Why are student loans so important to your credit score?

Student loans can be a credit killer, especially for young people. Student loans have a major impact on the consumer credit scores of young people for a number of reasons. These reasons are:

1. Student loans are typically given to individuals with a brief credit history. These loans are given to college students and are typically repaid by people who have recently finished college, many of whom only have a couple credit cards and their student loans listed on their credit history. If you have a shorter credit history, then defaulting on a payment has a larger overall impact on your credit score.

2. Student loans are usually not a single loan, but rather a series of separate loans. Most college students who rely on student loans need lending each semester. Each new semester when a loan is given is counted as a separate loan. Therefore, if you went to college for four years, or eight semesters, and received lending each semester, then you would actually have eight separate loans that you would be expected to repay.

3. Defaulting on a student loan payment typically means default on multiple loans, not just one. Repayment on student loans usually consists of one lump sum repayment each month. In spite of the fact that you might be repaying on multiple loans, most lenders simplify the process by accepting a single payment, and then paying spreading that payment out across all of your loans. Because of this fact, if you miss a single student loan payment to the lender, you actually might be missing multiple payments from a credit reporting standpoint – and your credit score will reflect accordingly.

4. Students are not well educated about the student loan process. Many students become involved in student loans without really knowing or understanding what repaying them will entail. Because of this, they graduate without a real understanding of how they will be able to repay their loan.

4. Recent graduates are in a poor position to repay student loans. Another thing that makes student loans a credit score killer is the fact that, statistically speaking, recent college grads are in the worst position to repay loans that they will ever be in. Many college graduates take several months, or even years before they secure their first job. However, student loans must begin to be repaid as quickly as six months after the last class was taken.

You can never get rid of a student loan – not even through bankruptcy

Another crucial thing to remember is that because student loans are typically subsidized by the government, a student loan is one of the few types of loans that has to be repaid regardless of your financial circumstances. Student loans are one of the few things that a bankruptcy will not remove your obligation to repay.

There can be relief from bad credit caused by student loans

If you are one of the many college graduates who has been buried by the burden of student loan debt after graduation, there is still hope. If your credit report has negative items on it from late student loan payments, you can dispute those items with the credit reporting agencies in order to get them removed. As you remove the negative items from your credit report, your credit score will increase and you will be able to qualify for low-interest loans for cars, houses, and other everyday items you would like to enjoy. Companies like Lexington Law Firm specialize in helping consumers repair their credit.

Many people believe that once a debt is “charged-off” they no longer owe it, but this is far from the case. In fact, charge-offs are often the first step towards creditors attempting to collect through legal avenues such as liens and judgments.

Understanding how charge-offs work is important if you want to repair your credit and get back on your feet. Here are the facts about charge-offs that will help you make the right decision when it comes to improving your credit.

Charge-offs Still Leave You on the Hook

Because calls and letters from the original creditor often stop when charge-offs occur, many people think that they are in the clear once the collection activity stops. The truth is that creditors are required to charge-off your debts within 180 days of nonpayment. It’s an accounting practice that allows them to report the account as a loss, but that doesn’t mean their collection efforts will stop entirely.

Many creditors will turn your account over to an in-house or third party collection agency.  Most often, these collection agents will then attempt to collect the full debt, even if it is thousands of dollars. In the case of third-party debt collection agencies, you will have not only charge-offs, but separate collection accounts listed on your credit report.

These third party debt collectors buy your debts for much less than they are worth and are only seeking to make a profit. They won’t hesitate to trash your credit report with multiple charge-offs as they sell your debt from one company to the next. Because of this, it is possible to have multiple charge-offs and collections accounts listed on your credit report from a single debt. Tracking down who really owns the debt can prove difficult, if not impossible, as not all debt collection agencies keep accurate records.

Charge-offs Carry Huge Credit Penalties

Beyond the harassment and stress of dealing with debt collectors calling you at home and at work, charge-offs lead to big drops in your credit score – as much as 50 points to 100 points. This is particularly true if you’ve never had credit problems in the past.

