumer's responsibility to dispute the error with the credit bureaus. A consumer has the right to dispute inaccurate accounts on his own or with the help of a professional like HOPE4USA.)

If a collection agency and the credit bureaus are all following the Fair Credit Reporting Act properly (BIG if) then a $0 balance collection is actually allowed to remain on the consumer's credit reports. According to the Fair Credit Reporting Act, a collection account is legally allowed to remain on a credit report for 7 years from the date of default on the original account as long as the account is being reported accurately and it is verifiable. Paying or settling a collection account alone is not grounds to force it to be removed from a consumer's credit reports and, generally, paid collection accounts stay put.

Why Paid Collections Still Hurt Credit Scores

The FICO credit scoring models which are currently in use by the vast majority of lenders are built so that they do not care so much about the balance of a collection account as they care about the occurrence of a collection account in the first place. Therefore, paying or settling a collection account will generally do nothing to raise a consumer's credit scores (with the exception of paying/settling a credit card collection). FICO Score 9, announced in the summer of 2014, was built to ignore collection accounts with a $0 balance. However, lenders are not currently using FICO Score 9 and only time will tell whether or not the new scoring model will be adopted in the future. In the meantime, $0 balance collections will continue to have a negative impact upon a consumer's FICO credit scores.

The Pay for Delete Strategy

There is nothing in the Fair Credit Reporting Act which compels or requires a collection agency to report an account on a consumers credit reports. Credit reporting has always been a voluntary practice. As a result, it may be possible for a consumer to negotiate a "pay for delete" settlement with a collection agency.

A "pay for delete" settlement is essentially an agreement for a collection agency to remove an account from a consumer's credit reports once the account has been paid or settled as agreed. In order to properly negotiate a "pay for delete" agreement a consumer needs to be sure to take the following steps.

1. Call the collection agency.
   To begin a consumer should call the collection agency who has reported the account to his credit reports and offer to settle the account in question based upon the understanding that the account will be deleted from his credit reports once the settlement has been paid.
   
   
2. Get the offer in writing.
   The harsh truth is that collection agents are not always known for being the most honest people on the planet. If a collection agent promises to delete an account after payment is received and does not follow through then the consumer will need the offer in writing in order to have any type of recourse. "He said, she said" simply is not going to cut it if a collection agency tries to renege after the fact.
   
   
3. Check credit reports after the fact.
   The only way to truly know if a collection account has been deleted from a consumer's credit reports is for the consumer to check his credit reports after the collection agency has had time to update the account (i.e. around 30-60 days after payment). A consumer can also subscribe to a 3-bureau credit monitoring service, at least temporarily, so that he will be notified immediately when any changes take place on his credit reports. CLICK HERE to check out some great 3-bureau credit report and score monitoring services.

The Catch

While it is not illegal for a collection agency to delete a paid collection account (remember that credit reporting is completely voluntary), deleting paid collection accounts is something that the credit bureaus frown upon heavily. In fact, when a collection agency signs their service agreement with each of the credit bureaus - Equifax, Trans Union, and Experian - there is language in the agreements which warns collection agencies not to delete collection accounts simply because they have been paid. If a collection agency is caught violating the terms of their service agreements then they could lose their ability to report collection accounts to a consumer's credit reports - a crushing blow to any collection agency's bottom line and something that they want to avoid at all costs.

Negotiating a "pay for delete" settlement is a difficult, often downright impossible undertaking. However, that does not mean that consumers with collection accounts are without hope of improving their credit. CLICK HERE to download a free copy of the HOPE4USA Credit Repair Toolkit for help getting started on your journey toward better credit today! 

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Meet Your Team

Helping Our Clients Stand Up to “Credit Bullies” Every Day!

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Michelle Black is an 13+ year credit expert with HOPE4USA, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here. 

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Kicking the Habit of Overspending

Does the arrival of your monthly credit card bill strike fear into your heart?  Have you ever discovered that your checking account is empty without knowing where your paycheck could have possible gone so quickly?  Do you have more new pairs of shoes in your closet than you can count?  If you answered yes to any of these questions then you may have a problem with overspending.

Overspending is one of the most common causes of poor credit scores and unbalanced budgets.  Of course, typically consumers do not set out to overspend; however, without a solid plan for spending it is easy to find yourself in the uncomfortable situation of having more bills than money over and over again.  When you find yourself short on cash that is when bills get paid late (or not at all) and credit scores begin to slip.

Keep in mind, over-spenders are not bad people!  Our team of credit experts at HOPE4USA has helped many, many people to overcome credit problems, a sizable percentage of whom arrived at those credit problems due to overspending. The good news is that if these clients were able to fix their overspending problems and turn their credit reports back around then it is possible for you to do the same.  Here are a few tips to get you started on kicking the habit of overspending:

1.) Write down every dollar you spend for the next 2 weeks.

