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.
Just an auto loan. Really trying to get approved at an manageable rate for now. I know a few loan officers, but they would like at least 620, ideally 660 or higher.
When the three derogatory marks drop off next year, I anticipate a decent jump and would refinance at a much lower rate. I can handle 10-12% in the short term, but 20%+ would really limit how much I invest.
I’m may ride it out another month to see if any positive changes apply.
If I could wait out the new car purchase for a few months I would too.
I has debating opening a credit card or two, but have read varying opinions if it would help or actually hurt my score.
My student loan is the only debt I have (other than utilities and the like) which do not appear on the reports. My debt to income ratio is really pretty good. And only shows $92 TOTAL monthly going out.
1) Do (or how can) the bureau’s look at DEBT to INCOME ratio (without actually knowing one’s income?
2)Why would my report show my loan as DEBT to CREDIT, which according to the email they sent me today, is credit utilization? Considering any loan taken out would immediately show a 100%+ ratio. Does that have any bearing on score?
1. That is calculated more by an underwriter reviewing a loan application. The credit report is part of the story lenders will use, whether algorithmically determining debt to income, or in a hands on review.
2. I would have to see what you are seeing in order to comment much beyond it does not sound like the student loans should be hurting you at this point now that they are changes, but that perhaps the prior reporting of a 13k monthly payment due is what caused whatever is happening now.
Are you going for a home loan or anything like that in the next 12 months?
600 to 598 back to 600. I have five collections. Three old ones that were paid and three are slated to drop off next January, including one of the not paid for a credit card debt of $4100.
The only other negative is a past due credit card for about $2800 which went to collections in 2013.
I have probably 6/7 positive accounts, but currently no revolving accounts. Mostly paid as agreed loans and cc’s. Got rid of all cc’s
What I cannot figure out is: they show my installment loan category (which is my student loan only) as a 255% debt to credit ratio … I thought debt to credit only applied to revolving account according to Fair Isaac?
Credit utilization is what is calculated with revolving consumer credit cards.
Debt to income is what the student loans will impact, and more from an affordability factor (like how much howm loan you can takeon when considering all other debts and monthly payments).
The unresolved collections are hurting you. And I do think you need more time from just recently getting things updated (including that $150 collection).
It would be good to start rebuilding with a secired card with a reputation for converting to unsecured after some use and timely payments. I like Bank of America for these ($500 to open usually), but talk to your current bank to see what they can offer along these lines.
Checked my credit report through Equifax and found a lower score than expected and a couple negative past accounts and one big error.
Paid $150 for an account that was in collections I had forgotten about when I moved. They would not delete the account, but I paid it anyway.
After that … my score dropped two points. Was told this might happen, so no biggie.
More troubling was the reporting errors on my student loan. The report showed I was $13,000 past due and was paying $1700/month. In actuality, I am $0 past due and only pay $92/month.
After jumping through various hoops the past two months to rectify this, it has been corrected.
I get a notification from Equifax saying my score change has placed me into a higher score band as a result. When I log in and check it … my score went up a WHOPPING TWO POINTS!!! Back to were I started.
How can a change of $13,000 past due to $0 past due, from 120 + days past due to 0 days past due and a change from $1,700/month to $92/month only be worth a two point increase??? I called Equifax, total waste of time. Lady in India or wherever just recited what was on my account. She said scores update daily as report changes apply. Is there any lag time, or am I stuck with a two point change?
What were the exact scores prior and after?
How many other active positive trade lines are on your credit reports?
Any other negatives than that one debt collection and the student loan?
There may be a hurry up and wait element to the updates helping you gain more score, but hard to say without looking at the reports.
Hi Michael,
I am in the process of building my credit and wanted to know if a charged off credit card can count against my cc utilization. I had a first premier card that was changed off in 2011 and noticed that it is being reported on my equifax report as open and $235 over the $300 credit limit. It is being calculated in my current utilization (178%)and effecting my score. How should I handle this? The weird thing is it is showing closed on Transunion and not effecting that reports utilization or score.
Thanks
Charged off credit card balances are still owed and those dollar amounts do indeed factor into your debt to income ratio for lending and credit scoring purposes.
Negotiating and settling those collection accounts for less than what is owed is often the most cost effective way to resolve situations like this in order to put yourself in position to improve your credit.
Fico scores from experian 615 equifax 603 and transunion 612 Fico auto 8 is 629
Dealership pulled credit last weekend and showed 583 with co signer had 620 and no offers.
Collection account with Verizon approx 1,100 – paid off 2 weeks ago for about 700. 1st delinquency date 9/2014
Collection account for CC settled early this year. 1st delinquency date 6/2014 * this shows that I disputed this on my report because I asked them to remove after I paid it, does that look good or bad?
Collection account for sprint for $400 paid in full 5/2014
Collection for medical bill $214 – from 9/2012 * I recently disputed this bc I didn’t know until I pulled my report, do u think they will remove this and does it look bad? I haven’t received any bills or notices.
Car balance of 4,500 interest 1.9% have about 15 months left on it. @309 a month.
