Credit Report Problems :( (NOT SPAM)

[Frag Mortuus]

Ok, credit report savvy friends,

In the past I have been somewhat irresponsible when it comes to paying my credit cards and loans on time. But, about 2 years ago, I paid off all debt except large student loans and my car. I paid all credit cards and closed them and a small $900 student loan. I actually called all lenders and got a final payoff amount and immediately paid them using my debit card over the phone.

So, today I pulled my credit reports and saw that most of the lenders showed that I still owed them a small amount of money and that I had several "failure to pay" notices on my report. The only thing I can think of is that between the time that I paid my, supposedly final, balance and the time they applied the payment and closed the account the lenders applied interest to my account, of which I was never notified.

Also, with the student loan, my wife paid it in person and got a receipt. Last year I got a call from a collection agency looking for the money. My wife went to the college and re-confirmed that the account was settled. I then called the collection agency, who then called the college and they all agreed that I didn't owe them money. Well, now it is showing that I owe $200 and have so for two years.

My questions are: Am I responsible for the residual balances if I confirmed a final payoff amount? And regarding the student loan, if everyone agrees that I have settled the account, what should I do? How should I combat these? My wife is going to call the places this week and see what the deal is, but it's frustrating because even though I didn't pay these things on time, I did what I thought was right and attempted to pay the balances and part ways with them. My wife and I want to buy a house in a couple of years and really want to get all of this mess cleared up.

I know this is a retro gaming site and not a financial planning site, but a lot of the users on here and pretty wise with money and can probably off some good advice.

[Jagosaurus]

I imagine the $200 was interest that hadn't hit yet. Crappy of them not to notify you. Did they have the wrong address on file? Was it $200.00 exactly? If so, looks some other fee.

Also, might want to open a credit card & make monthly payments to boost credit. I've been doing this since college. Pay monthly bills only with credit card, place that dollar amount in savings, pay off CC @ end of month, each month. There is no difference to your wallet if you're disciplined but it'all help your score when you guys start applying for loans just be sure the balance is @ zero when you apply bc lenders check outstanding debts & sum them as part of the equation that determines how much your loan/monthly payments can be. Hope this helps long term but sry I'm not much help with the student loan mix up.

[KalessinDB]

Yeah, I can't help with your specific questions unfortunately, but on general help, Jag's definitely right as far as "Open up a credit card" (or two) "and use it to pay for things" rather than debit card. Also, I would have suggested you not close any credit cards, ever. Monitor them to make sure no false charges are on them, but 2 things that affect credit score are average age of credit (which, if you close accounts you've had open forever, necessarily drops) and I forget the exact term but essentially "Amount of debt you owe"/"Amount of debt they will let you owe"... basically, percentage of your credit line that you have USED. By closing credit cards, you're lowering the denominator in that equation and thus making the number less favorable for you.

I will however, quibble that you shouldn't pay it off in full every month. And I know, I know, you're worried that you'll be paying interest you don't have to, but hear me out:

If you pay off your balance in full every month, the credit card company can't charge you interest, ergo you are not seen as being all that attractive to them. You're more attractive than the person who makes NO charges, or the person they have to send to collections, because they still make a small amount of money on you (charging the merchant for processing the transaction), as opposed to precisely zero, or actively costing them money as the other two choices do. However, you're still not their optimal customer and as such you won't see as much of an improvement on your credit as you would by making payments.

My brother, who has dealt with "Special Finance" for auto loans (read as: getting car loans for people who pretty much don't deserve car loans) since approximately 1991, before that was even a thing that had a term, will make the following suggestion to someone with *ZERO* credit (which, you may have heard, is worse than bankruptcies and other terrible credit situations): Step 1: Get a store credit card if you can't get a normal Visa or Mastercard. They'll give them to basically anyone over 18 that can sign their name. Step 2: Charge a couple hundred dollars. Nothing crazy, $100-300, something that's not going to break the bank. Heck, set the $100-300 in your own personal escrow account under your mattress if you're truly petrified of owing people money. Step 3: Pay the minimum payment, and only the minimum payment, until it is paid off. On time or early, every month. Yes, this will mean you're paying interest. Deal with it. That's how credit companies know that you're a good credit risk, because you're paying on time BUT at the same time they're making off of you. Step 4: Repeat Steps 1-3 if necessary.

Now I'm sure some people will want to say I'm crazy, or that they've found other ways to improve their credit, or this that or the other thing. I'm not claiming I know the one true way. I'm claiming that this is the way taught to me by my brother who has over 20 years experience helping people with terrible, terrible credit.

Good luck man, and I hope you can get answers to your specific questions as well.

[Frag Mortuus]

I appreciate the advice guys. The crappy thing is that I've had these types of problems my whole adult life. I could go into a whole history of things that I've had to dispute with the credit bureau's. I'm not saying that I'm completely void of blame because I have had my fair share of late payments. However, I should have never had a write-off or failure to pay on my record and it seems that I have a bunch due to no fault of my own. This is the problem I want taken care of. I'm just going to have to dispute these things and try my best to get them removed.

