Bad credit repair strategy doesn’t make sense all the time. Take a guy named Eli Rodriquez, for instance. He thought he did "right" when he paid off old collection accounts. But then, his credit scores dropped 90 points. What happened to Eli seems common and costly. Before you pay off a debt collector, you might consider a little due diligence first.
Eli paid off old collections, watched in horror as his scores dropped & then contacted me for help…and an explanation. At that point, I told Eli he cleared his conscience by paying off debts he said were his from many years ago. How many years, you ask? I asked Eli the same question. He claimed he could prove the bills were from 10 years back…at least 10 years he swore.
Certainly, I hear about people all the time whose situation compares to Eli’s. They pay off a collection…or 2…maybe 3 or more. They believe they’re doing what’s right. In one sense, they are doing what’s right. They’re paying off legitimate bad debt. Unfortunately, they’re paying a debt collector, not the original creditor. Further, people pay debt collectors what the debt collector demands. There’s no verification and validation of the debt. It’s as if I (a debt collector) show up at your front door, demanding your money. Without questioning why I’m asking you for money or demanding I prove you owe money or that I have legal cause to collect or even that the amount I’m demanding is correct, you hand me your money. You wouldn’t hand me your money like that, would you?
No, of course you wouldn’t hand me your money without due diligence. Of course, the debt collector wooed Eli, telling him his credit would "sparkle." Suddenly, the debt collector told Eli, his credit scores would jump and he no longer would be rejected on any credit app. At the time, this sounded good to Eli and his wife. However, that was a bunch of hot air, not founded on Fair Credit Reporting Act.
Therefore, payments on past due charge-offs or collections demands strategy:
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Do you need to settle? That is, is a creditor suing you?
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Do you need to settle to have your mortgage app considered?
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Is your conscience bothering you?
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Avoid allowing any potential creditor to pull your credit. Don’t surrender any leverage you might have to
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Is the account in question yours?
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Is the account reported 100% accurately with each bureau?
Should you choose to negotiate, you might insist the debt owner puts the terms in writing and is signed by an authorized agent for the debt owner.
In credit repair, doing what you think is RIGHT usually is WRONG. For instance,
1.Settling accounts for less than you owe will hurt your credit scores.
2.Arranging a payment plan or even inquiring about an old debt can restart the statute of limitations [on collecting] in some states, allowing creditors to sue you.
3.Simply contacting a creditor about a past-due account can revive its interest in trying to collect, leading to harassment and hardball tactics.
4.Nasty collection agencies might promise to delete or give you a good credit rating in exchange for your money — then not follow through or make matters worse by making the debt seem more recent than it is.
5.By law, creditors whom you pay off are obligated to report accurately.
Therefore, paying off an old debt only to have the creditor report the account as "settled" (which is 100% accurate but grossly unfair) on your credit reports tends to be worse for your credit scores than just leaving the account open and unpaid. Ask me to explain this phenomenon if you’re interested. Eli learned a difficult lesson about paying off old debt: don’t just pay off BAD debt without negotiating first.
Bad credit repair, regardless of how illogical it sounds, requires solid strategy and understanding of your rights. Don’t fall for the hype on the Internet deleting all your bad credit with a magic letter or ebook or credit disrepair company. Yes, you do have choices….and you can grab the keys to your new home.
