How to Deal with Debt Collectors

Dealing with collection agencies can be an unpleasant experience with annoying tactics at best — and predatory, or even illegal, at worst.

The FTC enforces the Fair Debt Collection Practices Act (FDCPA), which makes it illegal for debt collectors to use abusive, unfair, or deceptive practices when they collect debts.

The most important thing for you is to know what debt collectors (and attorneys) cannot do:

  • Contact other people such as your neighbors, relatives, or employers about the debt except to get your address and phone number.
  • Contact you before 8:00 A.M. or after 9:00 P.M.
  • Contact you at work if you tell the collector your employer does not allow this.
  • Contact you directly if you have an attorney.
  • Continue to try to collect the debt if you dispute the debt in writing.
  • Lie to you about the debt or threaten or harass you.

If debt collectors are calling you, consider talking to them at least once, even if you don’t think you owe the debt or can’t repay it immediately. This will help you gather information about the debt and confirm whether it’s really yours.  

If you do talk to them, be sure they can provide  “validation information” as follows:

  • How much money you owe
  • How to get the name of the original creditor
  • How old is the debt and when was the last payment made in the account. It may be past the statute of limitations to be sued on this debt.

If a  debt collector is hounding you, seeking payment on a consumer debt you owe – whatever the situation is, we can help. 

THD Credit can help settle debt and stop all the harassing phone calls. Just call us at 800-822-7120 today.

-Erik Kaplan

Comparing Debt Consolidation vs. Debt Settlement

Debt consolidation and debt settlement are both options for resolving debt.  However, each method has a different strategy and timeline before you are free of debt. They each can affect your credit score differently.

 Debt Consolidation

Debt consolidation is a debt management strategy in which you combine multiple debts into a single payment, with a lower interest rate.  You can use a balance-transfer credit card, debt consolidation loan, home-equity loan or 401(k) loan. 

Why You Might Choose It:  

  • To get a lower interest rate than you’re currently paying, which saves you money and can help you pay off your debt sooner.
  • To reduce the number of creditors you owe and therefore the number of payments you’re juggling. 
  • Debt consolidation loans may allow you to use assets like your home or car as collateral.

What You Need To Know:

  • Debt consolidation can lead to a small dip in your credit score typically by a few points when a lender performs a hard inquiry on your credit. 
  • You’ll have a longer period of time before you’re debt free.

Debt Settlement

Debt settlement is the process of negotiating with creditors (usually credit card issuers) to reduce the amount you owe in exchange for a one-time lump sum payment to settle the account.

Why You Might Choose It: 

  • Your income is stable enough that you can continue to pay your mortgage or rent and other essential bills in addition to the payments required under a debt settlement.
  • To avoid court-mandated controls of bankruptcy while still lowering the amount of debt you have to pay.
  • Creditors know you can always file for bankruptcy, which could eliminate their ability to collect anything from you which is why they might be willing to accept less.

What You Need To Know:

  • Typically, only unsecured debts can be settled. Unsecured debts include medical bills and credit card debt; but not public student loans, or secured debt (i.e. auto loans or mortgages). 
  • The process of debt settlement requires you to stop making payments on the accounts you want to settle which can damage your credit score.  Typically from 75 – 100 points.
  • Debt settlement will be on your credit report for seven years and can impact your ability to get a loan and the interest rate you pay, if you are approved.

Tackling debt can be an important financial and personal goal. If you have any questions about either of these debt relief methods call me at (800) 822-7120.  I can help!

-Erik Kaplan

Tax Liens and Civil Judgments: What is changing and how it affects your credit report.

On July 1, 2017, the three national credit bureaus are going to stop collecting and reporting substantial amounts of civil judgment and tax lien information.  

In fact, the credit reporting agencies will remove this data from reports if the information does not provide complete details on consumers i.e. person’s name, address, Social Security number, or date of birth.

What are tax liens and civil judgments? 

Tax liens are levied against properties when the owner is delinquent on payment of taxes. Civil judgments are ordered by courts in legal disputes, typically involving monetary damages – debts owed by the losing party. Tax liens and civil judgments negatively impacts your credit scores and remain on credit files for extended periods.

How this change will affect you?