Credit bureaus calculate your score by using patterns of behavior that include the number of times you’ve had negative information listed on your report, the kinds of negatives on your report, and how long ago a negative item was placed on your report.

That last is very important as it means that a recent charge-off is hurting your credit score much more than one from several years ago. And when it comes to charge-offs, even paying them doesn’t get rid of all the damage.

A charge-off that is listed as “paid” or “settled” still affects your credit scores negatively until it is removed from your credit report. The only time paying your charge-offs helps you is if you can negotiate with the creditor (in writing) to remove the charge-offs when the debts are paid, or to update the account to say ‘Paid As Agreed’ with no mention of the charge-off.

Paying Old Charge-offs Can Hurt You

It’s not uncommon to get a lot of collection activity around charge-offs that are many years old. This can happen for two reasons:

1. The debt is close to being “time-barred” (meaning the debt collectors won’t be able to sue you to collect anymore). Debt collectors use high-pressure tactics to try to get a payment or a promise to pay, which restarts the clock on how long they have to collect. If you fall for this trap, you may find yourself facing a judgment or lien.

1. The debt is close to the reporting limit (meaning that the charge-off won’t show up on your credit report anymore). Even if the charge-off is time-barred, if it’s on your credit report it is still a negative mark. You can’t get certain types of loans such as mortgages if you have charge-offs on your account. Debt collectors try very hard to collect on accounts that are about to fall off of your credit report, because they know that they will have zero leverage once the debt is past the time it can be reported.

In either of these cases, paying or making a promise to pay on the debt can put you in a dangerous financial situation. You open yourself up to lawsuits, and some unscrupulous creditors will try to list the account as being brand new if they can get even a token payment from you. This opens you up to not only legal issues, but additional drops in your credit as more recent negative information weighs your credit score down the most.

You may also find that debt collectors will try to collect on debts that aren’t even listed on your credit report! These debts may be 10 years old or more, and they are hoping that you will pay up without checking your credit reports first.

Again, paying anything on these types of charge-offs puts you at risk for being sued to collect. And if the charge-offs aren’t listed on your credit report, paying them will not help your credit scores to improve.

It IS Possible to Remove Charge-offs

Getting rid of charge-offs on your credit report may seem impossible but it isn’t. First, it’s important to recognize the fact that ANY error on your credit report can be removed. That means if third-party debt collectors have been sloppy with their paperwork and have filled your credit report with mistakes, you can get every single one removed.

This means any mistakes, including mistakes in the amount that you are supposed to owe, mistakes with your account itself, and even simple computer errors can all result in a removal if the company doesn’t have records to correct their data. For charge-offs that are several years old, your account may not even be in their system anymore.

The dispute process that you can use to remove charge-offs from your credit report requires that you know the law and your rights under the Fair Credit Reporting Act (FCRA) as well as how these laws protect you from errors on your report.

Additionally, you’ll need to be able to keep track of all correspondence between you, the creditors, and the credit bureaus. If you want to be sure that charge-offs are removed, you will also have to be certain that you frame your requests carefully. If the credit bureaus think your request is “frivolous” they will ignore it, even if you have a valid error to remove.

For many people, all of the work involved in getting charge-offs removed is just too much hassle to do alone. No one wants to have to speak to debt collectors on the phone, and no one wants to be in the position of having to keep track of multiple letters sent back and forth to creditors and credit bureaus.

Often, the best solution is to speak with a credit repair specialist that is familiar with the law. They will be able to explain to you how charge-offs can be removed from your account, step-by-step. They will also be able to help you manage the process to ensure that the credit bureaus and your creditors actually listen to you instead of blowing you of as one more uninformed consumer.

Even if you do decide to do it all on your own, take the time to speak with a professional and be sure that you have accurate information. The sooner you take care of the charge-offs on your credit report, the sooner you get to have financial freedom and peace of mind.

However, the process can seem overwhelming and confusing to an individual that has never had to deal with their credit directly. If you are wondering about free credit repair help, this post will give you the information you need to get started on the right track.

