Are pay for delete collection settlements real?
Learn more about this credit improvement technique from HOPE4USA credit expert Michelle Black.
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You are probably familiar with the concept that most negative credit report items have an expiration date. There are very specific guidelines regarding credit reporting statutes of limitations which are spelled out in the Fair Credit Reporting Act (FCRA). Thankfully for consumers, most negative items on a credit report have to be removed somewhere between the 7 and the 10 year mark. (CLICK HERE to read How Long Will Items Stay On My Credit Report for a detailed list.)
However, there are a few items which do not have a credit reporting expiration date. Check out the list below of the types of items which are legally allowed to hang around and haunt your credit reports forever.
Unpaid Tax Liens
When you pay off an outstanding tax lien and the lien is released it is required to be removed from your credit reports after 7 years from the date of release. Better yet, if your lien is withdrawn then it can actually be removed from your credit reports immediately. CLICK HERE to learn how to remove paid federal tax liens from your credit reports.
Unpaid tax liens, unfortunately for the tax payer, can remain on your credit reports forever. Another frustrating fact regarding outstanding tax liens is that fact that these liens can make it impossible for you to qualify for a mortgage, regardless of how high your credit scores climb. However, the good news regarding federal tax liens is that you may only need to set up an approved payment plan in order to be eligible for a withdrawal under the IRS Fresh Start Program. The credit reporting agencies - Equifax, TranUnion, and Experian - do not currently include withdrawn tax liens on credit reports. So, if you are granted a withdrawal then you can request for the lien to be removed from your credit.
Outstanding Federal Student Loans
The Fair Credit Reporting Act (FCRA) is actually silent on the subject of federally guaranteed student loans. Instead these government guaranteed loans are governed by the Higher Education Act. As a result, federal student loans which have gone into default do not follow the 7 year deletion rule which most other defaulted accounts must adhere to under the FCRA. In other words, defaulted student loans are legally allowed to remain on your credit reports indefinitely.
You Are Not Out of Options
If unpaid tax liens (especially federal liens) or defaulted student loans are plaguing your credit reports that does not mean that you condemned to spend the rest of your life in credit prison, never able to qualify for a loan again. On the contrary, several rehabilitation plans or payment options may be available to you to help you get these outstanding issues resolved and enable you to begin rebuilding your credit.
CLICK HERE or call 704-499-9696 to schedule a no-obligation credit analysis to review your 3 credit reports and discuss possible solutions for your specific credit problems.
Other Exceptions
1. When Borrowing Over $150,000.
If you are applying for a loan higher than $150,000 then, according to the FCRA, any item on your credit reports which was previously purged off due to the age of the item (i.e. older than 7 or 10 years) could actually be included on your credit reports again. For example, if you had a 20 year old foreclosure it could legally be included on your credit reports when applying for a loan in excess of $150,000.
2. When Applying for Certain Jobs.
Credit reports (not scores) are often used for employment screening purposes as well. If you are applying for a job with an annual salary of $75,000 or higher then credit reporting statutes of limitation under the FCRA are suspended as well. As a result, previously purged credit report items could legally be allowed to show up on your credit reports.
3. Insurance Screening.
The final exception to the 7-10 year credit reporting rule can come into play when you apply for a life insurance policy valued at $150,000 or higher. Should a credit reporting agency choose to provide an insurance provider a more extensive view of your past credit history, including those items which have aged off of your standard credit reports, then they have the legal right to do so.
The Catch
Although in the case of the 3 exceptions above the credit reporting agencies are allowed to include information which would be outdated on a standard credit report, they are probably not going to choose to do so. In fact, it would be extremely unusual for a previously aged off account to reappear on your credit reports even if one of these specific exceptions applied to your situation.
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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As I was checking Google for credit related news this week, something that I do quite often as the admitted credit geek that I am, I came across an article about a new study that really bothered me. The study I am referring to was recently conducted by Bankrate and, among other things, it estimates that around 35% of US consumers have never reviewed their credit reports and over 26% of consumers have never even checked one of their credit scores.
