How Best to Repair Your Credit Score After Foreclosure, Repossession, and Default
Hi Michael, I recently decided I was going to tackle my husbands bad credit myself. Unfortunately, like so many, I do not have the best idea where to begin. Below is a breakdown of the situation I am trying to resolve as a DIY-er. Anxious to hear your thoughts.
Background: Lost job due to sudden company wide lay offs. Was the only income for our family at the time. The lay off caused a relocation, which in turn felt like starting from square one. We now have a two income household, which we hope will allow us the flexability to rebuild. Because my husband was the only one working at the time everything financed was in his name, only. We currently have everything that requires financing in my name...
Events (not in any particular order):
Forclosure of home: July 2012
Reposession of cars (2) November 2010
Credit card debt: We had 7 open revolving lines of credit, all of which are now in bad standing.
Student Loans: (2) I have recently contacted Sallie Mae and committed to a repayment plan.
Current Score: 540
Goal Score: 650
Let me know if you would like any further information. I look forward to hearing back from you. I figure there is no better time than now to at least get a game plan and start making steps in the right direction.
Is my situation far to much for the DIY-er?! Do you think we have a chance of bouncing back?!
—MelissaD
Short answer
You can often get better results repairing your own credit than by hiring someone. What it takes is patience, some money to resolve old collection accounts where that makes sense, and a bit of know how. If your report carries more negatives than positives, plan on 24 months and longer.
Key points on this page
- Negatives hit hardest when they are recent. Roughly 24 months after a negative appears, it has less impact on your score.
- Someone with one or two negatives among several positives can see fairly rapid results. Someone weighed down with more negatives than positives needs a patient perspective.
- A repossessed car is auctioned, and any shortfall becomes a deficiency balance. That balance often settles at good savings, and getting it updated to zero helps your debt to income ratio, though not the score immediately.
- Defaulted student loans limit your ability to consolidate or qualify for income based repayment. You have to bring them out of default, which usually means several on time monthly payments, often 6 or more, before the reporting improves.
- Unpaid credit cards charge off at 180 days. Setting up a plan or settling before that point limits some of the damage. If they have already charged off, resolving them now is how you start to bounce back.
- After charge off, accounts go to third party collectors or debt buyers, who may add their own entries to your report. Some are placed with attorneys, and a judgment arrives with its own fresh 7 year shelf life.
Recovering from a temporary financial setback (not that the years you endured could be called temporary), and repairing your own and your husbands credit score, is possible. You can have better results going about your own credit repair, than by hiring someone. The number one ingredient you will need is patience, a sprinkle of resources to resolve old unpaid bills in collections (when it makes sense to do so), and a dash of know how – and you are on your way to recovering your credit score. Well… at least getting to your goal of 650. First thing I want to address is the patience part.
How quickly can you repair credit on your own?
There are going to be different circumstances for each person trying to repair their credit. Someone with one or two negatives, set beside several positives, will have an easier go of repairing credit and increasing their score, and can often see fairly rapid results.
Compare that to someone whose credit report is weighed down with more negatives than positives and you need to have a patient perspective. Measured in time, that will often mean 24 months and more. And given the information you shared, that is going to be the case here.
Negatives on the credit report tend to have the heaviest impact the more recent they are. 24 months after a negative appears on your credit score – the damage is going to have less of an impact. With that in mind, I will size up your situation with some general feedback.
Repairing Credit with a Foreclosure on Your Credit Report
That foreclosure will have less of an impact starting next summer. There is not much you can do about that at this point. So using the next year to improve other areas should be the goal. If you can clean up much of the other negative reporting, you could find yourself in a position to get a new home loan approved (if you enter the market that soon) within 2 years from now.
FHA underwriting standards for home loan approval have pretty low credit scoring thresholds compared to other lending standards. But you can need 3 years separation from a foreclosure or short sale event in order to qualify.
With the new qualified mortgage rules, that will take affect at the beginning of 2014, you would need to handle all of the collection accounts and get them to reflect zero balance owed in order to improve your chances of getting approved for a home loan. This is because of the debt to income ratio that will soon be required to be met in order for loans to meet Fannie and Freddie purchasing.
That Car Repossession on Your Credit Report
The car repossessions happened nearly 3 years ago. That means the credit impacts could have lost some potency. But that would be more applicable if there were only a few negatives compared to many more positives on your husbands credit report. In other words, those 2 defaulted auto loans do not exist in a box. Dealing with those alone will not improve the credit score overall because of the other things that are weighing him down.
Auto loans that go unpaid, and cars being repossessed, result in the cars getting auctioned. More often than not, the auction price paid will be less than the loan balance that was still owed. The auction price will get subtracted from the loan balance and any amount on the loan left over is referred to as a deficiency balance.
The finance company will typically make some initial attempts to collect on the deficiency balance by making a couple collection calls, and sending a collection notice or two. But their collection efforts are often quickly turned over to outside collection agencies. The unpaid debts from repossessions are also bundled up and sold off to debt buyers.
At this stage (after 3 years), you probably will see the auto loan default and charge off, but could see other negative credit reporting from a debt collector or debt buyer. Settling the deficiency balance can often be accomplished at a pretty good savings, and the updates to the credit report that the balance owed is zero will help improve the debt to income ratio, just not the credit score immediately.
Who are the last known collectors on any deficiency balances from the repos? Are there any additional negatives on his credit report (besides the original reporting by the finance companies)?
Credit Report Showing Defaulted Student Loans
When you default on many student loans, you limit your options to consolidate them into more affordable monthly payments, or to qualify for income based repayment plans. You have to bring the loans out of default in order to again qualify for better payment options.
Similarly, you often must bring student loans current, or out of default, in order to improve how they appear on the credit report. This will often mean getting set up on payments, which you indicate you have already done, and also making several monthly payments (often 6 or more), on time.
Was there any part of your conversations with Sallie Mae that involved the benefits to credit reporting once the loans were brought out of default and timely payment being made for a certain period of time? How long have you been making the new payments you set up?
Credit Reporting and Credit Cards in Collection
Unpaid credit card bills that go 180 days without payment get charged off. If you can get a payment plan set up with the banks before that happens, or even settle the balance for less than what you owe before the accounts charge off, you can mitigate a little bit of the damage to your credit. If all 7 of the accounts have charged off already, there is little to be done about that. But you can start to bounce back from that by resolving the debts now.
Once credit cards get charged off they generally will get sent to third party debt collectors for further collection efforts, or sold off to debt buyers, who may add additional collection accounts on your credit report. Some banks (and debt buyers) place collection accounts with attorneys. This can lead to being sued. If a judgment goes against you, that fact will appear on your credit report with a whole new 7 year shelf life. That said, I have some questions about the credit card debts.
- When were the last payments made on the accounts?
- Who were the original creditors? Who is collecting on the credit cards now (if you know)?
- If the credit reports are showing the original creditors as charged off, but with a zero balance owed, it nearly always means the debts were sold. Are there any collection accounts showing up that you can tie to the original credit card banks?
- Are there any attorney collectors trying to collect on any of the accounts? If so, are any of those attorneys located in the same state as you are?
- If you were to approach your credit repair efforts by methodically and strategically resolving old debts one by one, how much can you commit from your monthly budget consistently? Can you tap any lump sum resources in order to be more aggressive with resolving the debts?
Making progress with your efforts to repair credit is going to take time, but from what you have shared, if you have credit goals with a 1 to 2 year view, and can apply resources to this, you can meet your goals. There are alternatives like bankruptcy that may make more economic sense, but I will save that for some comment feedback after you post answers to the above questions.
Anyone looking for feedback about repairing credit after experiencing a tough financial setback is welcome to post in the comments below for feedback.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
Ok….on the student loan question. You cannot be in deferred if you are in default just because you go back to school. You have to actively get yourself out of default by consolidating or rehabbing.
Michael, So, I have settled all of my accounts. 8 in total. 7 directly with the original lender. One sent to collections. My first missed payment was in Jan of 2013. I settled 7 of them by Oct 2013 and one in Jan 2015. How do I improve my credit score now? Can I get some of the derogatory items off of my report? Can I hire someone to do this for me? If yes, who would you recommend? I have already applied for secured cards and have one old card from 2002. I have total 4 cards now and I have been carrying some balance on all cards and making payments on-time on all cards to improve the credit.