Free Credit Repair Help — The DIY Method

If you want to repair your credit on your own, you should understand that this can be a time-consuming process and that you will need to keep meticulous records. However, if you are comfortable with contacting the credit bureaus and your creditors directly, free credit repair help by doing it yourself is well within reach.

Get your free annual copy of your credit report, either online or by writing to each bureau. Under the law, you have the right to get your credit report for free each year — three, actually, one from each credit reporting agency.

Depending upon which state you live in, you may be entitled to a second free credit report, and if you’ve been recently denied credit or employment based on your credit files, you can get yet another free report.

Once you have a copy of the reports, it’s a matter of going through the dispute process to remove any inaccurate information.

Free Credit Repair Help — Consumer Agencies

One of the biggest obstacles when it comes to credit repair is misinformation. If you want to be sure you’re getting information that you can trust, you need to look to reputable sources. There are several agencies that provide information about free credit repair help and credit in general:

The FTC (Federal Trade Commission) — is in charge of protecting consumers’ rights. This government agency offers information on credit and credit repair, as well as tips for individuals who want to hire a credit repair specialist. Because the FTC investigates many thousands of fraud claims when it comes to credit repair, they take an extra-cautious stance when it comes to credit repair companies in general.

The BBB (Better Business Bureau) is another consumer advocacy organization, but it is not a federal agency. They do, however, collect information on a local and national level about all companies, including credit repair companies. They also have resource pages that cover various tactics to use to manage your credit and get yourself on track for free

Both of these agencies provide information on free credit repair but for actual free credit repair help — that is to say, advice — you will likely need to turn to additional sources.

Free Credit Repair Help — Free Consultations

Many credit repair agencies offer free credit repair help, at least in terms of initial information to get started. It’s common for these credit repair companies to offer free initial consultations, as well as websites full of free downloadable documents to help you on your path to increase your credit scores.

Lexington Law and the Credit Assistance Network, just to name two out of many companies, offer free consultation to get you started. Many of the legitimate credit repair businesses will give you a free consultation and advice as to how to proceed, and a real business trying to help you won’t ask you to sign anything until you’re ready.

The NFCC (National Foundation for Credit Counseling) offers free resources – calculators, budget worksheets, consumer tips and an online financial self-assessment tool. They offer free and low cost counseling to determine your needs and develop personalized plans.

With these three options for getting free credit repair help, there is no excuse not to take the plunge and start working on improving your own credit scores. The sooner you start, the sooner you will reap the benefits of good credit.

What it boils down to is a clear illustration of how important it is to make sure you’re not being lured into a scam when you are just trying to get your credit repaired.

According to the study, the average paid by individual consumers to (often unsuccessfully) repair their credit is around $816, and for debt settlement the cost goes up to $2,000. While you might feel more secure dealing with a company that offers a money-back guarantee, in practice you may end up disappointed.

A lot of the fraudulent companies claim that consumers will get a refund if they don’t get the progress they want- – and this study finds the average refund is only $67.

Signs of Bad Credit Repair and Debt Settlement Companies

Credit repair scams can occur in many forms. A common scam is the credit repair “clinic” that appeals to people with poor credit reports by promising to be able to remove any information, accurate or not. No credit repair company can remove legitimate, accurate items from your credit file. Any company that promises or implies that they can is a sure sign of a credit repair scam.

Debt settlement companies don’t fare any better. They typically want you to pay a monthly fee directly to them that is supposed to cover their cost as well as the cost of your debts after they’ve negotiated with your creditors to reduce the amount you owe.

They might tell you not to pay your creditors anymore, and send the payments to them. If the company is legitimate, then this can work, but at the cost of your good credit — every missed payment is another black mark on your credit report that lowers your scores.

However, most individuals don’t even get the minor benefits of debt consolidation because a shocking number of debt settlement companies don’t pay anything to the creditors at all. The money simply vanishes in this scam, with the consumer paying the price of both ruined credit and losing thousands to a scam artist.

The BBB wants several changes, and the report encourages federal and state agencies to get tougher and work harder to get the scam artists aggressively taken out before they damage more people’s credit and wallets.