Government Student loan of 20k in deferment until 2018
Revolving is showing I have balance of 4,700 with limit of 5,500 these are credit cards – always made at least minimum
My income is about 2,900 per month and another person in household with about the same sometimes more monthly income. Can cosign if needed. Co signer has 450 monthly car payment about 26k left got approved thru ally last year at 2.9%. Without a co signer
No rent or mortgage payment.
I will get a lump sum of about 5k in a month or so.
I want to finance a truck for about 35k-40k and have 5k to put down I want to purchase within about 2 months.
How should I utilize that 5k to best improve my credit? Pay off cards in lump sum? Do you think I will get financed with a decent rate? Will I need a co signer for income? I would like to finance longer like 72-84 months to keep the payment lower but I’ve noticed it seems like the interest rate is higher on longer terms, is there a way I can figure out a median. While I’m at the dealership can I tell them to give me different rates depending on the term so I can see because that difference in interest rate sometimes makes it not worth extending it to 72 months etc
How soon is it that you are looking to get the new truck loan? You could use 90 to 180 days separation from any paid collections. If the medical debt does not come off, you can pay it off or settle it. Paid medical bills now impact your credit much less than in years past, or not at all.
You could use the cosigner if that is not a big deal. If all other bills are affordable, you could even use the 5k you get to potentially put a down payment on the vehicle in order to improve your financing package (not always possible). You may want to using half the money to pay down credit cards so that you are under 50% utilization, and the other half as a down payment, or some variation thereof. It is good to have less than 35% to 20% utilization on unsecured credit cards in the months leading up to any financing goals.
You should absolutely hit the dealers financing staff up to put together a loan that works for you. 6 year loans on a depreciating asset are not a great deal. The higher the interest rate, the less so. Depending on what the loan will look like, and depending on the cosigner particulars, having one would appear to improve the loan that you get, and probably a 60 month loan or less if you can swing it.
Michael,
Miraculously the previously stated loans took care of themselves and dropped off this past week. Now I have a question pertaining to a student loan that we settled in 2013 (it states it’s due to come off in September of this year) although when we settled it was supposed to have been closed there is a balance of 7300 showing. I have called and was told it hadn’t been closed and they would close it now and it would be off by the 16th of June. when it wasn’t I called back and was told even though they show no balance they have nothing they can send me and to put a dispute in then the credit company will contact them and they’ll then take care of it, but could take up to 60 days. So my question is do I dispute it through the credit bureau or cfpb? Thank you
Given the information you shared you will want to dispute it with the credit bureaus, and not the CFPB.
Send any disputes in writing and use certified mail return receipt.
Please do post an update with the results.
Michael thank you for all the information. I will send our dispute letter in tomorrow.
now I have a question on my credit score, which I pulled from experian today.
It showed a 560 which was much lower than I thought it would be.
My experian credit score shows 2 late payments, time since last 67 months,
1 collection account. my credit report shows 2 negatives and 8 positives.
U.S. Dept of Education which was paid in full June 2013, but shows a balance
of $7356 last reported jan 2015 which I’m going to dispute. and a medical charge from June 2009 that I never received a bill for. It’s held by Wakefield and assoc for $734 original amount $554, scheduled to be recorded until March 2016. should I call and settle this and if so with the hospital or Wakefield?
What do I need to do to get my score higher.
Thank you for your time
Michael,
sorry for the repeat question.
should I call and pay off the medical dept or let it ride?
it’s due to come off March 2016, if I pay it will that reset the
7 1/2 year mark? original amount is for $554, but now showing
a 734 balance. I never received anything on this and thought my
insurance had covered it, which I’ve called and asked for a summary.
Thank you
Paying or negotiating and settling the medical bill for less will not reset the 7 year reporting clock. At this late date you would call Wakefield and Associates to settle up the old bill.
Of the 8 positive trade lines on your credit reports, how many are being paid monthly today? Are any revolving debts like credit cards?
So it looks like the loans that came off my experian are still showing on transunion. why wouldn’t all three credit reports be the same? Should I file a complaint? the us education is now marked as paid and closed with the June 2013 date but not dropped off the reports. And in working to clear up our debt and be debt free we do not have any current revolving credit. we are currently renting and would like to buy a home in the near future. Also in February before clearing up my report I applied for a credit card and was turned down with a score of 651, which I’ve stated is now 560.I’m afraid I’ve totally messed up getting any type of loan now. Any suggestions on a course of action? Thank you again.
I am missing something in all that you have going on. It may be better to call in for a consult so I can get a better understanding of the particulars before I make any suggestions about next steps.
You can reach me at 800-939-8357, press option 2. I am around most weekdays until 6 pm pacific.
Michael thanks for all your advice.
All the previous negatives have fallen off my credit reports, with the exception of one, which leads to my question. we had a car for our business that was a voluntary repo, with the last payment October 2008. It is listed on equifax as RF, opened august 2006, closed/bad debt. It was on all credit reports early 2015 than removed on july 31 2015 and then added back December 31 2016.
is this normal and/or legal to drop than add again 5 months later or should I contact the CFPB?