Congratulations on all of the settlements jag!
Pull your credit scores for me and post what they are. Get your actual ones that you often will have to pay for, if you do not already subscribe to a monitoring service. Include what your credit goals are in the next 12 to 24 months, and lets go from there on next steps.
I signed up for Experian. It shows my credit Score as 693. My Goal is 740 in next 6 months. Here is more info below:
Revolving Debt: $4,238.00
Revolving Credit Limit: $9,550.00
Revolving Credit Usage: 44%
Real Estate Debt: $142,763.00
Installment Debt: $0.00
Total Debt: $147,001.00
Negative Information
Accounts Ever Late: 8
Accounts In Collections: 0
Time Since Negative: 1.1 year(s)
Inquiries: 8
Oldest Account: 13 year(s)
Average Account Age: 5.8 year(s)
I am bringing the Credit Utilization under 30%, made a payment this month for the purchases over Christmas time. Also, The Citi account that I just settled, does not even show up in the report under listed accounts but it shows 8 accounts as negative in total.
Thanks, that gives a good picture. Other than the 740 credit score target, what is it you plan to do with credit and financing in the next 1 to 2 years? My feedback can be more than generalized if I have a clue about that.
I want to be able to buy a car later this year at a very decent interest rate. I also want to get a credit card with 0% APR for 12 months.
I cannot make any suggestions to get you over the hump on approval for a 0 percent introduction interest rate on a credit card. I would suggest waiting at least 6, and probably 12 months after the citi credit card settlement updates to your credit reports.
I think you have a really good shot at qualifying for a highly competitive interest rate on an auto loan around the same time as the zero interest credit card, and maybe even sooner.
Thanks Michael, So, there is no value in disputing any items on credit report, or signing up for a credit repair service for me?
Not much value in my opinion. If I were to focus on anything when hiring a credit repair company, it would be the most recent citibank account showing settled.
I do not think you have a shot at removing all of the settlements from back in 2013, and if you get a couple removed, it is not likely to nudge you toward your goals much.
Credit repair company prices are not all that out of reach these days. The only one I refer people to is Lexington Law because of the folks I have referred there having gotten results (some do not get any results though, but those that do make the reference possible).
If you do credit repair with realistic expectations, know that you could be throwing a few hundred dollars, over a several month period, at a maybe.
Michael –
I have learned quite a lot from reading all of the previous posts and have already taken some steps based on this information to improve my credit. I am seeking advice on a plan of action to address the remaining debt, including several collection accounts and a judgment. I understand that the SOL in Maine is 6 years, but am not certain just what that means for my specific situation.
First, the positives:
• Credit Union unsecured line of credit (overdraft protection) opened 8/2014 current $0 balance (used and paid off periodically) never had a late payment
• Capitol One auto loan opened 5/2013 current balance $14,000 spotty late payments until 4/2014, no late payments since then
• Credit Union unsecured installment loan opened 8/2013 current balance $400, never had a late payment
• Sallie Mae student loans, five total, opened 2012 with at least 12 months of payments recorded on each none late, closed 2013 (consolidated)
• Credit Union auto loan opened 2009 for $15,000, closed 4/2013 never had a late payment
Now the challenges:
• Two medical collections accounts placed in 2013, $60 and $75. Both paid in full 1/2015.
• Chase Bank credit card last payment made 2/2010, charge off balance $1,630, transferred to Cavalry Portfolio on 7/2013 which is now being handled by Gosselin & Dubord. A judgment was made against by default on 7/2014 for $1,630.
• GE Money credit card last payment made 3/2010, charge off balance $1,100, transferred to Portfolio Recovery Assoc on 9/2011 which is now being handled by the Law Offices of H. Schiff. A statement of claim was served to me in 9/2013, however no further action or correspondence has occurred since that time and nothing additional has appeared on my credit report.
• Federal Loan Servicing two student loan accounts opened 6/2013 totaling $27,000, currently in deferment as I am a student, however the last four months of 2014 show as late payments.
• First Premier credit card last payment made 2/2010, charge off balance $667, transferred to Midland Funding and I made just one payment in 2/2013. Current balance $517.
• HSBC Bank Best Buy credit card last payment made 4/2010, charge off balance $819, transferred to Portfolio Recovery Assoc on 9/2010.
I am not sure if I should reach out to attorney Schiff and try to strike a deal or if this will cause them to file a judgment. I realize I must have restarted the “clock” when I made the partial payment to MidLand. Should I be bargaining with them as well? I am also unsure of just how to go about contacting the agency that placed the judgment. Would it help my credit to make small payments on my school loans each month while they are in deferment? I do have a great job with decent pay and I’ve worked for my employer nearly 11 years. With that being said, I am a single parent student who also has a college student son. I need to be smart with my funds and can’t afford to settle all of my debt with lump sum payments. I would like to create a plan to improve my credit for a home purchase within about two years. I’m not doing this alone. I have a great partner who has impeccable credit and also has worked at his employer for many years; however I want to carry my own weight financially. Any thoughts or suggestions? Thank you so much for your time.
Have the two medical debts you settled last month updated to your credit reports to show paid? Also know that, depending on the credit score modeling used, small medical debts may not impact your score much, or at all.
Were you aware of the lawsuit Cavalry filed, or did you learn after the fact?
Regarding the Portfolio Recovery Group collection, have you looked in the court to see where the case stands today according to the records? Find out, and post an update. I can offer better feedback about your concerns with contacting Schiff from there.
Contact your loan servicer and ask what can be done about your loans showing as late pays while you are in deferment, if you haven’t already. If you have done that, what was their reply?
You can settle directly with Midland. Lower balance accounts do not often settle for as low as larger balance ones, but I would still target around 50 percent settlement with Midland.
You can settle the HSBC account for roughly 50 percent with Portfolio Recovery too. But hold off on any outreach there until you know more about the account they sent to Schiff to collect on.
In fact, post the answers to my questions above, and then let me know what amount of money you can pull together to settle all of these accounts over the next 3 to 6 months. I can sketch out a plan of action for each after I know a bit more.
Thank you for the prompt response Michael!
The two medical debts were just paid in the last couple of weeks and don’t yet show as updated on my report.
Yes, I was aware of the Cavalry suit as I received proper notice. I moved before the court date was set and did not receive the notice. I understand that a partial settlement appears the same as a full payment on the judgment on my credit, but how do I go about approaching Cavalry?
On the Portfolio collection for GE Bank, I contacted the clerk of courts today and there was no record of the statement of claim or any suit initiated by this agency (or the attorney on their behalf) against me. In fact, the copy of the notice of claim I have doesn’t have the Docket No. filled out and the clerk questioned its legitimacy.
As far as my student loans, they were in default until I became a full time student again at which time they were updated to deferred. I was just unsure if it made a difference on a future home purchase that I had so much deferred student debt and if it would help to make any kind of payment while in deferment.
I will receive an annual bonus in March for approximately $3,000 that I plan to use towards rectifying my outstanding debts. I know that isn’t much, but it’s all that I have for lump payments. I can also afford to make payments, if that’s an option.
Thank you again for your assistance!
I am going to ask a friend and student loan expert to share her feedback on the student loans reporting the default status, then going into deferment. It would have been better to get the loans out of default before going into deferment, or perhaps it may have made no difference at all. What options there are now for that, she will be better able to offer feedback for.
I think you have a good shot at settling all of the debts for the 3k you will have next month. I would call Portfolio Recovery Group and look at resolving the GE Money, and HSBC accounts, at the same time. Given what you have shared about your finances, and the parts that are visible to PRA from real time access to your credit reports, I would realistically target 50 percent settlement deals. You may be able to get lower, so certainly start there, but be prepared for roughly half.
Midland does not settle for the best savings on small debts, but I think you have a shot at 40 to 50 percent.
The Cavalry judgment I would target at 50 to 60 percent.
I would look to negotiate all of these simultaneously, even play one off the other in a short period of time, in order to get the best results. This way, when your credit reports update with paid or settled accounts, a debt collector you have not settled with yet will not view you as the willing and able payer that you are.