It’s a sad fact that the debt settlement and credit repair industries are full of conmen, and that makes it difficult for people who are legitimate credit repair specialists to be taken seriously. Note: if you are considering credit repair, always choose a company that has a good reputation in the industry and that is backed by independent reviews.

The BBB also wants congress to amend the CROA to specifically rule out compulsory arbitration in lawsuits alleging violation of the act. Compulsory or mandatory arbitration can strip consumers of their right to go to court. This effectively means that if you get into a dispute with someone protected by compulsory arbitration, you could lose the right to sue.

Arbitration means that a neutral third party hears both sides and makes the decisions about the dispute. While arbitration can be much faster, averaging 8.6 months instead of up to 2 years for a court case, it is not necessarily good for the consumer. Not only is it not up to a court – the “neutral” person judging the case is probably going to be hired by the very people with whom you’re in conflict.

Always look at the contract or anything else before you sign away your rights. Make sure the FTC, and your State attorney general do not have negative reports about someone to whom you are about to give over your trust.

Finally, the BBB wants consumer oriented agencies to increase consumer education about credit repair and seeking help with debt. The Better Business Bureau wants consumers to make smart choices, not just about credit repair, but about their finances over all, and about how to choose companies who will help get bad credit back on track.

Sound impossible? It has already happened. 

A company called Accretive Health has started playing out this quite possibly illegal drama in hospitals across this country, including healthcare facilities in Minnesota, Michigan and Utah.

Debt collectors are being placed in emergency rooms, dressed as hospital employees. They reportedly demand outstanding bills be paid up before patients receive treatment. Hospitals floundering under a mountain of unpaid bills are taking things to the next level – hard core debt collections right inside the hospital itself.

If you have had a charge-off or other debt, these bogus health care workers reportedly try to discourage you from seeking emergency treatment at all. Accretive Health’s debt collectors have also been reported to use collection scripts usually only heard over the phone by hard nosed agents using harassment tactics to get peopleto pay.

And in spite of laws stating otherwise, they don’t always identify themselves as debt collectors — reportedly, part of their plan is to make you think they’re hospital staff, not back office personnel. These debt collectors are not supposed to be part of the admissions process, legally or morally. It breaks all trust with the hospital to have the credit department harassing patients while they are sick, vulnerable and helpless.

Charge-offs, Medical Bills and Missed Treatments

According to an online report by the New York Times, collection employees were told to stall patients coming into the emergency room and make them enter into a payment agreement for a previous balance.

The agents were told to ask for a credit card payment before getting treatment – or to tell patients to go and get their checkbook. These bill collectors required point of service payments before they let patients receive treatment, and were described as ‘really aggressive’ by one victim. The actual hospital workers complained that patient care suffers while collections improve – the report says that medical staff complained that patients were harassed mercilessly.

In fact, doctors at the affected hospitals are complaining about strong arm tactics actually discouraging patients from seeking life-saving treatment, but their complaints were trivialized by the debt collection company, who were reported as saying that the doctors’ concerns are just ‘country club talk’. Additionally, some even some debt collection staff members thought the situation went too far. They reported that they are being threatened with termination if collection quotas aren’t met.

How did the collection agencies get so much power to hold your medical treatment hostage against charge-offs? The hospitals were promised savings and increased collections if they turned over some of their administrative functions. And suddenly, collection agents were dressing as hospital staff and trying to strong arm patients into coughing up cash before being allowed access to health care. And collections are, indeed up – but at what cost?

Your Medical Privacy Compromised by Charge-offs and Other Debts

According to reports, the debt collection workers have direct access to health information while chasing down patients about their charge-offs and past due bills. This is being investigated as it could violate a long list of federal privacy laws. Perhaps this access is for investigating the debt, but HIPAA affords patients equal rights, whether or not they are able to pay. It’s been reported that one patient’s cancer status was discussed between debt collection employees — a circumstance that is certainly none of their business or concern.

What can you do if you are confronted by a bill collector about a charge-off in a hospital?