A study by credit scoring developer VantageScore Solutions which was created by the three credit bureaus, estimated that 8 percent of consumers would see an average score increase of 10 points on its most widely used scoring model if all civil judgments and tax liens were removed from credit reports. While 8% and 10 points may sound small, in the mortgage business they equate to significant numbers for applicants.

When this information appears on credit reports, it can affect your ability to obtain credit, loans or receiving consideration for employment. This change is a step in the right direction of minimizing the impact of non-loan related items on your credit score.

THD Credit can help!

If you have tax liens or civil judgments appearing on your credit report, give me a call or email me.  We can check out your options for getting them removed sooner.

-Erik Kaplan

Coming Soon!

What happens AFTER you file for bankruptcy?

Keeping track of your credit is a crucial step in rebuilding your credit profile, especially after a bankruptcy.  Let’s take a closer look at what happens, after the dust has settled.

Q:  What happens AFTER you file for bankruptcy?

THD Expert:  When you file for bankruptcy, the law says that you must list all of your debts, even if you plan on continuing to pay them. You pick and chose what debts you want to continue paying- such as the house if you want to live there or your car if you need it to get to work.  But you don’t pick and chose what debts are covered.  When a creditor is notified about your bankruptcy, they then report to the credit bureaus that a particular loan was “included in bankruptcy.” At that point, creditors stop reporting the payments you continue to make, such as for a mortgage or car payment. This explains why payments don’t show up on credit reports.

Q:  So why is the information on your credit report wrong?

THD Expert:  If the credit bureaus worked for you and me, rather than the creditors, it would probably look more like this: The credit bureaus would report your house payments as long as you are current, but they come off if you get behind. Unfortunately, we don’t make up the rules. 

Q:  How can you make credit bureaus report your payments?

THD Expert:  Start off by requesting a payment history from your lenders (such as the mortgage company or car finance company), and use it to dispute the incorrect entries. Lenders are required by law to give you a payment history once per year if you request it.  Next, take this payment history and use it to dispute the missing payments on the loan with each of the 3 credit reporting agencies (Equifax, Experian  and TransUnion).

Unfortunately, you may have to do this every year as the lender may not start reporting your payments even after you have successfully disputed it.

Now that you know why payments are not showing up after filing for bankruptcy and what you can do about, you can take steps to fix it. 

If you’re need help, or have additional questions give me a call or email me today.

Erik Kaplan
CEO, THD Credit Consulting
erik@thdcreditconsulting.com
Phone: (800) 822-7120

Do you have questions you would like to submit to the THD Credit Experts?  Email your question to: asktheexpert@thdcreditconsulting.com

Coming Soon!

A Residential Mortgage Credit Report vs. a Consumer Credit Report.

When it comes to your credit, applying for a home loan is different than applying for just about any other type of consumer loan.   

Since a mortgage loan is for a substantially larger amount and for a longer time frame there is more risk for the lender.  Therefore, to qualify for a mortgage more information is required in the underwriting process than for a credit card or auto loan.

For example, when applying for a credit card or auto loan, your lender will most likely request a copy of your credit report from one of the nation’s three credit reporting agencies, and either approve or decline your loan request.  

When you apply for a mortgage loan, it is a whole different ball game.   

What is a Residential Mortgage Credit Report?

Also referred to as a RMCR and tri-merge, this report is a composite of merged information from the three major reporting agencies – Experian, Equifax and TransUnion.  It basically puts a ton of information in an easy to read format for a lender.  All scores in one place, all negative accounts in another, all positive accounts in yet another, etc.

Can pulling a RMCR lower your credit score?

 Since this type of report is a hard pull, you may see a small dip in your credit score.  

If you are contemplating buying a home the first step is to figure out where you are at RIGHT NOW!

Here are a few things you need to do:

  • Get a copy of your credit report and make yourself comfortable with the information on your reports.
  • Check for errors that could be dragging your score down. 
  • Do NOT make any major changes, like closing an account. It could send your score down.   

If you need help improving your credit in order to buy a home, give me a call or email me today.  I help clients with this type of repair work everyday, and know how to make good things happen!

-Erik Kaplan

Coming Soon!