NEVER IGNORE COLLECTIONS
Don't put off raising your score!
Applying for a loan soon? Paying collections can actually lower your score initially. . . know how it works.
Dates are extremely important on our credit reports. A collection weighs less on your credit report after it is paid and time passes. Our credit reports are set up to assign higher points to our score - the longer length of time between todays date and the last open collection entered on your credit report. When you pay a collection, and your report is updated to indicate the new zero balance, the date is also updated. This may lower your credit score for a short time, however every month that goes by without adding any new collections or late payments will put you in the perfect situation to raise your credit score.
***ARE PLANNING ON APPLYING FOR A HOME OR AUTO LOAN SOON? - YOU DEFINITELY WANT TO TALK TO YOUR LOAN OFFICER BEFORE YOU PAY ANY COLLECTIONS OFF! YOU MAY ACTUALLY LOWER YOUR SCORE TOO LOW TO BE APPROVED FOR THE LOAN. YOUR LOAN ORIGINATOR WILL LET YOU KNOW THE BEST ROUTE TO HANDLE YOUR SPECIFIC INFORMATION!
My credit score lowers? For how long? Why? Why should I pay the collection off then?
When you pay off a collection account from the past – the collection account is updated with a current date on your report which causes your score to lower for a minimum of a month or two before it begins to rise! Even though you are paying the collection, it will never become a positive entry. The only way to stop the negative effect it has on your score is to pay it off and let it slide into the past!
To have a true solid credit report you need to have a credit report clear of collections. Procrastinating now is only going to create another "I wish I would have" stress in your head. Even if small payments are necessary . . . to get your credit on track PAYING OFF COLLECTIONS HAS TO BE DONE! PERIOD.
Options:
HOW TO SETTLE COLLECTION ACCOUNTS FOR LESS THAN YOU OWE . . .
Follow the steps below:
- Contact billing department of creditor. (Always document the name of the person you are speaking to.)
- Tell them you are calling to make a settlement agreement on your account.
- You will want to have an amount prefigured that you are able to pay over the telephone, and amount you feel comfortable with if further payments are needed. (Being prepared is the key)
- As them what type of agreement they are willing to make - or state what you are able to pay. You may have to go back and forth a bit with the representitive - as they are going to try to get you to pay as much as possible. (Many times commissions are involved on their part.)
- When making an agreement - keep in mind that having the collection deleted by the creditor will raise your score as if the collection never touched your credit report at all - deleting the collection will raise your score immediately as soon as the entry is removed from your credit file. So, make sure that is part of your offer. "I will pay you $XXXX right now via my bank card if you delete this from my credit file." Simple as that. Double check with them that your account is noted that it will be deleted. As soon as you are finished with the call dispute the entry via your Identity Guard online, or send the appropriate information to dispute the credit entry. Simply state this account was paid before collection, since the company has agreed to remove the collection. Do not add extra words to your dispute, no excuses, only the facts.
- You are not required to disclose any further information about employment or income to the creditor or the collection company ( the information gained can be used in any way to collect their debt).
- Once you come to an agreement be sure that you have your agreement in writing, whether it is an e-mail or fax, or that your account has been noted by the person you are speaking with - make sure you have that person's name.
- If the representative is unwilling to make an agreement, ask to speak to the manager. (It is not likely that you will have this problem.) At times you may get a lazy or unexperienced representitive, sometimes calling back at a later time will allow you to get in touch with someone that is eager to work with you.
- Be firm and persistant yet polite - let them know you are paying those who are willing to work with you!
IF YOU DON’T HAVE ENOUGH MONEY TO PAY A COLLECTION COMPLETELY OFF - MAKE SURE THAT YOU SEND PAYMENTS NO MATTER HOW SMALL. . .
Start sending small payments, even if you can only afford 5 or 10 dollars a month. It will help to start lowering the balance instead of not addressing the collection at all. Paying small payments will start you moving you in the right direction. You will be surprised at only 5 or 10 dollars a month how fast your debt starts getting paid off. Doing nothing will definitely get you nowhere fast! Many times if a company see's that you are acknowledging the debt - that is enough to keep them satisfied for a bit. When you have an opportunity to pay a bit more - pay more. The faster this collection is paid off - the faster your score will rise, and you have one less item on your 'stress plate' to deal with! Remember to keep a work sheet on your collections to keep track of the company - contact person - total amount owed - and the amount owed after each payment. Keep an eye on your credit report to be sure that it is reflecting the payment. When you get towards the end of paying your collection - it is a good time to call the creditor and offer to pay the balance in exchange for having the entry DELETED from your credit report. When a collection is actuall deleted - your score raises immediately as if the collection never existed in the first place.
**If you encounter a getting a representative to set up an agreement plan with you, don’t give up after one try! Unfortunately you will run into lazy representatives, or reps that are new. Call back at another time, or the next day. Keep in mind these are humans we are dealing with, just like every industry, there are times we will find that the person we are dealing with are not the best at what they do. Don’t let someone having a bad day ruin your opportunity to get your debt issues resolved. Most reps that you come in contact with are trained well to handle settlement procedures, and are happy to do so.
Easy way to build credit while eliminating your collections.
BUILD CREDIT and PAY OFF COLLECTIONS at the same time . . .
If your credit is still in somewhat good standing and you need to open a new account to build positive credit but still have a few collections to get on track . . .
When you open the new account - charge your collection to get it paid off. (Only if you can afford the payment it will create - of course.)
Remember that when you first pay off a collection your credit score may drop a bit - so it's best to get those collections paid as fast as you can, and let those collections start becoming a part of the past. Once they are paid each month they will become less of a negative weight on your score.