Know your rights. If they don’t identify themselves as debt collectors, they have violated the law and you can report them to the FTC and your state attorney general. If you suspect you are dealing with a debt collector and not actual hospital staff, you may want to seek treatment elsewhere in order to preserve your medical privacy.

Accretive Health is already under investigation in Minnesota by Attorney General Lori Swanson for its very shady tactics. Fairview Health Services, a Minnesota hospital group, has fired them, but Accretive Health recently announced its been picked up by a major health care group that serves 11 states. So be aware that the situation is spreading. If you have charge-offs or other medical debts that you need to dispute, do so now. Otherwise, you may find yourself being given the runaround at the ER over demands to pay.

Repairing Bad Credit: First Steps

If you have the financial means, repairing bad credit can start by re-evaluating your spending habits and allocating additional funds to pay off your debts. However, that may not always be the best solution. In some instances, such as the case of time-barred debt, you’ll need to make some strategic choices in repairing your credit.

The first step is always to take a look at your credit report. When repairing bad credit, you need to see what you’re up against and knowing what’s listed on your report will help you to make the best decisions possible when dealing with your creditors.

Repairing Bad Credit: Negotiate and Pay

Negotiating should only be done when you are repairing bad credit for accurately reported debts you actually owe and have the means to repay. If you do not, then negotiating can actually make a bad situation worse, as your creditors will be less likely to offer any leeway in the way they report your debts. Your best option is to be realistic, always, about your ability to pay.

Furthermore, it can be intimidating to negotiate over the phone. Repairing bad credit through the mail may be a better bet unless you are used to doing phone negotiations. You’ll have time to gather your thoughts and won’t be confronted by an aggressive collection agent. Written correspondence also offers you a chance to get their responses in writing – a very important legal consideration. You want to get everything you can in writing in case you need to dispute the listing. Use certified mail with return receipts so you have a record of attempting to negotiate, as well.

If you do try to negotiate over the phone, always request everything in writing before moving forward. Always pay off your original debtor if you can, because it just looks better on the credit report, especially as the original creditor can remove the report entirely most of the time.

Collection agencies, however, are second party collections and paid to get your debt, pennies on the dollar. Negotiation time. Do not pay them the full amount if you don’t have to, and it is worth adding that it is illegal to charge you a collection fee on top of your original debt so don’t be fooled by their agents’ claims otherwise. You can go as low as thirty cents on the dollar, and be willing to let them talk you up to 50 cents on the dollar.

After you have started negotiations, monitor your credit so you can make sure they did what they said they would do and remove the bad record of your debt. Once you have made payment arrangements, they must fulfill their agreement to report a change in your status with them or if applicable, remove the negative item entirely.

Repairing Bad Credit: Filing Disputes

Sometimes when you are repairing bad credit, you will find items on your credit report that you do not owe, or that are incorrectly listed. Get rid of these items by filing disputes and following up with concrete evidence that the debt is reported inaccurately.

In terms of updating listings, 30 and 60 day past due listings are easiest to prove with your current creditors. They want to get paid – you want good credit. if you have paid on time and have a receipt, it should just be a matter of providing the confirmation number in order to get the problem fixed. Remember — if you use the phone to speak with creditors, try to get them to give confirmation in writing or ask for a phone ticket number to confirm your conversation later. If they aren’t willing to do so, it may be a sign that you need to follow up with the credit bureaus to be sure that your file has been updated.

Repairing Bad Credit When You Have Charge-offs, Liens, and/or Judgments

All of these are going to seriously impact your credit score. Charge-offs are often handled in house by your original creditor, so if you still have an open account with them, negotiate, negotiate, negotiate! Their desire to keep you as a customer (if you’ve previously paid on time) can help make the charge-off it disappear.

However, you will have to pay it off if it is an accurate debt. A charge-off does not mean that you no longer owe the debt — just that the company thinks you won’t pay it off, ever. That’s why a string of charge-offs is essentially poison to your credit score. Repairing bad credit means paying your debts that are valid and timely. If the debt is accurate, you are not going to have a good chance of getting it removed, so negotiations are the only real option.