As a credit expert I am constantly approached by consumers who are extremely concerned about their credit and want to learn more about how to improve their credit reports and scores to the highest level possible. So, I found it pretty disturbing that over 1/4 of consumers simply seem not to care about their credit at all.
Although disturbed by the study, I was not surprised by the fact that a large portion of US consumers are unconcerned about their credit reports and scores. After all, thanks to the Fair and Accurate Transactions Act (FACTA) passed in 2003, consumers have had the right to pull copies of all 3 of their credit reports for free annually via AnnualCreditReport.com. Yet only a mere 4% of these free reports are claimed on an annual basis.
There are many different reasons why consumers ignore their credit reports and scores. However, regardless of the reason ignoring your credit is a recipe for disaster - especially with the modern prevalence of data breaches. Here are 3 of the top reasons why consumers do not care about their credit as much as they should.
1. Failure to Understand the Responsibility
Of course you have the right to expect accurate and error-free credit reports. It is a right that is afforded to you under the Fair Credit Reporting Act (FCRA). Yet even though you have the right to expect accurate credit reports the fact of the matter is that errors and fraud occur on credit reports every single day. Mistakes on credit reports are quite common. In fact, the Federal Trade Commission released a study in 2013 which estimated there to be around 40 million mistakes on consumer credit reports. This means 1 in 5 consumers are victims of credit report errors.
While you do have the right to expect accurate credit, it is 100% up to YOU to monitor your credit reports for mistakes. When and if a mistake does arise then you have the right to dispute the mistake with the credit reporting agencies or even with the creditor or collection agency directly. However, if you are not in the habit of checking your credit reports routinely then you will never know when an problem occurs.
2. Bad Advice
The cash-and-carry crowd has many consumers convinced, especially young consumers, that living a life free from the shackles of credit is the only logical choice to make. However, the belief that credit scores, credit cards, loans, and mortgages are all part of an evil system designed to ensnare the unsuspecting masses is completely false.
Even if you decide to avoid credit cards, rent your home, and pay cash for vehicles it is still impossible to live a life which is unaffected by your credit reports and scores (unless you plan on going completely off the grid and living in a shack in the woods). Like it or not, your credit reports and scores impact many areas of your life including your insurance premiums, utility deposits, your ability to rent an apartment, your ability to rent a car, and even your ability to land a job. The sooner you admit to yourself how much your credit really matters the better off you will be. CLICK HERE to read "Why Credit Avoidance Is a Bad Strategy."
3. Mistaken Beliefs
Many people mistakenly believe the their credit only matters when they apply for a loan. However, only checking your credit reports and scores during a loan application is a giant mistake. First, if credit issues do arise during a loan application it is important to understand that it can often take months of hard work to resolve credit problems on your own or even with professional assistance. Second, only viewing your credit reports during a loan application is dangerous because it increases the probability of fraudulent accounts appearing on your credit reports without your knowledge.
How to Monitor Your Credit
Thankfully, monitoring your credit is not very difficult. You have the right to access a free credit report from each of the 3 credit bureaus individually annually via the website AnnualCreditReport.com. There are also many websites where you can access completely free credit scores (generally from one credit bureau at a time). CLICK HERE for a list of free credit score websites. Finally, you can sign up for an inexpensive, 3-bureau credit monitoring service to make the process of keeping tabs on your credit reports and scores consistently a breeze. CLICK HERE for a list of reputable, 3-bureau credit monitoring services.
Michelle Black is 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, 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 identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.
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Media outlets were set into a frenzy last month when the New York Attorney General's office announced a landmark settlement agreement which had been reached with the 3 major credit reporting agencies - Equifax, TransUnion, and Experian. The agreement will completely overhaul many of the practices and policies previously held by the credit reporting agencies (CRAs) and has the very real potential to bring about credit score increases for millions of American consumers.
The 41 page long agreement will introduce a large number of credit reporting and dispute resolution changes, some of which are not all that exciting for consumers and several others which are extremely so. If you are interested in reading the agreement in its entirety it can be found here. However, for those of you who would simply prefer the highlights you can read below for the top 5 things which you need to know about the new settlement agreement and the ways it may or may not impact you directly.