Thank you!
Who added the repo back on (name of company reporting the negative item)?
Is it back on all three credit reports?
What is the date now showing for this item to drop from your credit reports?
The company is Fidelity Bank. It’s only on Equifax and I’m not seeing any drop off info.
It’s listing as:
Open date August 16, 2006.
Status is open-collection/charge off.
Balance $8568
Last reported Dec 31, 2015.
Acct status – Open
Closed date – —
Date last payment Mar 1, 2009
*This is how it appears on credit karma. When I pulled all 3 credit reports thru experian it shows as closed. Bad dept and placed for collection. Charged off acct.
Thanks again for your assistance.
I would indeed consider filing a credit reporting and/or debt collection complaint with the CFPB. Let me know what happens with that if you do file.
The alternative is to dispute this with Equifax and see what they do upon investigating. If you do not get the right outcome from Equifax you could then file the CFPB complaint against Equifax and the furnisher.
i had a business that i lost and a home that was forclosed on, both in florida.
i pulled my experian credit report in february and it showed seterus to fall off in may of this year and wells fargo to fall off in June of this year. so i pulled the report again today to see my clear report only to find that the dates are no longer on there and also the past payment boxes are not showing. the seterus is now showing a foreclosure date of august 2012, opened in 2/2006. i never received any official notice only a notice that the property had been purchased by the lien holder, auroa lending in 2009. i’d stopped making payments in 2007.
so now I see nothing is off my report as of yet. and i can’t find my report from february showing the dates.
can a lender change a date like that and what steps can i take to get it fixed. also if a report is to come off in june is that at the first of the month or do i wait until july to see it cleared?
Thank You
The dates you provided are too many. If basing how long any of this should appear on your credit reports using the stop payment date of 2007, now would be the latest time frame I would expect the unpaid mortgage to remain.
There are situations where a public record may stay longer on your credit report, than the original creditors collection derogatory. It is not clear from what you shared if that is what is happening, but I doubt it. Public record items on your credit reports do not tend to inexplicably change, but collection accounts can.
I would file a credit reporting complaint with the CFPB. Post an update with the results of that and lets go from there.
Hello!
I am trying to purchase a house and I have a few negative things on my credit:
A car loan that was charged off for $3,250.00
3 accounts totaling to $850.00
What I wanted to know is will the car loan company take a settlement for a lower amount and how much I was looking to give 1300.00 the other 3 accounts I am going to pay off but not until I receive in writing that they will remove them from my credit. By the way the car was not in my possession it was stolen, which I reported someone else had it they have the police report and they faxed me over a voluntary repo form that I signed so they could go find the car which they never did. The guy disappeared as well as the car. I also did not have a job at the time so I could not pay the remaining balance.
How long ago was the last payment made on the car? Is the finance company still reporting a balance owed on your credit reports, or do they shoe a zero balance (which means they sold the debt)?
Who are the other debts owed to? Pay for delete is not as common as we all would like it to be.
Enrolled in dept management program in 2009 to pay off $50,000 in credit card debt (4 different cards). It was to be paid off over 5 yrs, making about $900/ month payments. We did well paying off debt, however during the 5 yrs did have some months we couldn’t make the full payment. The debt management program would take whatever money I sent in, and they would pay the creditors of their choice. Well BofA ended up having a past amount due, and then every month, I would make a payment, but the money would go to the other 3 cards,(so they wouldn’t get late) and a portion to Bof A. Eventually the whole debt was paid off about 6 months longer than initially planned. However, today I got my credit report, and see that Bof A “charged off” the account 1 year ago for $6000 (12/2013) It is now listed as paid in full, account closed. However there was 1 year it was “charged off”.
I was a bit surprised I was never notified of this. Plus, the whole past year….I did not ever get a credit card statement from them. I did call once, and they told me they don’t send them when the account is so far past due. They did then send a copy, however I didn’t’ get any more. At the time, I didn’t care, since the debt management program was paying them directly.
I am wondering if I could get the “charged off” off of my account? Is that unheard of, or is it a moot point since the debt is paid? Should I just not worry about it, and just focus on good payments going forward? I was so proud that we paid off $50,000 in debt, but was deflated today when I read the report. Credit scores range from 640-706
You will not get BofA to remove the charge off. It is really not going to be a big deal to your credit scores in another 6 months, and less still another year after that.
The fact that the charge off shows paid on your credit reports is good enough.
What I find missing from credit profiles of those who complete a debt consolidation plan with a credit counseling agency is depth and recency. Those revolving accounts were all closed 5 years ago. You are likely missing open revolving account activity, which is easy to add with a low limit credit card, or two. You are missing long term credit depth that you probably had going for you on some of the debts you consolidated because all those accounts got closed.
Time will help regain more credit depth, and absorb any blow to your credit score from the charge off.
Thanks for providing great information. Hoping you can advise me on my situation:
Financial goals: 60-90 days: Finance private party auto purchase $3-4000 cheap car. 1-2 years – Buy a house.