Liens and Judgments are the ones you absolutely cannot just negotiate away entirely. They have to be paid off before you can get them removed. This does not mean you cannot negotiate with the holder of the lien or the person who has the judgment against you, but very definitely get your paperwork in order before tackling it. You need to back up everything and keep documents, and know when you have it paid off so you can get it removed from your credit record and restore your credit to its potential glory.

This is where the problem typically comes in when you have a charge off, because it may be some time before collection attempts on the account begin again. When they do, it is also very likely that it will be a third-party collection agency that attempts to collect on the debt. Knowing when to pay a charge-off and when you should not pay a charge-off is important not only for your finances, but for keeping your credit score as high as possible.

When You Should Pay a Charge-Off

The Charge-off is Recent

If the charge-off is very new, you are likely to see a big dip in your credit scores – and the higher your score, the bigger the dip. While a charge-off may take 20 or 30 points from someone with a low score, for someone who has a higher credit score, a charge-off can cause the score to drop 100 points! This can mean the difference between qualifying with excellent rates and not qualifying at all for some types of loans, so if possible, make arrangements to pay the charge-off on the condition that it is removed from your credit file entirely. This is typically easier when the charge-off is new and you are dealing with the creditor’s in-house collection team.

You Have to Pay the Charge-off to Qualify for a Home Loan

It is fairly common practice in the mortgage industry to require that all outstanding debt be cleared before a loan can be approved. This includes late payments, judgments, liens and charge-off accounts as well. If the charge-off is very old, you may be able to negotiate a partial payment to get the debt settled, but always verify with the lender if a partial payment is enough to satisfy their lending requirements.

Pay the Charge-off if the Creditor Will Delete/Re-age It

Some creditors will delete a charge-off from your credit file if you make the payment in full. However, not all creditors will do this, and some will claim that it isn’t possible, though this is not the case. You may have more luck asking them to “re-age” the account, however. In this instance, it would reset the timer on the payments and essentially your pay-off would look like you settled the debt in a timely fashion.

As you can see, there are several scenarios where paying a charge-off is the best option, and they all hinge on the assumption that the charge-off is actually yours and you have verified the amount of the charge-off is correct. If you have not verified that the debt is actually yours and that the payment amount listed on the charge-off is accurate, you may be better off seeking professional assistance from a credit repair specialist before you commit to making a payment.

When You Should NOT Pay a Charge-off

There are also several instances when paying a charge-off is a bad idea. While the following is not an exhaustive list, if any of these scenarios apply to you, you should consider the avenues available to you to repair your credit before you pay a charge-off.

Your Charge-off Account is Listed for Multiple Companies

It is all too-common in the third-party collections business that debts are sold and re-sold with very little (if any) documentation. If you see the same charge-off account listed several times with several different collection agencies, it is worth it to have each agency verify the debt before proceeding further. Confirming who actually owns the debt will ensure that you don’t pay an unscrupulous debt collector who will take the money even if they no longer own the debt.

You Aren’t Sure You Owe the Amount Listed on the Charge-Off

Sometimes debt collectors try to tack on bogus fees and interest. Unless the agreement you signed with the original creditor stipulates that third-party collection agencies can add their own fees and interest, debt collection agencies cannot add their own fees. It is also possible that you paid off the debt, but due to an error in the system, your account was flagged as a charge-off. If you have any proof that the debt was paid,  you absolutely should not pay a charge-off.

However, even if you don’t have proof, having the debt verified may still work in your favor. A professional credit repair specialist will be able to advise you on the best course of action if you aren’t sure how to proceed.

The Charge-off is Past the Statute of Limitations

This last scenario will vary from state to state, as collection laws are different. However, if the charge-off is past the statute of limitations, you have a built-in defense against having a judgment brought against you fro non-payment. The catch is, you must go to court and defend yourself against any lawsuit brought by the collection agency.