1. Changes will be implemented for consumers nationwide.
Although spearheaded by the New York Attorney General, Eric Schneiderman, and the despite the fact that the settlement was actually made solely with the state of New York, all of the changes detailed in the settlement will be implemented for all US consumers across the country. One of the primary reasons why the new policies and procedures will be rolled out for all consumers instead of only those consumers located in New York state is due to the fact that it does not make sense, logistically speaking, for the CRAs to have separate policies and procedures in place for an individual state.
2. Changes will still take time.
The CRAs are going to have to complete tremendous amount of programming work in order to implement the changes detailed in the settlement and, as a result, the changes are not expected to happen overnight. Instead the CRAs have been given a total of 3 years and 3 months, broken down into 3 phases, to complete all of the steps which will be required in order to comply with the settlement. Here is a quick overview of the 3 phases.
· Phase 1 (September 8, 2015)
The easiest changes in the settlement must be implemented by this date. These primarily include changes which will not require an extensive amount of programming and/or training.
· Phase 2 (September 8, 2016)
The changes which must be implemented by the Phase 2 deadline are those which are more (but not most) time consuming from a logistical standpoint. Phase 2 initiatives will involve the development of many new internal policies in addition to new polices for credit reporting between the CRAs and their customers (aka data furnishers).
· Phase 3 (June 8, 2018)
The "Completion Date" detailed in the settlement is the deadline for implementing all remaining changes in the settlement. Changes included in the Phase 3 rollout are the most time consuming in nature from a programming and training standpoint.
3. Medical Collections
Among the most exciting new policy modifications in the settlement include those which are related to the handling of medical collection accounts. Once implemented there will be 2 major changes in medical collection reporting procedures.
a. Delayed Reporting - Medical collection accounts will not be permitted to appear on a credit report until the account is at least 6 months past the date when the account initially went delinquent. This change is required to be implemented by Phase 3 (June 8, 2018). Preventing the early reporting of medical collections will allow consumers more time to ensure that medical bills are paid by insurance without the fear of their credit reports and scores being damaged due to slow insurance claim review processes.
b. Accounts Paid by Insurance - By the Phase 2 deadline (September 8, 2016) the CRAs will be required to remove or suppress from credit reports any medical collections which are paid or are being paid by a consumer's medical insurance provider. The removal/suppression will be retroactive and will apply to medical collection accounts which were paid by insurance in the past but are still currently remaining on any consumer's credit report. What makes this change especially exciting is the fact that the removal of a collection account from a consumer's credit reports, depending upon the situation, could potentially have an extremely positive impact upon that consumer's credit scores especially if it were the only negative account present.
4. More Dispute Resolution Influence from the Credit Reporting Agencies
One of the more anticipated changes by consumers which will be implemented in Phase 1 (September 8, 2015) has to do with the way which the CRAs handle certain disputes. In the past when a consumer disputed an account with the CRAs and included supporting documentation (i.e. proof that an account was paid off) the CRAs would still fully rely upon the data furnisher to either modify, delete, or verify the account.
Once the new policy is implemented, should a consumer submit disputes to the CRAs with supporting documentation AND the account is still verified as accurate then the CRAs themselves will also be required to assign agents to review the supporting documentation in order to determine if a deletion or change is warranted. If a change is deemed to be warranted then the CRAs will actually modify or delete the inaccurate account themselves. Should everything work as planned then it should result in a much easier process for consumers to see errors corrected on their credit reports (provided they have proof of the error).
5. More Free Access to Credit Reports
Since the FACTA amendment to the Fair Credit Reporting Act was passed in 2003 consumers have had the right to claim a free credit report from each of the 3 CRAs annually via the website AnnualCreditReport.com. In addition to this free report some consumers will also be entitled to a 2nd free annual credit report from the same website as part of the new settlement. The additional free report, which must be made available by the Phase 2 deadline (September 8, 2016), can be claimed by any consumer who meets the following criteria: (a.) the consumer already pulled an initial report from AnnualCreditReport.com in the past 12 months and (b.) the consumer initiated a dispute after doing so.