Given the outline of your debts and finances, I would not be a fan of payment arrangements on any of those debt collection accounts.
Okay! I’ve got a great start to my action plan thanks to you. Should I wait to begin settlement discussions until I have cash in hand? I know for certain I will have my bonus on March 13th. I have also read your post on the debt settlement process and documentation and wondered if being 5 weeks out is too far to begin the negotiations.
Thanks!
It is too far out in my opinion. If it were me in your shoes I would wait until about a week or so from having the money in hand to start making the calls.
Good Afternoon Michael, it’s been awhile. I am making headway on my settlements, slowly but surely.
No late payments since my last post! My student loans are now current; the small collection debts have been updated and closed on my credit report (though one of them wouldn’t voluntarily do it, I had to report them to TransUnion to have it fixed!), I’ve paid off the remaining balance on my small installment loan with the credit union; and was approved for a small credit line, zero interest credit card which I have used and paid off each month to add to my long term positive credit rating.
For the settlements – I negotiated Midland Funding to settle for just under 60%, which I am satisfied with…however it was a bear to get them to agree to send me something in writing (or electronically for that matter) prior to providing my banking info to pay. After 10 minutes of arguing, the representative finally gave in to mailing me a settlement letter.
I also got the run around with Chase/Cavalry, who eventually gave me contact info for an attorney’s office here in Maine, Gosselin & Dubord. I have had to call the office several times – never get return calls! Finally reached an individual who has taken my settlement offer of 50% to submit to “their client” for approval. The representative said a letter will be mailed to me within 2 days with an acceptance or counter. I am relieved to at least have made an offer! This process is much more difficult than I expected.
I saved the worst for last here. Portfolio Recovery has been awful to work with….It took several tries to get a live person to discuss my accounts with me and they weren’t very helpful with the negotiation process. First indicating that the two accounts I had with them were held in two different departments and that I would have to negotiate them separately, then advising they were both held with an attorney. PRA offered to accept 75% for the HSBC account, but I wouldn’t take it. I’ve received better offers from them in the mail in the past and just haven’t been in a position to pay. I did call the attorney they referenced, Howard Lee Schiff, many times. It was a recorded loop that I sat on hold for a long time, many times. I did finally reach a representative who was polite. They only offered to settle the GE account at 70% and indicated that the HSBC account was closed with their office and returned to PRA. Sheesh! Talk about circles! He offered to contact PRA internally and request the account be reopened so that I could negotiate with Schiff and not PRA. I am to call back in a few days to confirm this has happened. At this point I have not agreed to any settlement terms with Schiff, but I am thinking 70% sounds high? Is there any leverage when they hold two accounts? Thoughts on strategy to get that settlement amount down? Also, any tips on how to convince collectors and attorneys to send settlement confirmation letters PRIOR to getting my banking info?
Thanks for your continued help and sorry for the long post!
No surprise about dealing with PRA. I was just speaking to a gentleman this morning who lamented the same.
Here are some resources I want you to read through that are direct your questions.
Smaller balance accounts often do not settle for the best rates.
Getting the negotiated deals in writing before paying. As you read deeper in to the comments of this article, you will see that I do encourage you to use a mobile phone app to record your conversation and the outline of the settlement deal, telling the collector that you are recording and why.
50% would be my targets on the account(s) with the Howard Lee Schiff collector. How you get there will differ from file to file. Focusing on the hardship and the fact that funds are not only limited, may be used to pay other collectors, is some of the strategies I use in dialogue. There are also timing specific strategies I would encourage you to be think about when setting up to make your calls to debt collectors. Watch my video about debt negotiation timing with debt collectors.
Thanks Michael. I watched the video you referenced and read through the comments there and on the other topic links you provided. Very helpful. Question – the recurring theme is negotiating with collectors (such as PRA)…..do the same strategies apply to the attorneys that then take on the debt from the collectors? Is it better to negotiate with one over the other? I ask as Schiff had offered to contact PRA to reopen a closed account and PRA called today (I did not answer to allow time to come up with a plan)…..should I attempt to negotiate with PRA instead of Schiff?
On another note, I took out my current car loan about 2 years ago (when my credit was iffy) and have a really high interest rate – 10+%. Once my negotiation efforts are done and paid off and my credit has a chance to catch up (say 6 months from now), would it be beneficial to refinance that loan? I have a great relationship with my credit union and they are willing to work with me. I just wondered if adding a new loan/credit inquiry would be detrimental to my over all report if I was looking to get a mortgage in a couple years.
Thanks again!
If the attorney has not filed a lawsuit, the negotiation tips remain largely the same. If it were me I would negotiate each debt by itself, or one with PRA and one with Schiff.
I would want to reduce my car loan interest after the settlement dust clears too. 6 months may be long enough to get the credit score bump you want to have with your credit union. With your mortgage loan goals being a couple years out, you are way ahead of this. Do you happen to know what your credit scores are now?
Good Afternoon! Finally got all my negotiations done! PRA agreed to fax me my letter and once received I called back in and paid the agreed 53% – very pleased with that final outcome. The larger account with Cavalry (the judgment account) was settled at 68% and i am fine with that…at least they were professional and courteous to work with. Schiff wouldn.t budge below 70% and I just wanted it done. They agreed to mail my settlement letter, which should be received no later than this Saturday. At which time I’ll call and pay that one off……last one! Who would have thought this process would take nearly 5 months! Overall I settled my entire debt for about 64% of the balance owed and my credit score has risen from a 501 at the end of January to a 561 at the beginning of June. I have an old bankrupcy that will drop off this September as well as almost all of the original default credit cards that started this mess. By January 2016 I expect my consistent on-time payments, new credit card account and removed negative files will have made a huge difference. By January 2017 I’ll be in great shape for a mortgage (and have a decent amount of down payment money, too!). Thanks for all your help, it has made a world of difference. I’ll be sure to keep posting updates so that others can see how time and effort pay off. It was others’ positive comments that drew me in to begin with…..it is possible to recover!
Congratulations Tammy! I look forward to reading your updates, and thanks for pointing out that reading about other peoples solutions motivated you. That is really what this site is about.
Thought I would check in. Last settlement officially paid and the majority have been updated on the credit bureaus. Though, as with the negotiations, PRA updated my reports to reflect a partial payment was made (instead of settled in full) with a remaining balance due in collections. i had to dispute it with one of the bureaus and it has already been updated. Keep very clear documentation of everything! Portfolio Recovery Assoc was one of the collection agencies that initially refused to supply documentation of our agreed settlement. I would not give them any banking information/payment until I received a letter from them and now I know why!!!!! After all that work they could have bullied me into paying even more just to get my credit reports updated.
I’m also pleased to say that my score made another big jump to 596. Nearly 100 points in 6 months!
Here’s a question – if i submit a dispute with one reporting agency, say TransUnion, do the other agencies get updated once the dispute is resolved? (Another random note, keep an eye on your personal information as it is reported on the bureaus. I had a SECOND social security number associated with my file….one that I had never heard of…..not a spouse’s, co-applicant’s or my son’s. Very strange, but I had it deleted from the record!)
Again, thanks for all the help!
You will want to dispute anything with each agency separately. You should not expect any update one credit bureau makes to be reflected on the report of any other agency.
If you are so inclined, I would file a credit reporting complaint against PRA with the CFPB. As those complaints add up against them they will hopefully change the deceptive practice of continuing to report an amount owed that they agree is not.
Word of caution, do NOT agree to be a Trustee for a family member or friend without finding out if the person has or had litigation proceedings. I made that mistake. I got sued by a friend’s creditor , and never even knew about the years old litigation. It took sixteen months of effort by some lawyers – to get myself dismissed from the suit. Just got released all of a sudden yesterday , as I was preparing to sign off on filing bankruptcy.
1. Is this all I get/need if I pay LTD/Chase? “This letter is to confirm that we are hereby authorizing the settlement of the above referenced account for the amount of $1825 if paid by.. Upon receipt of this amount, your account will be settled in full. This letter and your cancelled check or other receipt will serve as your proof of payment.”