Credit/debt situation: FICO score is 660. 8-9 derogs stemming back to 7/30/2008 (first late payment). I haven’t paid anything since. Total of ~$15,000 in open collections. All credit cards. Recently started payment plan on back taxes. Does not show on CR.
In 2013 opened 2 secured cards. Keeping balances low.
Total debt: $10K IRS (will pay in full in 2016). $15K misc CC/collections. $23K current auto loan GM finance. (wife’s car)
Current HH income: $130K
QUESTIONS:
1. Most of my derogs have been sold/transferred and show they will be removed from my CR in the next 2-6 months (May-October). The big question for me is, since I live in Illinois how does the SOL work? Looks like it could be 5 or 10 years depending on the type of agreement. I only plan on paying the collections/credit card debt if it is necessary to get a mortgage. What are your thoughts?
2. Since I have so many agencies and items to deal with, is there a service you know of that can help be more structured and efficient about this entire process?
3. Any thoughts on the auto financing? What are the chances I can get approved or something with open collections? Or should I try the Roadloans or Wells Fargo route? Or just wait until October when most derogs should drop off?
I know that’s a bunch so that’s in advance for any counsel.
1. You mentioned all of the debts are credit cards, so open accounts. They are passed the SOL in Illinois now. If the home loan goal is not for a year or two, I would just let these all drop from your credit reports (unless any are judgments already).
2. I would not hire a credit repair or any type of debt relief company. You do not really need any professional assistance with any of the debts, when you are probably a good candidate to just wait things out.
3. I think things look good for the auto purchase. In a few months it sounds like some of the collections will come off your credit reports. Auto lending is not as tight as mortgages. I do not think a few collections on your credit will hold you back. You already have the GM loan that is current. You could possibly get a better interest rate waiting until all the derogatory items come off. What is the interest rate on the car loan you have now?
First off thanks! What a great service you’re providing.
1. Yes, all of my derogs are old credit cards that have been charged off or sold to places like asset acceptance and the like. None of them are judgements. Question on this, so after the derogs fall off my report, the mortgage underwriters will not be able to see this debt at all…on all 3 bureaus? Is it that simple?
2. Got it, thanks.
3. The current rate on my GM car is 13%. on this part, I’m curious on the sequencing and where to get financed. Should I wait until most of the derogs are gone and then do the refinance first or apply for the used car financing?
4. Do you have any recos on where to apply for private party financing with mediocre credit?
Thanks again for the feedback.
An underwriter doing some deep dive manual review of your loan file could potentially see some old collections that no longer appear on your credit reports. But I doubt it would change the outcome of your loan approval. They are looking for unpaid judgments, or unpaid collection accounts that show on your credit reports.
Unless you are in a really big hurry about that extra car, I would just wait for the collections to fall off the credit reports. You could potentially be in 0% for 60 month well qualified borrower territory. I would also refinance your existing car loan shortly after too.
You can shop competitive offers through many financing companies.
Thanks Michael.
In regards to the underwriter. I’ve been told by loan officers that they will do a manual review and find the unpaid collections. Is that just not the usual case? Are you saying that the underwriter will only do the manual review if they see the collections on the credit report? What triggers a manual review versus just pulling the 3 CRs?
Anything is possible. But I am fairly confident those unpaid collection accounts that are too old to remain on your credit report would not hold you back from qualifying for FHA type of loan underwriting. Similarly, I would not expect any surprises over this issue from the likes of Wells Fargo and others.
Whole bunches of people with similar scenarios have been getting mortgages approved since the home loan market tightened.
That make sense…I really hope you’re right. It will be at least one year so it’s along time but I will let you know what happens.
One other question is my wife’s credit. She has a few derogs on her CR too. Same type of situation. Can I apply for the mortgage just using my credit or will they factor hers too. Her income is only about $20k per year so I don’t really need to use it to buy a $250k-$300k house? My income is $130 and $150 combined.
You can get the mortgage without your spouse.
Are her derogatory accounts dating back to the same time as yours?
All but one is from the same time period. So I’m thinking they would drop off, too? She has one more recent collection. We’re working on getting that settled.
Thanks again for all you do. Very helpful.
They should drop off around the same time. Review her credit reports and match the delete dates with when payments stopped etc.
Your welcome. Help spread awareness of the site.
I was and am still self employed my husband is on SSI since 2009. This 10 yr old debt for a car repossession with Ford Motor sold to a Virginia attorney who filed the judgement under Midland Funding for $3164 and expires 4/2016. I need to buy a house now and since they got nothing it has been resold to at least 3 other JDC’s. My credit score is 720. I am willing to settle for $500. – $1000. to get it off my credit but not sure they have the”‘assigns” to actually take it off when settlement is agreed on and don’t want to just open a can of worms. Also if I do speak with them can they then extend the judgement date because I contacted them.
You cannot reconfirm a judgment by talking to someone about it. The judgment can be renewed without any concern for what the debtor does or doesn’t do (unless you pay or settle it of course). Each state has it’s own rules for time frames to renew judgments.