Most collection agencies don’t bother filing a lawsuit if your debt is past the statute of limitations, so some people choose not to pay and instead let the charge-off drop from their credit file after the federal reporting period expires. This doesn’t help your credit scores in the short term, but it can save your finances if you are trying to pay down debts on currently open accounts.

Regardless of whether or not you choose to pay your charge-off, having the advice and experience of a trained credit repair specialist can help you to come to the right conclusion for your particular situation.

While it is illegal to be sent to prison for judgments on your credit report, the states have their own laws regarding the legality of arresting debtors and debt collection agencies have been quick to pounce on these loopholes in recent years. People living in Arkansas, Arizona, Illinois, Indiana, Minnesota, Oklahoma, Tennessee, and Washington state are all at risk of arrest for non-payment of judgments or failure to appear in court, and other states may support the practice as well. Because there are no official statistics being kept, debt collectors are taking advantage of the system as much as possible.

Judgments on Your Credit Report? Why You Might Be at Risk

Typically, if you have judgments on your credit report and you reside in one of these eight states, several things can happen:

• The creditor can hire a lawyer to file for an arrest warrant if you don’t show up for your court date after being sued over debt.
• The creditor can hire a lawyer to file for an arrest warrant if you fail to pay after the judgment is placed on your credit report.
• You can be held in jail until you pay a fine and submit full financial documentation to allow creditors to seize your assets and/or garnish your wages.

Not all creditors will go the arrest warrant route, but the problem has become so prevalent that the Illinois Attorney General is seeking to push state-court judges to put a stop to arrest warrant requests by lawyers representing debt collection companies. According to the Wall Street Journal (emphasis ours):

“[C]ourt filings in nine counties across the U.S. showed that judges signed off on more than 5,000 such warrants since the start of 2010.”

Protect Yourself from Judgments on Your Credit Report

Consumers may feel trapped by a Catch-22: they don’t want to appear in court to face the possibility of jail-time for not being able to pay their debts, and so they don’t show up for their court date. In so doing, they end up facing arrest and jail time for failing to appear. The only real way to protect yourself if you have judgments on your credit report is to be proactive.

This is especially true if the judgments are based on inaccurate or incomplete information – as debt collection companies often don’t have all the necessary information about a debt, and these filings are used as leverage to make people pay, regardless of whether or not the debt is actually owed.

With debt collection companies being fined for millions of dollars for FDCPA violations, it is inconceivable to think that every judgment they seek is accurate. If you are being sued for a debt you don’t owe, fight back!

Even if the judgments are already on your credit report, if they are inaccurate, you can file a dispute and have them removed. What you should not do is ignore the problem in the hopes that it will go away. If you are too overwhelmed to deal with the issue yourself, hire an attorney that specializes in consumer law or turn to an advocacy group. Always show up for any court dates, even if the debt is time-barred: if you aren’t present, the courts will side with the debt collector and you could be on the hook for money that you don’t owe, as well as face possible arrest.

There is no reason why any consumer should be arrested and forced to spend time in jail with criminals over a past due debt, but the facts are that it’s happening more and more in this country. Take the time to educate yourself about the laws in your state, and if you have judgments on your credit report, get the help you need to resolve the issue before it can escalate into arrest and time spent in jail.

In many cases of delinquent taxes, the IRS can seize bank accounts or garnish wages to recover the money owed, which can make it difficult or impossible to keep up with other financial obligations. The IRS can also put a Federal Tax Lien on your property, which can be just as damaging to your credit scores, if not more so. Once the lien is filed, it shows up on your credit report and in many cases you will not be able to get any new loans, credit cards, or even sign a new lease until the lien is satisfied.

Any new property that you obtain after the lien is placed will also be subject to the lien, and in some instances the government may move to seize your property to recover the money you owe. Even if the IRS does not seize your property, if you don’t pay it can take up to 10 years for the lien to be released. It’s also important to note that for unpaid liens, the IRS may reinstate the lien indefinitely by refilling after each 10-year period if they choose to do so.