2. Where’s a “safe” place for me to keep money so that Amex’s attorney doesn’t access it again by enforcing another lien from their judgment? Am I correct in understanding that they can do that at any time that they believe there are funds in the account–and that they can ping the account to check it? Obviously using my personal bank account to keep money is not ‘safe’ in this regard: So far business bank accounts have been safe. Will that remain to be the case? They’d have to take special legal action like a lawsuit to access funds there that I control, right?
What about if the funds were in an investment account, at say Schwab, but in my personal name? Would that be any safer than in the personal account at Wells Fargo that they’ve now accessed twice?
(I imagine they may have access to see the balances in my linked business accounts at WF that are linked to my personal account… Do you think that would be the case?)
Thank you!
1. That will generally suffice to fix any problems later on, if any should arise. I cover settlement letters with some detail here: https://consumerrecoverynetwork.com/debt-settlement-letters-agreements/.
2. You should run your bank account concerns by an experienced debt collection defense attorney in your state. Generally, my experience is that business accounts tied to an EIN and not your social are okay. Keeping funds in an investment account may also be viable. But run that one by the attorney too.
I do not think the attorney collecting for American Express can see into the business bank account with Wells Fargo.
Judgment debts that remain unresolved can sometimes lead to asset discovery hearings. This is where you are questioned about money and assets in order to discover how they may better collect on the judgment. It is part of the court collection process.
I guess all of this leads me to wonder what the answer may be to this question:
If I had the means to pay back all of the credit cards in full at this point–which is now 2 years down the road, and after all 6/7 of the accounts have gone to collections and/or attorney debt collectors, including 3 court judgements against me, and so there are already all sorts of negatives on my credit report now… and my goal were to clean up my credit as much and as quickly as possible, would it make much of a pile of beans of difference at this point if I were to pay them back in full, or simply to settle them for the best offer I could get out of the current debt holders? The reason I ask is, suppose I could afford to pay them off, what if the difference between the best deals I could get and the full face value pay off were $40,000, but at the same time doing the later would significantly improve my credit much more quickly, and if I could have better credit and more access to capital it would be easier to earn that money back more quickly through, say real estate investing (e.g. needing to take out a mortgage or two), then potentially in the medium-to-long run it could be worth it to clear that up sooner. And I’m wondering if it could/would save me a lot of time in the near term in terms of time I wouldn’t have to spend on trying to get my credit reports cleaned up.. Or would I have to put time into trying to see to that anyway?
I dont know if anyone actually ever does this (pay them back in full after going so far into arrears), but I was curious enough about it that it seems worth it for me to mention it to you for your opinion.
Thank you very much.
J.T.
My experience is that it would make roughly the same amount of impact to your credit reports, and access to credit products, whether paying the full amount, or settling for less. And that was the case after the accounts were charged off, which for credit cards is 6 months of not paying them.
That being the case, if it were me, I would settle and save the most I possibly could.
You will spend the same amount of time dealing with credit reporting clean up either way.
And yes, people get their debts caught up, and paid in full, all the time. There are varying reasons for this. My experience suggest it is mostly out of guilt, a sense of obligation, or a lack of understanding of how the debt and credit systems work.
Michael
Hello again.
Mandarich came back at 5800 for the 7400 debt. I’m fine with that.
But a) in the original letter they sent to my atty they wrote “February 18, 2013” in the pay by date instead of 2015. May be a typo. But I wanted it to be accurate.
B) my *#! atty got me the letter later than that date anyway.
C) their letter seems somewhat vague to me otherwise and that worries me:
“This office has been authorized to accept a lump sum payment..as settlement of the above-referenced account….Upon receipt of the amount indicated, we will notify our client to make any appropriate adjustments to your Account. Upon funds clearing the bank, this office will submit a request for acknowledgement of satisfaction of judgment. ”
[ Side Note: I paid a settlement to Midland for another card on 1/15/15, and as of yet they still have not updated the bureaus , tho they say it will be done on 3/15/15. So that’s got me dubious about the believability of these firms.
I’d like to be in position for a mortgage refi by June. So I’m watching the clock on both of these accts and getting anxious. ]
Since the faulty 2/18/15 Mandarich letter it’s been 2 1/2 weeks and Mandarich still hasn’t gotten us a new letter yet. I’m going ***ing nuts. I want this over with. And I cannot understand their “strategy” if there is one. My attorney says there’s nothing he can do– which doesn’t come off as very credible to me. The Mandarich rep on the case is easy to get on the phone, but says he can’t say much to me since I am represented by and attorney, but all he ever says is “I am not the attorney. But the request for the new letter has been given to the attorney and we are just waiting for him
to approve the revised language.”
Its truly maddening. I don’t know where my leverage is but I really need to get this done and move on. I’m not sure it’s “worth” going to a new atty at this late stage in the game. And I’m afraid of just dumping my guy for fear that Mandarich will rescind their $1600 reduction — which at the end of the day isn’t that great, but better in my pocket than theirs
So I feel very stuck, frustrated and hung up on this thing. Meanwhile it really isn’t that if of a deal and it shouldn’t be. But I’ve lost all detachment and have very little ability to objectively assess because of my limited experience.
What does this look like to you? Do you have any ideas? What would you do?
Thank you so much for your time !!!
I do not see anything wrong with that verbiage that speaks to the debt being settled, and the obligation to notify the courts.
Post an update if Midland does not update your credit reports next week and we can go from there.
As far as the maddeningly frustrating feet dragging from collection law firms… I have ridden that bus. I had a pass with loyalty points (sarc off).
You are still within the time constraints to reach your goals.
I would avoid calling the firm to check on things when you have an attorney working for you on this. It sends a message of urgency which is often not conducive with getting a lower balance payoff on judgment debts (or others for that matter).
So, I think what you’re recommending is patience.
For a few weeks.
Haven’t paid on cards in 2-3 years. Some are still with collections, some are with attorneys. A few judgements against me have been obtained. I’m now in a position to pay off negotiated reduced balances, but have some questions about what is the best outcome for my credit report that I can negotiate for before I pay?
I’ve negotiated settlements with some of the card companies, but before I pay them the negotiated settlement figure, what kinds of release statements and actions can I negotiate from the collections agencies and/or attorneys in terms of not only getting the debt reduced but also getting the negative credit history information removed from my credit report?
Other than getting the courts updated that your judgments have been paid/satisfied, there is not much to negotiate that will have a positive impact on your credit. The judgments are part of the public record. But once they are showing as resolved (can take a couple-few months), they will not hold you back much, once the rest of your credit is back on track.
Post a list of the collection agencies you are dealing with, and I can offer feedback about settlement percentages to target, and any likelihood of negotiating anything more favorable than zero balance and resolved on your credit reports.
What state are you in?
What credit and finance goals do you have in the next 12 to 24 months?
Hi Michael,
I appreciate your response.
I’m in active negotiations for settlement on all of the credit card debts below. What I’ve just been made aware of from a close friend in similar straits are two things:
1. Settling the debt doesn’t go all the way to clearing up the credit report down the road; that a credit report saying “settled in full” is not as good as one that has no trace of the issue ever having been there, and
2. There are two possible ways to get all traces removed: either at the time of settlement or after the fact with credit clean-up type companies. My friend’s advice is that I try and get the negative histories erased at the time of settlement as part of the settlement. It seems though that both avenues are difficult—if possible at all..?
I don’t know whether any of these entities below (attys and/or collection agencies) have the power to make those negative histories disappear, or if it’s more likely one type would versus another. The one I’ve asked so far, LTD, said they had no idea. I wondered if you would think they were just passing the buck when they said that, and then also said they also said that Chase still owned the debt and they have to submit their settlement to Chase for Chase to take the final steps. However the credit report itself states “Close—Derogatory. Charged off as bad debt. Canceled by credit grantor.” That would lead me to imagine that Chase no longer has anything to do with it.
Just to make sure we’re on the same page, I was specifically asking about getting derogatory credit remarks off my credit report, after the fact, if you will. It hadn’t even occurred to me yet by the time I’d written you last how any judgements that may be noted on my credit report would be referenced once they are finally resolved. I don’t believe there are any public records/judgments on my credit report as of this time.
Amex. There were a personal and a business card that were lumped together. $21,000 total. Case turned over to Attorney Firm named Zwicker. They obtained a default judgment. Have twice made it into my personal bank account via liens and taken a total of $5300 toward the $21k total figure.