As previously mentioned, the full settlement agreement spans a total of 41 pages. There are certainly many other changes which will be brought about as a result of the new settlement in addition to those listed above. If you are interested in learning more about the coming changes feel free to check out the following article: Huge Changes Coming to a Credit Bureau Near You.
Michelle Black is 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, 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 identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.
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Ignorance is bliss...or so the saying goes. However, when it comes to your credit reports and scores being ignorant can be a truly horrible strategy which can have some seriously negative consequences as well. People generally ignore their credit for one of two reasons. First, many consumers with good credit assume that everything on their credit reports is fine and do not even bother to check their reports until their next loan application. The second most common reason why consumers ignore their credit is due to the fact that it is so bad that they feel overwhelmed and powerless to change their credit situation. Regardless of the reason, ignoring your credit is a really bad idea.
Why Consumers with Good Credit Need Still Need to Pay Attention
If you always pay your bills on time and maintain very low or even $0 balances on your credit cards then odds are high that your credit scores are probably in pretty good shape. The truth is that you have the right to expect your credit reports to contain accurate information. However, the reality of how the credit scoring system works is that mistakes on credit reports happen. In fact the Federal Trade Commission released a study in 2013 which proposes that there were around 40 million mistakes on the credit reports of US consumers. Although the Fair Credit Reporting Act does give you the right to expect accurate credit reports, errors still occur every single day. What you may not realize is that the responsibility to make sure you credit reports remain error free lands squarely on your own 2 shoulders.
Credit reporting errors can range from insignificant with little to no credit score impact to all the way on the opposite side of the spectrum where the wrong credit reporting error can wreak utter havoc upon your credit scores. Thankfully, there are several options which make it extremely easy for you to keep a close eye on your credit reports in order to ensure that they remain accurate.
Option 1: In 2003, thanks to the FACTA amendment to the Fair Credit Reporting Act, consumers were given the right to access all three of their credit reports completely free of charge once every 12 months. To access these free credit reports you simply need to visit AnnualCreditReport.com. (Not-so-fun-fact: an average of only 4% of these available free reports are actually claimed by consumers annually.)
Option 2: If you are wise enough to understand the importance of keeping a close eye on your credit reports then you will also realize that checking your credit reports once a year is not going to be often enough. The good news is that there are many free options available to access and review your credit reports throughout the year - though this option can be a bit time consuming due to the fact that truly free reports can generally only be accessed one credit bureau at a time.
Option 3: Finally, there are also several affordable fee based credit monitoring services which will allow you to check an monitor all 3 of your credit reports and scores simultaneously and easily.
Why Consumers with Bad Credit Still Need to Pay Attention
There is no question that credit problems can feel overwhelming and insurmountable. When faced with credit problems the desire to stick your head in the sand and ignore them can be very tempting. Unfortunately, ignoring credit problems does not make them go away but only keeps you stuck in the same bad situation for longer than necessary.
Whether you choose to work on resolving credit issues yourself or to seek professional assistance with your credit problems you should make the decision to do something. No matter how bad your credit reports are currently - even if you are one day out of a freshly discharged bankruptcy - there are always steps which you can take to begin moving your credit back in the right direction.
CLICK HERE to schedule a no-obligation credit analysis with a HOPE4USA credit expert to learn how to improve your credit reports and what HOPE4USA can do to help.
CLICK HERE to download our free credit repair toolkit - no strings attached.
About the author: Ron Lambright has been a credit expert for over 14 years and is the Executive Director of HOPE4USA - a company he helped to found after struggling to overcome personal credit issues on his own twice before. He is a regular guest on radio talk shows and is featured weekly as the premier credit expert at training seminars in the Charlotte, NC region and up and down the East Coast. Ron is an expert on teaching consumers how to achieve "loan ready" credit reports, improving credit scores, and an expert in the fields of business financing and business credit as well. You can connect with Ron on Facebook page by clicking here.
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