You will typically not be able to settle, or even pay in full, and get the judgment off your credit reports. The court record is why the judgment shows up, not something a debt collector is doing. You can expect that the judgment owner files notice with the court that the judgment is satisfied, but be sure that is included in any agreement to settle that you negotiate, and get it in writing.
The judgment has gone a long time without payment, and that can often mean a really good settlement, but not always. The amount you can settle debt for can depend on a myriad of things. Offering 1000 dollars may be enough, or you may need to add to that.
I am not sure if that judgment amount you shared is what it says from 2009, but Virginia allows interest to be charged on judgments at 9 percent or the contract rate.
Thanks much. Since the judgement owner is the only one able to file with the court that it is satisfied once settled are they the only ones I should negotiate with verses any of the other JDC’s . I thought midland funding was out of the negotiating process since they have sold it.
I would start by contacting the last known legitimate debt owner that you knew for certain. It sounds like that would be Midland Funding? If they sold the legal rights to the debt, find out to who, and progress from there.
In reading these, I see that the objective is always to settle the accounts, which is reasonable because they are my debts. But after becoming sick, losing my $75k/yr job and having to go on SSDI, with a 2 year application process in the meantime and no income, I lost my home, my car, my credit cards and have unpaid medical bills all sitting on my credit which dropped my score to a 490, now still its only a 540, two years later. I want to repair my credit so that i can at least qualify for an fha home loan and not be relegated to renting for the rest of my life, but there is quite literally nothing I can offer my creditors. My income is hardly enough to care for myself & my daughter now. What would your recommended approach to repairing credit damaged in this manner and to this extent be?
Filing chapter 7 bankruptcy would wipe away most if not all debts. It is a more cost effective way to get debt relief if your debt totals are more than roughly 5 thousand dollars.
You can qualify for FHA underwriting currently if it has been 2 years since your discharge, and you have a 620 FICO. There are exceptions that would make this 2 year wait time and credit score minimum shorter/smaller, but most people would be waiting out the 2 year and/or 620 scenario.
Michael,
I wrote a long ways back and really did appreciate the help provided. It is a comfort having someone with experience in this area responding to everyone’s questions. I have improved my credit and taken care of many things over the last few years. I am, however, finding myself in a position where I hope you can lend a little more guidance.
We have the major things under control, but there is some lingering medical debt. Some of it years and years old and other things more recent. Fortunately I have always had medical coverage through work, unfortunately my wife suffers from an illness that nobody really has a great answer for and ER visits are a part of the equation. For some reason the medical plan we have at work has almost become a punitive thing when you go for urgent care, the more you go, the more they make you pay. That is the primary reason we’ve got anything spotty on our credit.
Well, 2 boys into college later – we were fortunate enough to qualify to co-sign loans for them, we get a note from the loan company saying because of recent accounts in collections on our account that we’re suddenly no longer worthy of being a co-signer. Our credit rating isn’t bad and we’ve got a variety of things (small to large) medical related that we haven’t been able to clear up, but it’s been that way for years. What I’m hoping you will have insight on is…
1- From a credit report standpoint, why are only a few things showing up negatively like this? we financed our house (land contract to purchasing on our own) last January and they weren’t there, but why would it suddenly be different in how it’s being reported?
2- I think my wife uses a free credit reporting tool and said that it showed 6 items in that state, the historical thing indicates we may have jumped from 2 such items to 6 recently. What it shows on the report is an amount, but is there a way to trace this back? A few are smaller and we could manage to put those on a credit card or outright pay them off.
3- My kids have stellar credit, but no work history. Is there anyway they can get loans (outside of the FAFSA stuff) independent of our woes? I just don’t want to be the reason their higher education dreams come crashing to a half. This may be way off topic for you though. 🙂
I moved your comment to a more related post about fixing credit reports.
My first questions are about finding out who the debts were owed to, and when the services were provided? Can you post the answers to that?
It is not uncommon for collection accounts that had not been showing on your credit, to suddenly appear after you apply for credit, like you did a few months back. Debt collectors use sophisticated programs to alert them to changes in your credit reports. These alerts may be why the additional collections appeared, but that does not mean they are legitimate. Let’s get to the bottom of that first.
There are additional options for your kids to look into through their college Student Financial Aid Services office.
I know the debts are owed to a local hospital who had turned them over to Money Recovery Nationwide … the services all show some time in 2014, from February and a few months beyond that. I’m pretty sure based on my wife’s regular trips to the ER that they are legitimate, we didn’t have much extra to cover everything and some of these slid.. there are some every year that have done that for several years now, it is just the first time they’ve appeared like this.
We were looking up other options for their schooling. I was OK with being a co-signer (kind of happy we qualified for that) but now that it could be in jeopardy I want to find other options for them. With any luck though I’ll have them thoroughly prepared for their lives and they won’t run into my situation without being prepared!
Just wondering if you had any additional thoughts based on my reply. Thanks!
Paid medical bills are not the drag on credit scores they once were.
How much are the bills?
How much can you put towards them monthly?
Can you come up with a source of cash to pay some or all quickly (sell a motorbike, collectible, etc).