[alexis524]

I currently work in the non-profit sector of mortgage lending and a fair amount of my time is counseling individuals on how to improve their credit rating/score in order to qualify for financing. As far as the reported amounts that you allegedly still owe, your best bet is to send the collection agency a "validation letter." You can google a sample letter which is really nothing more than a formal written request that they prove you owe the debt. The FDCPA lays out that 1. this is a basic right of every consumer, and 2. that the collection agency has a 30 day window to respond back to you. Definitely send your letter via registered mail so that you have documented proof they received your letter, and after they reply, or don't, then take your findings to the credit bureaus for help. Simply go online and open up a dispute and send in any and all documents that substantiate your claim. Part of what the credit bureaus do is resolve matters for us. If you really do owe an amount, the validation letter will also tell you how much the collection agency paid for the debt (pennies on the dollar) and now you have an amount you can use to negotiate a settlement with.

I do, however, take issue with the advice given below to carry credit card balances. That is irresponsible advice. The absolute best thing any consumer can do for themselves is IF they have credit cards, pay them off and in full every month while never ever carrying more than 30% of your limit as a balance. Doing this will cause your FICO score to rocket up and will have ZERO ADVERSE EFFECT to your credit score. We are all judged the same when it comes to whether or not a bank will lend to us - our FICO score. By keeping as low as possible the debt to limit ratio, you will do wonders for your score and wallet by not paying any interest/finance charges. We do not have to "deal with it" as mentioned below. Will creditors like us if we do that? No, because as stated, they do not make any money off of us. Do they look to "cut the fat" and let go consumers that they will not make money off of? Yes, but only if we give them reason to, and inactivity is the primary reason they do and will. If I pay a credit card off and let the card sit in my sock drawer, it'll take about 4-6 months of inactivity before my account will be closed- which does lower my credit score especially if that was my longest open account on my report. (third largest factor of a FICO score) By paying off my balance to zero, and using the card minimally each month to a point where I can pay off the balance each month, the creditor CANNOT close my account and guess what? My FICO score continues to trend up and up. If you take anything away from this wall of text, take this away - DO NOT CARRY CREDIT CARD DEBT.

I have been doing this for the last 15 years and hold several certifications pertaining to credit and have studied credit law for far too long now. I'm not trying to be a douche to the poster below who advised to not pay off credit card debt, but that is exactly the type of misinformation that I have seen hurt people over and over. If you don't know who's word to take here, look up your counties local non-profit housing education center (any agency with "Neighborhood Housing Services of..." is a good start) and ask to see a counselor individually regarding your credit and how to improve.

Lastly, if you already have open credit card accounts, work with what you have open first before applying for and opening up new credit. Why? Applying for credit in and of itself will lower your credit score too. If you have credit cards now, pay them down to a balance of 30% or less of their limit and just give it a few months and your score will be just fine. If you don't have any open credit cards, my suggestion is to seek out your local credit union, open an account with them, and apply for a secured credit card. With a credit union, you won't have any of the customary fees tacked on to the card right off the bat, and they tend to work harder for the demographic they serve. (i.e. more flexible on underwriting terms) They will ask you for a security deposit that will match your credit limit and within 6 months of responsible use, they give your deposit back and turn your account from a secured one to an unsecured account. That is the best way to establish/reestablish oneself credit-wise. Start with one account and go from there. Don't apply for every card in the mall with the thinking that if I apply to 25 stores, one is bound to say yes. All 25 of those credit applications will individually hurt your FICO score even more that it already is. Just keep it simple for now.

If you have any questions, feel free to pm me and I hope that my post helps you and others clear up common myths about credit.

[prfsnl_gmr]

^ is excellent advice.

.....

You and your wife should call your creditors regarding the charges; tell them that you do not think that the charges reflected on your credit report are accurate; demand that the creditor justify the charges to you; and determine if there is any way that the creditors will remove them voluntarily and update their credit reporting. (If the charges are justified, then you may have to pay some of them to get them off your credit report. If the charges are not justified, then the creditor should just remove them.) You should each take meticulous notes regarding each of your communications, and your notes should include: (1) the date and time of your calls, (2) the names of the people you spoke with on the telephone, (3) a summary of what you said to each of your creditors, and (4) what each of them said back to you.

If that does not work, then you and your wife should dispute the charges with the credit reporting agencies consistent with the Fair Credit Reporting Act. (You will find a copy of the act here, and the dispute procedures are in section 611. Probably more helpful to you, however, is the FTC's guide to disputing credit information, which you will find here.) Sending those letters triggers a duty by your creditors to investigate the charges, and assuming the charges are not justified, their investigation should result in the charge's removal from your credit reports. Sending the letters will also show your creditors that you and your wife are serious about the dispute, and they will notify the credit reporting agencies that you do not think the entries on your credit report are justified. Importantly, you should retain photocopies of the letters that you send to the credit reporting agencies and to your creditors; you should send the letters via certified mail and retain copies of the return receipts; you should take notes of any calls you receive from the credit reporting agencies or your creditors consistent with the guidelines outlined above, and you should retain copies of any correspondence that you receive in response to your dispute letters.