Attorney now negotiating on my behalf
Barclays. .Business Card $7500. Default Judgment obtained by Mandarich Law Firm. No further action taken to collect.
Attorney now negotiating on my behalf
Barclays. Personal Card $11000. Default judgment obtained by Nelson and Kennard Law Firm. No further action taken to collect.
Attorney now negotiating on my behalf
Chase/United $10800. Being handled by LTD Financial Services/ Houston, TX. They’ve offered to settle with me for $1825. They’ll mark the account at “settled in full.” Self-negotiated
Chase/United $18,890. Being handled by ARS National Services. Escondido, CA. They’ve offered to settle with me for $4700, And they’ve allowed payments of $25/month toward that for over a year until I’m able to pay the balance. I could do that now, but want to get it down to $2000. Self-negotiated
Citi/Home Depot .$4200 . Being handled by Midland Credit Mgmt, Inc., San Diego, CA They’ve offered to settle with me for $2566. I’d be willing to settle for closer to $1000 Self-negotiated
So, I’m in California. My goal in the next 12 to 24 months, would be to have my credit score back up to 700, and be in a position to obtain a home loan and/or refi.
Thank you for your time. I look forward to hearing what you have to say!
John T.
1. No trace of a negative account is better than a resolved negative account.
2. It is so next to impossible to get the credit card banks to remove the negatives as part of your negotiation that is not worth trying.
Collection agencies and collection attorneys have zero influence over the credit reporting of the banks they work for. LTD Financial Services would need Chase approval on any deal they make that exceeds the permissions they have as part of the contract they have with Chase.
Your Chase account showing as closed/cancelled and charged off is normal. If there is still a balance showing owed in the Chase credit report trade line, it is near certain they own it still, and do have final say on anything out of the norm.
Depending on how collectable you look, you are looking at 40 to 80 percent settlement lump sum with Zwicker and Associates on the AMEX judgment debt. If you get any lower than that, it would be abnormal, or your attorney working the file found something in the process to leverage for a better deal.
Barclay’s personal and business credit cards with judgments already are debts I would target similar to the AMEX account with Zwicker.
That is a really good deal on the Chase United credit card with LTD. And the Chase account with ARS National is really good too. The payment offer is unusual. I do not see you getting to 2k in your negotiations, but I would be happy to be wrong. How long ago were any payments made on these Chase accounts?
Midland Credit likes to hold firm to between 40 and 60 percent depending on how collectable you look to them. With how your credit report must look like a grenade blew up on it, you could hold out for a better deal lump sum. How long have you been negotiating this one, and how long ago was it that you last paid on the card?
Your goal of home loan or refinance in 24 months is doable. Maybe not with a 700 credit score, but that can depend on which scoring model is used, as newer Vantage and FICO scoring models are out, and will be somewhat more adapted a couple years from now. These newer models do not factor the paid collections so to speak.
It will matter how quickly you can get these settled. What are realistic time frames for you to fund settlements?
Hi Michael!
Updates:
Zwicker offered (only) and accepted a 40% discount off the AMEX debt.
Same goes for Nelson and Kennard holding my Barclay’s debt: 40%
The final big hurdle is Mandarich holding my other Barclays’s debt. They have a judgement, It was originally a card in the name of the incorporated business I own.
I would love to do better than 40% off on this final push.
I’ve been having an attorney negotiate this for me for a flat fee–already paid.
Any idea of how low Mandarich may be willing to go, and how to get there, please?
Because I settled 2 card debts, and sold a house, resulting in two loans showing paid off, my credit report is starting to improve. which could be a negative in negotiations, so I’m wanting to get the last two done quickly.
Thank you very much
ALSO- Do you think the credit reporting language that Midland is offering me will suffice: “Paid in Full for less than the full balance” ?
They’re willing to take a 45% payment to close.
Thanks again.
As long as the credit report from Midland Funding shows any form of resolved status with a zero balance owed.
Amex rarely settles for less than 40%. Zwicker and Associates collecting for American Express will often not go below 50 to 60 percent. You did fine settling this.
Barclay settlement average is right about 40 percent when you are not dealing with an attorney. What you negotiated with them for is not great, but not bad given the situation.
Your other Barclay that is a judgment that the Mandarich firm is handling is one I would target at 60 percent. Partly because it is a judgment, but also for the reason you are concerned about – you are beginning to look more collectable with other debts out of the way.
Can you offer more details about the 4th account?
Hello!
We walked away from our home in Washington State in July 2009, the last payment we made was October 2008 after I lost my job. We defaulted on a few small balance credit cards and some medical and utility bills at around that time. All have been paid or are about to fall off our credit report. The issue we are having is the bank did not foreclose until August 2014. So, after 6 years of bad credit due to the late payments, etc.. We are concerned we will have ANOTHER 7 years tacked on by the foreclosure just not hitting our report. The foreclosure was non judicial. Is this how it will be reported? If the actual mortgage can be removed next year because it will have been 7 years since our last payment, does the foreclosure remain for 7 more years? Our credit score is now in the 500s, we feel like we will never own a home for our family, what is your advice?
It is possible that the public record aspect of the foreclosure will inflict all new credit damage, as public record reporting on your credit has its own shelf life that starts fresh from the date of filing. If there is no money owed on that negative entry (like a court judgment would have a balance to be paid), it may not hold you back from future credit goals like you are thinking.
What were your credit scores before the foreclosure showed up? What unpaid collections are there now, if any?
Thanks for your reply!
Before the foreclosure showed up the scores were in the high 500s but this was due to the 6 years of 120 day late mortgage payments. We have a few unpaid collections but they are really old, I was advised to leave them as is since they will be coming off in the next 12-18 months. Our scores were in the mid 700s when we bought our house, the mortgages (1st and 2nd) on the home we owned before that were paid on time every month but we only lived there a year.
We have car payments and a small loan from our credit union that we pay on time just waiting for everything to come off…. We have rented the same house for 5 years and were really hoping to start shopping for a new family home when all of this goes away.
How long do you think it will take when everything is off except the foreclosure? Will the actual loan come off or is the foreclosure attached to that? Will potential lenders take into account the age of the loan and how long it took our lender to foreclose? What about FHA?
Thanks again for your help!
The loan would drop from the reports.
It could take 2 years after the date of the foreclosure entry in the public record to meet lender underwriting standards. And that goes for FHA too. You will want to work toward a 620 minimum credit score for FHA approval (though there are some limited exceptions to that). I think you are closer than you think once those older items age off your credit.
Thank you very much, we will keep doing what we are doing and wait and see….
Thanks again, greatly appreciated!
Hi, I have several credit cards that have been closed by the consumer because I was in a debt repayment plan but stopped doing it. Now I am trying to get caught back up on the payments. I also have two recent repos (in the last year) and about 4 collections/charge offs. Considering all that I have, will it even help my credit if I pay the credit cards that have been closed? I don’t want to waste my money and me and my husband make too much money to file BK. Not sure where to start as I would love to purchase a home in the near future. I feel overwhelmed trying to make the right decision. Thank you for your help!
In order to offer the feedback I think you need and are looking for, I need more details. Post answers to the following questions in a comment reply, and lets go from there.
What type of repayment plan were you in (debt consolidation through a credit counseling company, debt settlement program, other)?
Post the name of each creditor or debt collector, and the approximate balance owed on each account. Also list when it was each account was last paid.
What time frame do you have in mind when you say “near future” to buy a home? Do you both have dependable jobs and income?
I was in a debt management plan and paid the following credit cards, I am up to date on all credit cards except for my husbands amazon account .
Walmart, bal.$136, last paid 10-10-14
Walmart, $258, pd 10-10-14
Barclay , $148, pd 10-10-14
Barclay, $256, pd 10-10-14
Capital one, $440, pd 10-10-14
Capital one, $420, pd 10-10-14
Merrick bank, $760, pd 10-10-14
Merrick bank, $800, pd 10-10-14
Amazon , $980, pd 7-2014
Amazon , $600, pd 10-10-14
Lowes, $989, pd 10-10-14
David’s bridal, $720, pd 10-10-14
I am wondering if we are wasting our time paying on them since we have two repos with balances of $11,800 and $7500 after auction , the amounts we owe
We are wanting to buy a house in a year or so but not sure it will happen until we get things cleared up. Not sure what to do or where to start. Thank you
Was the debt management plan with the credit counselor affordable? Did you have money left over to start saving to settle the deficiency balances from the repo’s?