The 4 of them total about $700 – one thought was to heap them on a credit card, although I don’t love the idea. No free/extra cash to do that quickly. I’d just prefer they not show up on the report and then I think I’ll be able to contact the student loan place and have them reverse their decision to not allow the kids to draw from that for school any longer.
I will probably still explore other options for student loans, but I like knowing they’ll be good for at least the next school year!
I reached out to the hospital and they suggested a call.. is that something I can have them remove from the credit report or do I have to go back to Money Recovery Nationwide? I also am worried that they may have a few more lingering bills and I don’t want to open myself up to those as well.. especially if I have to pay these off and will then need to work on paying that off the card!
You can sometimes get a medical bill in collection removed from your credit reports. Also, if you work something out and pay the hospital or service provider directly, not the collection agency, I have seen a few success with disputing the medical collection off afterwards.
Paid medical collections are not factored into your score like they once were. Some of the newest scoring models do not calculate paid medical debts into credit scoring at all, and soon we should see a 6 month window before unpaid medical debts can even show on your credit reports.
You are not in all that bad a shape all things considered.
Hi Michael!
I’ve been looking over my and my husband’s credit reports and I’m a bit confused. My husband has a repo on his report back in 2006. It’s been sold and changed hands a few times. The car was his ex girlfriend’s and she never paid a dime.. bad idea. Anyways, we haven’t been able to pay anything on since probably 2007 when I made a payment to the collector. When I looked TransUnion shows it as closed-derogatory and says Charged off as bad debt Profit and loss write-off in the remarks. However, Equifax shows open – collection/charge off with charged off account in the remarks. Can they still come after us? It also shows the date it was opened was June 2008 but last reported December of 2014. What does that mean? Since we made a payment to collections.. not enough to make it current since the car was long gone.. does that “restart the clock for SOL? I’m so lost… what should we do?
Thank you for your time!!
Is the original repossession from 2006 still showing on his credit reports pulled today? If so, who is the finance company?
What state are you in?
I have more feedback about the credit reporting strangeness you are seeing, but would like to the answers to my questions first so I can better target my response.
I have a student loan that I took out through the school (American Intercontinental University) for part of my tuition that my financial aid and private student loan I took out, did not cover, back in 1998. I went past due in late 1999 or early 2000 which makes this debt way past the 7 or 7.5 years. At the time that I took out the loan, I resided in South Florida and now live in NC. This debt has not showed up on any of my credit reports since 2008 and now I recently pulled all 3 of my reports and it is showing up on my Experian and Equifax with an original default date of June 2009. The school has refused to send me any documentaion with the original paperwork and loan agreement along with the original payment history showing the original default date. And it is not a collection agency that is reporting this debt, it is the school itself. I believe they are trying to re-age this debt and if I’m not mistaken, that is illegal. But since they will not provided the documentation how do I go about getting this off of my credit report because they are reporting a false original default date and disputing it through the credit bureau is not helping they just keep saying that the information has been verified. I also have a Sallie Mar account (now Navient) that is a private student loan for that same tine frane that was taken out at the same time for a part of my student loan that was not covered by financial aid and my mom was the co-signer on and she is now deceased. Both of these accounts are now showing as charged off and the Navient is scheduled to cone off next year 2016 but that would make my original default date back in 2008 which would not be true. I doubt both of these companies would let me slide for 8-9 years on payments. I also want to thank you for sharing your story , it has given me hope in my situation.
I also had posted a similar post due to fatigue from being up all day packing up my house after getting off of a 12.33 hour shift at 7am yesterday morning because I am currently homeless with my children because I was pad locked out of my house today after losing my appeal to the eviction on March 2nd. I had made an arrangement with my leasing office to pay my rent late (verbal contract) and the assistant manager filed an eviction on me any way but since I did not have the agreement in writing, I could not prove we had the agreement and the assistant manager of course denied we had the agreement when we went to court but I should of had 30 days to move because I have 30 days to file an appeal to the appellate court and they were not supposed yo be able to obtain a writ for the pad lock until those 30 days had expired which would have been April 1st. So I am trying yo seek legal advice to see if I have a case of my right to appeal being violated but I don’t really have the money for a lawyer right now. So now I also will have this judgment on my credit but I do not owe them any money because I had to pay the money owed in order yo file the appeal along with paying any current rent due to the clerk of courts until we went to court for the appeal. I also have a recent repo from January 2015 for a car I bought ( Infiniti M 35, 2006) and the engine started knocking about a month in a half after I bought it and I don’t think it was properly serviced before I bought it. Which led to a domino effect of things going wrong with a car I hadn’t had for two months yet. The finance company refused to pay for repairs and put that expense at the end of my loan. This is why I was late on my December rent because I needed the money for a down payment, which is why I made the arrangement with my leasing office before I did all of that, but now I know better. I will get everything and anything in writing from here on out.
But I do have student loans in good standing and they are currently in deffernent and I have a Capital One credit card and fingerhut account that is in good standing. I would like yo purchase a home within the next 12 months, that is my main goal with getting my credit straightened out. I have a good job that pays well and I just need to get my living situation straightened out which will be next week on the 26th and get another car, which I will pay cash for once I receive my tax refund. After that I can afford to settle and clear up any other debts on my credit history. Any help you can offer Michael would be grately appreciated. Thank you so much and I apologize for the extra long post.