If the letters do not work, then you should consider consulting with an attorney. West Virginia has very strong consumer protection laws, and assuming the charges are unjustified, I am confident that an an attorney in your area would be willing to assist you with this matter. (An attorney may charge you a fee for assistance, and if you think will be an issue for you and your wife, then you may want to consider contacting West Virginia's excellent non-profit legal services provider.)

Finally - and regardless of the outcome of your dispute - you should consider building your credit back using the techniques discussed in the previous post. Having good credit makes life a lot easier, and you and your wife should be very mindful as to how your actions will affect your credit scores going forward.

[Frag Mortuus]

Wow, this all sounds like great advice. I'm going to start calling creditors and such this evening. I would love to get these things off my credit report.

One last question: If I get the creditors to admit that I don't owe them money, will they just mark the account as satisfied and the blemishes will stay on my credit report? Or will they go back and remove the errors on my report from the date in 2010 when I paid them off?

Thanks!

[prfsnl_gmr]

One last question: If I get the creditors to admit that I don't owe them money, will they just mark the account as satisfied and the blemishes will stay on my credit report? Or will they go back and remove the errors on my report from the date in 2010 when I paid them off?

If the creditors admit that you don't owe them any money and that their charges are unjustified, then the blemishes should be removed from your credit report entirely.

[alexis524]

My advice is to not call the collection agencies unless you absolutely have to. Collection agencies are first and foremost a for-profit business. Their goal is to collect money by any means necessary. They will fight you tooth and nail over giving you proof of a paid debt. I suggest taking them out of the equation all together by validating the debt first and then take your findings to each credit bureau they report to and let them deal with the collection agencies since they may have violated your rights as a consumer. If you really really want to call the collection agencies, a few words of advice:

1. Do not confirm you owe the debt, or deny you do not owe, you are simply collecting information since you received a letter or saw them listed on your credit report. They are like the police in that any information you give them, they will use against you. Most people choose to call a collection agency only when they absolutely have to. (i.e. i'm buying a house and my $1,000 Columbia House collection account needs to be paid) No matter how nice or sweet that agent sounds, If i reveal that I'm calling because my I can't buy my house unless I pay this collection account, they will not budge one red cent from what they claim I owe. Why? I've given them information that now gives them all the leverage, and they will use it absolutely.

2. If you are offered and agree to a settlement amount, get your terms in writing first before arranging payment. please, PLEASE do this. If you do not have the agreement in writing, what do you have to fall back on if they violate the agreement?

3. Never, ever, ever, ever pay the agency with your debit card, credit card, or check by phone. Why you ask? Well, if I fall for their tactic of "I can only extend this one-time settlement offer today so I need payment for you while we're on the phone, and, no I cannot give you anything in writing about our terms", what is to stop them from debiting out an additional amount? Which leads me to point #4,

4. Always pay collection agencies with postal money order. It is a Federal document which we can hand write on the following: "by cashing this document, you are agreeing to the terms of our agreement, whether verbal, or oral." If they now violate your terms, they have now committed a federal offense, and now they have bigger problems than not collecting your $200.

5.It's OK to play hard ball with these companies. If they refuse our offer, we can ask them note our account and then ask to speak with their manager to let them know that they have refused our money. That will change that agents tune real quick since that is the sole purpose they are in business - to make money.

[prfsnl_gmr]

I don't think that he is dealing with collection agencies based on his post. (Some of them can be unscrupulous, and I agree you should use caution when you are dealing with them.) Regardless, the original creditors (i.e., the credit card companies, the student loan lender, etc.) are the ones that did the credit reporting; so, those are the ones you should talk to to clean up your credit, much like you cleaned up the first problem with your student loan accout here:

Also, with the student loan, my wife paid it in person and got a receipt. Last year I got a call from a collection agency looking for the money. My wife went to the college and re-confirmed that the account was settled. I then called the collection agency, who then called the college and they all agreed that I didn't owe them money. Well, now it is showing that I owe $200 and have so for two years.

Moreover - and in my experience - you will get a positive result much faster (and with much less hassle) if you contact them over the telephone.

4. Always pay collection agencies with postal money order. It is a Federal document which we can hand write on the following: "by cashing this document, you are agreeing to the terms of our agreement, whether verbal, or oral." If they now violate your terms, they have now committed a federal offense, and now they have bigger problems than not collecting your $200.

I don't think that this is correct...You can try the "account number/payment-in-full" trick, but a lot of companies and persons would not cash a check with "payment in full" written on the memo line unless the the amount satisfied the account. Moreover, you cannot "rescue" an indefinite or invalid oral contract by simply writing a disclaimer on a cashier's check or money order. Finally, depositing the check or money order and continuing to pursue a collection action might violate state common law contract principles, but to my knowledge, it certainly would not consitute any sort of federal crime. In my experience, state consumer protection laws are the best way to deal with an overly aggressive or unscrupulous collection agency.