I am wondering if you can continue to pay your credit cards the way you are now, and save quickly to settle the charge offs and repossessions within the year to meet your goal.
If the credit cards are not affordable, settling with all of them is an option, but is highly likely to prevent the one year home ownership goal, and with so many low balance accounts, settling is a bad idea credit score wise. Here is more detail on accounts to keep out of settlement when possible: https://consumerrecoverynetwork.com/credit-card-debt-to-include-in-settlement-plan/
I have settled all my credit cards except one Citi Card. It is for $10,000. I missed the first payment on March 2013. It went to collection on Sep 2013. I have not heard from them since but someone just contacted me yesterday. I got a voice mail and a letter. I believe the account has been sold atleast 2 times. They mentioned they bought the account from someone (not citi). As a standard procedure they mentioned if I do not request validation of the account within 30 days, it will be deemed valid. How should I go about it? Ask for validation first via registered mail or just talk to them on the phone or do both?
Whether or not to ask for debt validation can hinge on what your goals are for the account. Having settled all other accounts, I would assume your goal is to resolve the Citibank credit card with the debt collector in order to improve your credit and finance options.
If your goal is to settle, depending on who has the account, debt validation could complicate reaching your goal.
Who is it that is collecting on the account today, and who did they say they purchased the account from? Is Citibank showing the account as a charge off with a zero balance owed? Is the new collector showing on any of your credit reports?
I want to settle this and be done with. This is the last one. The letter I got is from Phillip & Cohen Associates. It said, your account now has been purchased by our client PCA Asquisitions LLC dba Portfolio Asset Group and they have referred to our office for collection on their behalf. I checked my credit using Capital One’s free credit tracker and it shows Citi with the 10k balance, it does not show any other collector. Should I purchase my actual credit report? How much can I expect this to settle for?
Portfolio Asset Group is a debt buyer. I would purchase your credit report to be certain Citibank info the free one has is accurate (free credit reports are not going to be the most current in my experience). Let me know what you see on the real time credit report you get.
I would realistically target 50% for the settlement, but start low at 30-ish percent. If you hit the middle at 40% you did good. Can you pull together that amount?
I was eligible for Annual Credit Report from Equifax, so I got one. It does not even show the $10k citi card either in closed or negative account section. I had another $6k card from Citi and it does show that one as Paid & Closed, Paid for less than Amount owed. It does not show any collections on the report. I see a credit inquiry from Phillip and Cohen Associates on Sep 3, 2014. I also see a credit inquiry from AR-CITIBANK on May 08, 2014. I would like to settle but I don’t have $5k. I can spare around $2500.
It is possible to settle with debt buyers for the amount you can pull together. You have to be able to communicate your personal and financial hardships really well, and the information they can see about you, like what is on your credit reports, should also lead to their systems scoring you as not very collectable.
I do see 30 to 40 percent settlements with Phillips Cohen and Assoc., so you are not that far off the mark.
So, how come it is not showing on my credit report? Do I even have to settle if it is not showing on my credit report or not affecting my credit. I believe they can sue me within 4 years period, right?
Equifax may have never had your citibank credit card showing on their report, or something happened with how Citi was reporting it after they sold the account to a debt collector. I would want to check the other 2 credit reports to be certain. If you have not access the other two through the portal they are required to provide a copy to you for free once every 12 months, you can do that at http://www.annualcreditreport.com. Let me know what you see.
California has a 4 year SOL for this type of debt. If my goal was to settle, I would want to knock that down before Phillips and Cohen farm this out to a local attorney in your area. But if that does happen, you have access to some great assistance through the same attorney I remember referring you to on that Discover account we talked about before.
Thanks Michael, I checked Experian and it does not show this Citi card either. I did send validation letter to Citi, maybe they stopped reporting it after that. I am not eligible for TransUnion yet, the last report I got from TransUnion was in Dec 2013.
Well… whether or not the account is on your credit reports, you will still have the risk of being sued until the SOL passes in your state. That sounds to be roughly 3 more years.
If your goal is to settle, and you can raise enough to make a reasonable 30% offer, I would not necessarily start with a validation request. That could be a strategy to delay any decision they may make next to collect, but could also trigger your file for review, and sometimes that review is by the legal departments at these shops, which will sometimes, not always, instigate collection activity in the court earlier than would have been the case, or at all.
If you want to settle, I would call and work through that process, stressing the financial hardships you have, and that the money you are offering is all there is in the world you can pull together from xx many sources. You get the gist.
You could hang back and let this play out if settling is too much of a stretch right now. And if that is the case, and this is indeed a debt that has been sold more than once, there is some wisdom in sending the validation request.
Michael,
So, I did not hear back from Phillip and Cohen since last Nov. I made them an offer of $2000 on a $9300 credit card debt. They countered me for $3200. I did not have the money then and I said $2000 is the best I can do, they said they will review and get back to me and they never did until today. So, today I get the phone call, the guy said, “your account is pre qualified for a litigation. I am not threatening you, just letting you know”. However, his tone and the way of talking was indeed threatening, I said I am aware of my rights and this is a threat. He said, ” you have until fri to get back to me, otherwise, the account will go to litigation. You can settle for 50%, which is $4600″. I said the best i can do is $2800. He said the offer is nonnegotiable. He said, “the firm thinks they can retrieve money from you, so they are going to file litigation”. I do have the money now, however, i want to get the settlement down as low as possible. Is this threat serious? Do i need to take any action before fri? I have contacted the attorney you referred me to, he is going to call me tomorrow. What do you think I should do in this situation?
I would look at what Jeremy can do to help you settle this for a lower amount, including his fees, for less than the nonnegotiable amount Phillips and Cohen is saying they will accept.
Michael, I was able to settle the Citi account for $2500. Thanks for your help!
Michael,
I got a letter from Philip and Cohen Assoc. The letter stated that the $2500 has been applied to my account. Remaining balance is $6200. Payment made in the amount of $2500 on 1/30/2045.
I got the settlement letter from them on 1/29/2015. The letter stated:
Upon making the payment of $2500 this debt will be settled. Settlement Amount $2500. Date: 1/29/2015. Upon receipt and clearance of the above referenced payment(s), you will be released from any further obligation to regarding the above referenced account. This arrangement will be cancelled if payments are not made in accordance with the indicated schedule.
I paid on 1/29/2015 via Check by Phone. However, when I checked my bank statement, the check cleared and the date on the check is 1/30/2015 and they are stating in their letter that the payment was made on 1/30/2015. Did they trick me? Will they say the payment was actually made on 1/30/2015 and the settlement letter is no longer valid? I am getting worried.
I would first assume the letter they sent is some type of system error. Call and talk through the details and confirm that. If for some reason they are going to say that your account is not settled, post an update here and lets go from there. I will be more than happy to work with you one on one to resolve the issue.
I called them and they said my account is marked as settled and closed. They asked me to call after 30 days to request a release of debt letter.
Good. Let everything update in their system, call and get the “you owe no more” letter, then check your credit report to make sure it is updated and reflecting accurately.
Michael,
I called them and asked for a debt release letter. They did say the remaining balance on my account is zero. They sent the letter to me. It reads “This letter acknowledges that the above referenced account has been satisfied. On behalf of Portfolio Asset Group we appreciate your cooperation in resolving this matter.”
Is this good enough?
That covers you if anything were to come back up later on.
Keep that in a safe place with other important documents, and perhaps a scanned copy with your other backed up media.
Hi Michael,
I stumbled across your site as I’m looking for some answers about repairing my credit score. I foreclosed on 2 properties (purchased prior to being married), foreclosed one in 2009 and 2010. I went to seek help from a bankruptcy lawyer, but decided not to file since I wasn’t sure if that was the right thing to do. I am currently self employed and wanted to see if I could qualify for a travel rewards credit card and was denied due to “too few accounts with sufficient satisfactory performance” score 631. Also, my husband and I (and 2 sons) were trying to rent an apt, but since I had foreclosures (I’m assuming) we were denied. Thank goodness we have family who have taken us in. At this point, I’m wondering if I just ignore the foreclose for another 3-4 years will I be able to rent or purchase again? Or even apply for a credit card anytime soon? Thanks in advance for reading this!