I would start with filing a credit reporting complaint with the CFPB where you include all the attendance, loan and payment dates, and additional details. If you had not already disputed with the credit bureaus, I would have started there, but maybe have included written disputes to the school sent certified mail return receipt.
I assume those old ones are all unpaid private student loans?
Both of these loans are unpaid private student loans. All my other student loans are federal and in good standing. I did file the complaint with CFPB and am awaiting the outcome on that. Thank you so much Michael, I appreciate the guidance on this!
My husband took over the finances when I was diagnosed with MS and after 5 years I found out he had charged up 2 credit cards under my name. He stopped paying both cards in October 2014.i received a call from collections in both and one settled at 70% and the other I paid in full. Citibank is closed now and I will use the Bank of America for gas and pay off each month. My daughter is finishing her sophomore year of college and now I’m worried we won’t qualify for a loan. We took out loans for my son and will start payments in June. How will this affect qualifying for my daughter’s loan for August?
Are there any remaining accounts showing on your credit reports that are not resolved? Your credit will begin to repair itself from the events you mention, and how quickly may surprise you.
What are your credit scores?
How many positive trade lines are showing on your credit report total vs how many key derogatory?
I can offer more feedback with answers to those questions.
Hello~ I am trying to repair my credit. I came into some unfortunate circumstances in my life in 2011. I found out I had uterine cancer and needed surgery. This started my downward spiral emotionally and financially. I had surgery 8/2011, my company at the time incorrectly submitted my FMLA papers causing a delay of 6 weeks in payment to me. (I had to use my savings which wasn’t much) I had complications from my surgery which put me out of work for an additional 6 months. (1/2012) Even though I wasn’t completely healed, I went back to work due to finances. In 7/2012, I was laid off from my job which caused further frustration. (16 years with the company!) At this time, I was in pain, frustrated with life in general and gave up on my credit cards. I let them slip, my fault and totally irresponsible but at that time in my life, I didn’t care. I am now trying to correct my mistakes and move on with my life but my past is haunting me.
Here is what I am faced with now:
Chevron Gas Card: Original amount was $800- Midland Funding (C0llection Company) wants $1,271- date last paid 2011 but on my report it says 2013
Victoria Secret- Original Amount- $600 Portfolio RC (Collection Company) wants $1137. Date last paid-2011 but on my credit report it says 2013
Capital One- $3200- I don’t see a collection account for this one but I know it’s owed so this baffles me.
Harley Davidson- Original Amount owed $4,000- No collection for this account which is confusing.
Westridge Apartments – (Original Amount is $800- Dispute began in 9/2010- Kimball and Tirey, Attorney at law (Collection Company) wants $1,295- I believed I was in a secure financial place to help out a now ex-friend and she vacated an apartment that I had co-signed and paid the deposit for. They kept the deposit but said there was more damage. I asked several times to see bills or charges for fixing items but never received anything. So now I am on their collection hit list for the amount.
All of the above accounts have been charged off with the exception of the apartment and total collections is around $4-5,000. I have a good job now and can afford to pay off all of them but not sure how to go about it. I’ve heard so many conflicting answers it’s hard to tell.
Chevron sent me a settlement letter for $800 but if I pay that, will it show it is paid or settled? Do you think it’s possible to have it deleted if paid? And do I owe the original creditor also?
What date does the bad reporting begin and once it it sent to the collection agency, does that begin a new date?
Another question I have is, when I look at Credit Karma (I know they are not 100% accurate) my scores for Transunion and Equifax state 630 and 635 but when i paid for my experian score, it stated 548? How are they so different?
Is there any way I can get my self out of this and have a fresh start or at least begin a clean up? I would greatly appreciate any assistance on how or where I should start.
I have recently 5/14 purchased a truck ($37,000) with the help of my mom (she co-signed) and instead of paying the $625 a month payment, I pay $400 a week. She also added my name onto her credit (9/14) card and I haven’t missed a payment and actually pay in full if possible. Balance is 0 at this time.
The first payment you missed as you went into default is the starting point for how long these accounts will stay on your credit reports.
These collection companies that bought your debts, Midland Funding and Portfolio Recovery, should fall off your credit reports at the same time as the original creditor. But you do have to keep an eye on debt collectors showing a newer, more recent date. Part of the credit repair process is time, and you do not want to have this take longer because of inaccurate dates being reported.
Your Chevron card is no longer owned by the bank that issues and services them. Currently that is Synchrony (used to be GE Capital). Your account was purchased by Midland Funding. But double check something for me… is the there a balance showing as still owed by the original creditor on your credit reports, or does it show a zero balance?
When you settle with Midland you will not owe anything to anyone else related to this account. You cannot get Midland to delete this account from your credit reports. You can read about how pay for delete is possible in some situations, but it is really not common, and not in this situation.