Analyzing your spending habits is the first step to help you find out if you have an overspending problem and, if so, how severe the problem has become.  Wives and girlfriends, if you are asking your spouse or boyfriend to track their spending you may want to note that men are typically a little more resistant to doing so. My suggestion? Make it easy for them!  Give him a simple 3X5 card to keep in his wallet. Just ask him to jot down the amount spent and where he spent it if he does not want to save receipts. You will still get the basic information you need this way and he may be more likely to follow through with your request.

2.) Make a spending plan (in writing) and stick to it.

You may be wondering, “What exactly is a spending plan?”  A spending plan is a written list of your monthly income (paycheck, alimony, child support, etc.) and your monthly expenses (rent, utilities, car payment, etc.).  In other words – it is a budget.  You can even CLICK HERE to download a free copy of the HOPE4USA Basic Budgeting Worksheet - no strings attached. The key is to get started. (Note: if you are a current HOPE4USA client you can ask your case manager to review your completed budgeting worksheet offer advice and suggestions. Talk about a great membership perk!)

3.) Trim the fat from your spending plan.

Once you have reviewed your 2 week spending list and completed your budget worksheet, look for areas where spending can be cut.  Now, I’m not talking about sucking all the fun out of your life so be sure to resist the urge to respond negatively to this suggestion.  However, I am suggesting that you make a plan to get the things that you really want out of life (i.e. a new home, a new car, college education for children, family vacations, etc.) by figuring out what you can live without in the present. You may be able to find hundreds of extra dollars per month by reducing cable TV plans, cell phone plans, entertainment expenses, eating out expenses, or shopping.  Don’t be afraid to take an honest look at your spending habits and see if a change can and should be made.

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Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here. 

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Can Collection Accounts Really be Removed from My Credit Reports?

In my previous article, Will Paying Collections Help My Credit Scores?, I discussed the common misconception that paying a collection account will raise your credit scores. It is true that paying a collection account probably will not raise your credit scores and, in some cases, may even lower your scores if recent activity is reported on the account due to your payment. However, there is another credit myth which I would like to debunk today and that is the misconception that a collection account cannot be legally removed from your credit report. The statement that a collection account cannot legally be removed from your credit report is simply untrue. When a collection account is deleted from your credit report the result is almost always a credit score increase - great news for the consumer! There are several possible ways that collection accounts can be deleted from your credit report. Let's discuss a few of them:

Removal by Dispute - 

Have you checked your credit report lately? Chances are that, if you did so, you found errors and inaccuracies. In fact, a recent study released by the Federal Trade Commission found that 40 million Americans had errors on their credit reports. 

According to the Fair Credit Reporting Act (FCRA) you have the right to dispute any errors, mistakes, or inaccuracies with the credit reporting agencies - Equifax, Trans Union, and Experian. If any of the data is incorrect on an account (i.e. the balance, the date of first delinquency, the date of last activity, the date opened, the date of default, the date reported, account notations, etc.) then you have the right to dispute it. Furthermore, you are even allowed to dispute erroneous accounts with creditors and collection agencies directly.

Pay for Deletion -

It is possible for you to make an arrangement with a creditor or collection agency to pay an account in exchange for the deletion of the account from your credit report. You should know that it is extremely difficult to get a creditor or collection agency to agree to these terms. Some companies will reject a pay for deletion offer out right. However, payment for deletion is possible and it is 100% legal.

There is nothing in the Fair Credit Reporting Act which compels a creditor or collection agency to report an account to the credit bureaus. The reporting of accounts is 100% voluntary. Even though it is not illegal for an account to be paid for deletion, the act is frowned upon by the credit bureaus and most of the agreements that the bureaus have with collection agencies states that the collection agencies cannot engage in pay for deletion settlements.

Finally, if you do get a creditor or collection agency to agree to a pay for deletion arrangement you will likely be required to pay 100% of the debt. As with any debt negotiation, it is always important to get agreements sent to you in writing since "he said, she said" will not hold up if a dispute arises later.

Goodwill Deletion - 

You can request for a creditor or collection agency to grant you a goodwill deletion after an account has been paid. It is a long shot to have a goodwill deletion request honored; however, it certainly cannot hurt you to ask.

These are a few of the ways that a collection account can be removed from your credit reports. You have the right to try to employ some of these strategies on your own, though doing so will likely be time consuming and very difficult. You also have the right to hire a reputable credit restoration company to assist you. If you would like to speak with a HOPE Credit Expert regarding your credit report please give us a call at 704-499-9696 or click here to schedule a no-obligation credit analysis today.

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Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here. 

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