Do you have any other collection accounts, or negative items reporting?
What shape is your husbands credit in (list negative accounts)?
You may not have to wait for the foreclosures to fall off of your reports to be able to accomplish your goals. And there are people and companies out there willing to rent places to those with bankruptcy or foreclosure on their credit reports.
Do you have credit cards active now? How many?
Hello,
I am in serious credit problems. From foreclosure, 3 auto loan repossessions, to credit card debts. I was always on time and had exceptional credit while in the military until my ex kicked me out and put me on child support (was cheating on me), one brother stopped paying on a car I got for him, and another brother got into legal woes so attempted to help him.. Thus harming myself more unfortunately. I’ve spoken to a bankruptcy attorney already and may still consider it. Not sure if its better to pay off debts some how over time or file bankruptcy and deal with that blemish for 7-10 years though. I know either route requires time and patience so trying to go the best route and never make the same mistakes again. Any help is appreciated.. Thank you.
Also the mortgage was via Veterans Affairs and don’t see any debts owed to bank, US Bank, after foreclosure and re sale.
If you post the approximate balances on each debt; the name of the original creditor; if a debt collector is now contacting you, who that is; and when each debt was last paid, I can help you compare your options to resolve the debts.
*Capital One credit card $1602, transferred to another office, doesn’t specify who, last paid 08/12
*Chase credit card $1258, charged off, last paid 06/12
*Corpus Christi city employees credit Union $3035, auto repo, charged off, last paid 10/13
*Corpus Christi city employees credit Union $4972, auto repo, charged off, last paid 10/13
*CC Area Teachers FCU $7197, auto repo, last paid 04/14.
*Navy Army FCU $3178, Unsecured loan, charged off, last paid 01/14
*US Bank home mortgage $72,577, foreclosed, last paid 11/12
*Cach LLC $1453, collection agency, from HSBC Bank
*Credit Collection Service $75, Progressive auto insurance.
*Credit Collection Service $1057, Time Warner cable
*Credit Protection association $1014, Ambit
*I C Systems Collections $190, First choice power
*National Credit Systems $4254, Chandlers Mill Apartments
Hope this helps. Thank you for your time and advice in advance.
Not counting the US Bank mortgage, or the Progressive insurance that was sent to collections, your total outstanding balances in collection is $29,210.00.
Assume you could settle all of that roughly 30k of collections and bad accounts messing up your credit reports for roughly 40%. You will need close to 12k. How long will it take for you to raise that amount of money? If you cannot pull that together quickly, that is okay, you will just settle an account or two at a time. That is normal. But it is best for your credit scores, and credit reporting, to put as much of this behind you as quickly as possible.
Lets assume it takes you a year to get the 12k. You settle some debt next month… 2 months later, and so on, but you finish this all up by the end of summer 2015. It will take another couple years after your settlements still, to rebuild your credit. So you are looking at costs of 12k, and 2 to 3 years of crud for credit.
The national average cost of a chapter 7 bankruptcy is about $1,800.00. That is soup to nuts, all costs included. You can read this article about credit recovery and bankruptcy: https://consumerrecoverynetwork.com/credit-report-score-rating-debt-relief-programs/, and you will see how you will likely have quicker access to financing a vehicle (within year one of your bankruptcy and at a high interest rate); be able to obtain a mortgage within the same time you would have the earliest opportunity if you were to settle debt; and would likely have some sub prime credit card offers in the mail with a couple months of discharging your debts in the chapter 7.
Unless you can come up with some compelling reasons to not file chapter 7, it beats settling your debt, when measured by cost and time, handily.
From the sounds of it I might be better off filing for bankruptcy. The 12k throughout the year doesn’t sound too difficult but don’t see how it went from roughly $30k in debt to just having to pay 40% or $12k. Is that through a program or average bargaining to settle debts? Also the 12k and 2-3 years of crud sounds a bit better than bankruptcy being on my report even if it’s just 7-10 years.
I would at least call and talk to a bankruptcy pro in your area and get a feel for whats involved.
I got to the 40% of 30k using a general and realistic average for settlements with the creditors listed. 50% is the more realist target with the Capital One, and probably the auto repossessions with the credit unions (if not sold off), while some of the other ones could be negotiated lower than 40%. And these averages are based on you negotiating the settlements yourself. If you want help settling the debt, you could add a couple grand in fees to that figure.
Bankruptcy may stay on your credit report for the longest time (7 years for chapter 13, and 10 years for chapter 7), but you are not left without financing options that whole time. As you can see form the article I linked to in my prior comment, settling debts and chapter 7 bankruptcy are not that far from each other when it comes to which is better for your accessing credit products.
Ahh I see.. The cars were auctioned off and those are the balances left. I’m going to read the article linked asap. Thanks again.
P.S., sorry our current scores are 680.
Mr. Bovee, my wife and I would like to purchase another home after having to let our house go into foreclosure in January 2010 with Chase Mortgage. The unfortunate aspect is with the second mortgage we had with Bank of America and trying to get them to close the account which they will not do. Chase has closed our account with a zero balance but which seems to make lenders happy but B of A has the account as zero but open and this does not make the lenders happy.
A little background, my wife and I had tried to sell our house for more than 3 years with no luck. We were preparing for our twin daughters to graduate high school and enter College and for us to pay their College cost without taking any student loans which we did successfully and they have both graduated and have wonderful jobs.
We have never missed any payments on anything and we both had scores in the 780s prior to the foreclosure. We have financed 3 vehicles since the foreclosure without any problems and of course paid our rent on time. The only mark on our credit reports is the foreclosure and second mortgage non-payment.
I have talked to B of A numerous times with the last being a week ago and they said their intention was to leave the account open for 7 years.
Can you offer any ideas for us to deal with B of A.
Thank you for ay assistance you might offer
What amount is showing owed on the second mortgage with Bank of America?
The balance that is showing is zero but as I mention it shows open. I had failed to mention that our current score is 680
With a zero balance reporting owed on the second mortgage, there is no real impact on your debt to income and affordability factor. Did BofA sell this debt to a purchaser?
Negative items can stay on the credit report for 7 years. That does not mean you cannot access financing for that entire period of time though. Have you worked with a mortgage broker or loan officer in preparation for a loan?
B of A did not sell the debt. We worked with QLs earlier this year in hopes of getting approval for a VA loan before our lease expired on the apartment we were renting but the B of A account was the only problem. The credit company was satisfied with the Chase account but they did not like that B of A had the account open even though it was reported as a zero balance.
I was hoping to work on this before our lease is up April 2015 and try again. I guess my only thing to do is start 2-3 months prior to our lease end and see if any would take us on for a mortgage.
P.S. our daughters College meant a lot more than the credit score especially since they are doing so well.
I applaud your strategy for handling college costs. That would have been a way bigger priority than a credit score in my book too!
I am going to send our comment exchange to a broker I know and get his thoughts. He may not be familiar enough with VA loans to say much, but then again….
Thanks Michael, I appreciate any assistance.
We are investigating as to how we can bring our credit score up from 576. It has plummeted since November 2013 due to collections that we aren’t sure what they are for. There are 7 collection action items and today I was served with a summons from Cap One for an unpaid credit card. I have 20 days to respond but bottom line, I owe the balance. Is it too late (in your opinion) to call them and try to negotiate at this point (I can’t pay the full amount but would opt for payments) or should I have my day in court? I don’t have any proof I have paid on this balance since June 2013. Can our credit recover at this point if we settle and workout a payment plan? What should I do about the collection items on my report? I have been reading if you pay the balance and ask them in return for payment to delete it off the report that most collection companies will comply. Is this true? Any ideas as to how I can increase my score at this point?
You will want to tackle the account you are being sued for first. And if your credit report and score are the over all concern, now that you have been sued you will want to settle this in a lump sum, not payments. Can you come up with, say 60% of the balance you are being sued for?