Owing taxes to the IRS isn’t something you should ignore. While you can improve credit scores that are lowered by missed payments on bills such as credit cards if you catch up on the payments and reestablish a history of paying on time, the lien notation on your credit report will always reflect the total amount you originally owed, regardless of how much you’ve paid on the balance. You can request an updated balance from the IRS at any time, but creditors will not see your most recent balance when they pull your credit file. It will be your responsibility to obtain documentation that shows how much you’ve paid off.

The best way to minimize the damage of a tax lien is to avoid it altogether. However, if the damage has already been done, you may still be able to have the lien removed under certain circumstances. There are some instances where the IRS will determine that withdrawing the lien is in their best interests – usually when doing so will allow you to pay the debt faster. However, you must be proactive because the longer you wait the more difficult it becomes to have a lien removed.

So what can you do if you owe more taxes than you can afford to pay, or have tax debt from past years? Your first option is to contact the IRS directly. In many instances, they can work out a payment plan for you that will let you avoid the lien and the hit to your credit report. Make sure you can afford the payment plan – missing payments could cause the IRS to file a lien in order to claim the balance due. Another option is to speak with a licensed tax professional – they may be able to give you some advice on appealing or negotiating the debt, or arranging a settlement. Always check the credentials of any tax or legal professional before you commit to taking their advice. When it comes to your taxes, paying on time is the only sure means to be certain your credit scores remain in good standing.

Debt Collectors are NOT Credit Repair Experts (But You Can Be)

Debt collection agencies are finding out the hard way that informed consumers can mean huge losses on their end. Take the debt collection agency National Recoveries Inc. Just last month they were forced to reimburse $175,000 in debts they had collected, due to their own faulty collection policies. They were also fined an additional $16,000 for the debt collection violation itself.

These types of fines generally do not occur unless informed consumers are making complaints. And people who are working through the credit repair process are the most informed about their state’s laws pertaining to debt collection.

While $175,000 may not seem like much, National Recoveries Inc. isn’t the only debt collection agency to be in the hot seat this year – Asset Acceptance recently agreed to pay $2.5 million dollars in fines for deceptive debt collection practices. According to USA Today, the FTC claims that not only did Asset Acceptance try to collect debts that were past the statute of limitations, but they also tried to collect on debts that weren’t even owed!

This is why the credit repair process will always be so crucial. Without these checks and balances, debt collection companies would be free to use whatever underhanded tactics they could think of in order to get people to pay up – whether the person in question actually owes the debt or not.

If there are negative items on your credit report, you owe it to yourself to at least be informed of your rights and ways that you can repair your credit. It’s the only way to be sure that you aren’t being scammed by an opportunistic collection agency.

Credit Repair Fixes More than Your Credit

There are so many day-to-day necessities that are affected by credit, that it just doesn’t make sense to ignore the problem. While some people may be wary of credit repair companies in general, the best ones can help you not only repair your credit, but keep it that way in the future. For example, some credit repair companies:

• Keep track of any new negative items on your report. This lets you go to your creditors early to address the issue and nip any potential problems in the bud. With active accounts affecting your credit scores much more than very old debts, this can be an essential service.

• Provide specific information about state laws as well as federal laws. National Recoveries Inc. had to reimburse people for violating Minnesota’s state law, not federal law. Your state may provide even more protections than you realize (or may make you more vulnerable) and you need to know these facts before you try to negotiate with creditors.

• Can alert you to new open accounts and lines of credit. In this age of identity theft, you may need credit repair because your financial identity has been compromised. Knowing when new lines of credit are opened in your name helps you to stop further damage before it occurs.

Credit repair affects every aspect of your life, from how much you pay for insurance, to whether or not you can qualify for a better job. And with debt collection agencies working so hard to collect on purchased debt by any means necessary, professional credit repair may be the only way to stay ahead of their underhanded tactics.

Take the time now to look at your credit report and see for yourself if you need credit repair. Just because a debt collector sends you a notice in the mail or calls you on the phone, it doesn’t automatically mean that you owe that debt. Collection agencies make mistakes all the time – sometimes on purpose – and credit repair is your best defense against companies who are out for all they can get at your expense.