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Article Directory :: Finance & Investment Articles
Many people believe some individuals get bad credit by having multiple accounts and making multiple mistakes. However this is incorrect you can have one account, use it irresponsibly and this one debt can turn into multiple negative items on your credit report and tank your FICO score.
Typically a charge off will happen on your credit card. The credit card company will charge off your account after 6 months of no payments. They place the negative mark on your credit report and then they can claim your debt as a tax deduction.
Your account will then be transferred or sold to a collection agency and you will be contacted. This collection agency is legally able to charge you a fee for their collection attempts and create an additional bad credit mark on your report. If this collection agency is unable to get payment from you they will then sell your account to another collection agency.
The number of times your account gets sold is directly related to how large the debt is. Naturally larger debts will be sold to more collection agencies. Each one of these collection agencies is able to negatively report your account to the major credit bureaus.
What Should I Do?
The first step you should take is to find out who has legal rights to your account. This is most often the collection agency that is currently contacting you about the debt. You need to request debt validation from this collection agency.
This is going to require this debt collector to provide legal documentation that they own your debt and can therefore collect payment for it. It is estimated that over 30% of debt validation requests are not met and the debt collectors either do not legally own the account or have very poor clerical procedures and are unable to provide the evidence of ownership.
In either case if your account is not validated then you don't have to pay the debt and it is an easy process to get the item off your credit reports. If the debt is validated then you should negotiate payment in exchange for the debt collector to stop reporting your information to the major credit bureaus. This will enable you to remove the negative information after you make your settlement payment.
This Bad Debt Will Stay On Your Credit For Longer Than 7 Years
Collection agencies have long been avoiding federal regulation and are often paying FTC fines for not complying. One of the most common infringements are reporting your debt for longer than 7 years. Federal law says that the maximum amount of time a debt can remain on your credit report is for 7 years.
It is rumored that debt collectors will see your account as brand-new when they purchase it and illegally report the information to the credit bureaus from the purchase date. For example let us say they purchase your debt account after it was already 2 years old by law there is only an additional 5 years that this item could be reported on your credit.
The collection agency however will see the account as having 7 years from the date they purchased it and try to report your bad debt for 9 years instead of the federally mandated 7 years. Unfortunately this manipulation occurs all the time and you are left paying the bill with higher interest rates and potential rejection for financing.
For a free credit consultation call 800.483.0256 or visit us for more about how to remove a charge off or for more about how to deal with debt collectors such as lvnv funding.
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