Check out this post and the comments for more about resolving debts when sued: https://consumerrecoverynetwork.com/question/can-you-negotiate-and-settle-a-credit-card-debt-if-you-are-being-sued/
Where did you read that debt collection companies routinely remove stuff from your credit reports in return for your paying them?
Hi Michael I did come back again !
I do have a questions for again please…
My girlfriend, she did the bankrupt in 2011 and now she wanna buy a new car can she do it or not and how about she credit scores effected or how long she have to wait to get a better rate????
It is not too difficult to get a car loan after Chapter 7, but the interest rates are high. The rates will come down over time, and now that it has been three years, she could see some fair auto loan rates. She can pull her credit scores for a nominal fee. Post what those are. Does her bank offer auto loans? That would be a good place to look first. Does she have a specific car in mind?
We had a similar situation with citimortgage. We never spoke to the same person, we never got ANY answers when we did talk to someone. We complied with everything they asked us to do. We send paperwork numerous times. We were lied to, misled, and deceived. We were in the position to get other financing to keep the house, it was just a stupid slip of not paying on a second home. They told us that we could apply for a modification and that we should make no payments until it was approved. After almost a year of BS, and lies, we suddenly receivedm in the mail, the court notice of sale. We called them and they STILL told us not to worry because that was not the case and it was being taken care of. OMG! So we were stupid enough to believe they were telling us the truth after a whole year of trying to get this thing done. Just as suddenly we “found” a posting of notice to vacate. We didn’t have time to get all of our stuff out, literally, someone was in the house removing personal items. This was such a crock. We could have kept the home if they would have been honest with us. We were a part of the independent foreclosure review and received a whopping $3,000 for our losses. We have a foreclosure on my husband’s credit and no one at CitiMortgage can tell us much about our account. We are needing to relocate and are having issues with finding financing due to the foreclosure. According to most standards for financing we have to wait until it is 3 years, out, which is in 5 months. Is there any chance that we will be able to appeal to Citi and get them to remove the foreclosure since our loan was mishandled and the modification was a total sham?
JC – Taking a shot at Citi Mortgage being responsive is worth the energy, but be realistic about planning for this going past that three year timeline that is up at the end of summer.
Do you have any verbiage about credit reporting in your letter from the independent mortgage review? Have you escalated this concern anywhere yet?
In 2006 I filed a bankruptcy but kept and paid my house payment, I wasn’t able to work and I got behind on ONE payment to Chase Mtg. NEVER skipped a p’ment on my second mtg to Wells Fargo. At that time, I went to pay my payment that was late to Chase and they wouldn’t take it. It was ALMOST time for the next payment, yet they told me I HAD to pay THREE payments or they would not take it. I could not do that~!
I then got a letter from Freddie Mac telling me about the HAMP loan. I applied and I was told BY CHASE NOT to make a payment until it was approved. They rocked this on for THIRTEEN months, having me send anywhere from 20 to 30 papers every couple of months. They would have a NEW excuse each time..meantime, I found out MANY who had LOST their homes with this HAMP mess, now called HARP I believe. I just thought they weren’t following instructions and I KNEW that I was. BUT, when I got the papers to sign after 13 months, it was a PURE SCAM. I talked to 3 lawyers who ALL said NOBODY had been able to keep their homes with this “plan”.
I hired a law firm..He went to court to file chapter 13, pay my payment and a trustee to get caught up. Chase CONTINUED to add on thousands in charges. My lawyer said he knew and THEIR lawyers knew that I did NOT owe it. SO, I ended up with a 900.00 a month payment which, of course, I could not and would not pay~! My lawyer said the best thing to do was just let them have the house. I did that.
I moved out of it and they waited another 8 months or so before they foreclosed that house. NOW, that is ALL that is on my credit report as I own NO credit cards, paid my car off and literally have NO DEBT whatsoever. That bankruptcy was discharged. BUT it is still on my credit report as if I’d done it..it never went through..the judge refused it when I quit paying on the house and the trustee. HOW can I get my credit back on track? I do not want any credit cards and most likely could not get one anyway~ I am in a mess that I did not create. Chase did. Is there ANY WAY that I can get the bankruptcy that we never finalized OFF my credit report? I am renting a house now and paying more than I would be if I was buying. ANY ideas would be greatly appreciated.
I moved out of the house in Dec of 2011..I believe they foreclosed it the next spring in 2012. I have rented ever since…been on time and paying more rent than my original house payment was. I have now found a cheaper rental and I am paying 550.00 a month and have been since July of 2013..In other words, I moved out in Dec of 2011 and havce steadily paid rent since then. I am assuming the foreclosure was done in the spring of 2012..I don’t really know b/c I did NOT give Chase my new address because THEY wouldn’t even take my calls. SO, it is coming up on 2 years since they foreclosed.
Thanks so much for any help~!
Thanks~!
Sorry that happened Debbie. What state are you in? Did you receive anything from the national mortgage settlement?
It sounds like you are ready to buy a home again. There is not much to do about the chapter 13 filing. While it never progressed and was dismissed, it is still part of a public court record. Data miners (not the courts) send that information to the credit reporting companies. Chapter 13’s stay on the credit report for 7 years. But that does not mean you are in credit or loan purgatory for that whole time. You can generally wait around 3 years after a foreclosure, 2 years after a bankruptcy, and qualify for FHA type of home loans. There are instances where you can explain your situation and hardship at the time of the foreclosure or bankruptcy, and still get approved. You should run your scenario by a broker with a deal of FHA experience.
Do you happen to know your current credit scores (not free fake ones)?
Thank you Michael !! Safe travels!
Michael:
Received an email from a lender I have been chatting with lately. He mentioned a plan “back to work” FHA… We seem to qualify under most of what is required…The only thing thats got me is my spouse must have a 640 (we both must)…Considering the change, a different plan maybe?! Anxious to hear from you!
Thanks!!
Hi Melissa – Not sure what happened with my last (and long) reply. It would have spoken to some of what you just commented about. I did get a caching plugin tweak, so maybe that did something.
I am traveling right now, but will try to recreate that post tonight or first thing in the morning. Should not be hard, as I exchanged emails with a friend at credit.com about some useful tools for you. Here is one of the links I put up before: https://blog.credit.com/2012/07/the-ultimate-credit-report-cheat-sheet/. That article will assist you with how to read through and understand the different elements of your credit reports.
Back to post more soon.
Hi Michael:
First again, thank you for your time. From reading through your above thoughts, I think my first hurdle is going to be learning to read and understand the credit report. I am working off of one I had a friend pull from a finance company. The details do not seem to be user friendly at all. I received the file in adobe format via email. In the mean time, I can answer:
•When were the last payments made on the accounts?
No payments or correspondence has been made since 2010-2011
•Who were the original creditors? Who is collecting on the credit cards now (if you know)?
The cars – Chevron Valley Credit Union, Bakersfield California (Both appear to be reporting as charged off)
Forclosure – Bank of America
Student Loan – Sallie Mae
GE Money Bank – Midland Funding
Chevron Texaco – Asset Acceptance LLC
Tribute MasterCard – Midland Funding
HSBC – Portfolio RC
First Premier Bank – LVNV Funding LLC
•Are there any attorney collectors trying to collect on any of the accounts? If so, are any of those attorneys located in the same state as you are?
We do not receive statements, correspondence or phone calls on any of the accounts. Our contact information has all changed. I do not believe a forwarding address was ever done.
•If you were to approach your credit repair efforts by methodically and strategically resolving old debts one by one, how much can you commit from your monthly budget consistently? Can you tap any lump sum resources in order to be more aggressive with resolving the debts?
This is a tough one. We do not have any lump sum resources, but I recently picked up a second part time job that generates about $1,000 a month. I would be more than happy to use every penny of that source of income for repair. I truly just dont know where to begin, as I scroll through the credit report my intial hang up is understanding it. From there I dont know to call, dispute, ignore… We considered bankrauptcy last year, but could never obtain enough useful information to know if it was for us. We met with a local BK attorney and was told we make too much money to file, unless we were to divorce and he file seperately. Your thoughts on any of the above? I do not know the legality of it but I would be more than happy to remove SS# and share the credit report I have to work off? Ugh..Overwhelming!
Thank you Michael.
Melissa