Your able to repair your credit without getting the collections deleted. You will want to resolve them so that they update on your credit as paid or settled. It does not matter which really, so negotiating lower settlements for a lump sum payoff where possible is a good move.
Are Capital One and the bank for your Harley Davidson credit card showing on your credit reports? Are there still balances as being reported as owed? It is good that a debt collector is not showing up for these accounts, but things may not stay that way.
Anyone serious about credit repair that involves more than an account or two, or a single round of dispute letters, would be better off subscribing to a credit monitoring service where he details are real time and reliable. CreditKarma is fine for light lifting, but as you know, it is not always accurate.
Your adding new credit (the auto loan, and the authorized user) are part of repairing your credit. I would get the collections resolved before doing anything else to add credit. Once the collections are updated to show paid/settled for several months, you will be able to accelerate your credit recovering and may want to look at adding another account or two.
Long term, say 2 to 3 years, what are your credit and finance goals?
I just would like to give some encouragement to the folks on here and let them know there is light at the end of the tunnel.
My wife lost her 6 figure job in 2009 after the company went into bankruptcy. I had left mine earlier thinking she was safe so I could start a new business. Unfortunately the recession then came on full bore and I had to close the business after investing a good portion of our life savings. Neither of us could find work for nearly 16 months. During that time we blew through a 100K in savings and ended up being 90 days behind and barely holding on to our home and car and HELOC. Made settlements with nearly all our cards, in most cases we settled for 38% – 65%. The worse was AM EX and DISCOVER who sued us, but our attorney threatened them with bankruptcy and after some very tense negotiations we got them to settle and dismiss the suit for 85%. (incidently kudos to Bank of America and CITI cards. They were the most UNDERSTANDING and best to work with as was PAYPAL Credit/Bill Me Later)
Wells Fargo was a total nightmare. Entered their loan modification where simply reducing our 6.8% mortgage and 11% HELOC would have made us TOTALLY SOLVENT. The process was supposed to be only 60 days but it ended up being over 6 months, and we were encouraged to go 60 – 90 days delinquent in order to push the hardship case. In the last days we were told the modification was imminent, I talked to them at least twice a week, then suddenly after being told it was “any day now” we got a FEDEX envelope simply saying our Modification was denied and all delinquent amounts were due immediately. We were stunned….but the worse was yet to come….after having the wind knocked out of us we sort of felt paralyzed not knowing what to do. We ACCIDENTLY let the HELOC go 93 days….triggering an AUTOMATIC DEFAULT. When I realized it was 93 days, I got on the phone with them and explained what happened and begged them to allow me to make the payment, even clearing up the entire 90 days…..but they said TOO LATE, they CHARGED IT OFF!!!! And now they demanded the full payment. We eventually settled with them for a lower amount after help from family, but this left our entire situation in tatters.
Luckily that month we found employment though at half the salary we made before. We fought like crazy to pay of our bills, finally caught up the first mortgage and slowly improved our wages, though to this day we still make around 75% of what we did back then.
Our car was over 9 years old now and lots of issues. We literally begged our dealership to push a new lease through. Audi made an exception…but at a steep price…much higher interest and huge deposit, but it was the first step in our rebuilding process. Our FICO at the time was 580 because of everything that happened. (We never had less than 720 before this)
It took 8 months to pay off all the settlement payment plans (incidently I was the one that made all the negotiated arrangements with the CC companies except AM EX and DISCOVER) After the settlement plans were finished I turned to the credit we owed that was not settled and slowly paid off what I could afford starting with the higher rate cards.
It seemed like it would NEVER end, but slowly one by one they were paid off, including some personal loans. After 20 months our credit score got better each month. I subscribed to Equifax despite the high cost just so I could keep an eye on it. Capital One granted us a card with a $500 limit a few months after our settlements were done. Eventually that credit limit rose to over $2500 with increased limits every 6 months.
I NEVER EVER MISSED A PAYMENT…..24 months later our score was 635 despite all the CC charge offs from 2010 and 2011. We just refinanced our mortgage under the HARP program, it went fairly smooth and took about 60 days. I SHORTENED the amortization to 15 years at 3.5%
Finally we have exited the tunnel into sunshine. In the last few months our score has increased to FICA 685. We qualified for a HELOC and closed it. It is for emergency purposes only as we rebuild our savings. We are also in the process of buying a vacation home, barely qualifying but we did it because my score is FICO 740 now. (All the CC COs were unfortunately under my wife)
We are nearly debt free only owning the lease and the mortgage on our home and have tons of equity.,
Its like a whole new world now. Thought we like millions of others still are not making the salaries we did before, but at least now the burden of debt and bad credit is finally behind us.
You can do it!!!
Hi,I had many credit cards bills purchased I don’t know about them,I don’t know when I had those credit cards.Those bills are more than 13 or 14 years they are on my credits,I don’t know what should I do to remove them.Can someone please give me an advise?
When you say the accounts are that many years old, is that when you stopped making payments on the credit cards? Are the original credit card lenders still reporting?
What are the names of some of the debt collectors on your credit reports?
You can work to get old items removed, but I want to be sure what you have going on before offering more feedback.