How trusting a friend can ruin your credit rating.
October 6, 2006 12:33 AM
Trusting a friend years ago lead to a serious ding on my credit. I thought the whole deal had been cleared up but no, it's still there and is making housing loans look mighty high. Is there any way I can clean this up?
Several years ago I moved across country, trading apartments with a friend on the other coast. I had a month left of my lease and let him stay at my old place and in return he gave me a pretty sweet apartment for dirt cheap. I also kept the phone on in my name with the agreement that he would pay the last month's bill. That way he would have a phone to use to look for a new apartment.
Well the friend kind of screwed me and never paid the last month's phone bill. Years later I got a letter from a collection agency that had tracked me down and wanted a couple of hundred dollars. I paid the bill immediatly, eventaually getting the money from my friend and figured the whole thing over.
Now years later I want to get a housing loan but that bad debt is really hurting my credit score, and it's going to make my loan about a percentage point higher. Which will make an already hard purchase out of reach. Am I screwed? Is there any way I can fix that credit ding? Do I have to wait another 4 years before it drops off my file?
Several years ago I moved across country, trading apartments with a friend on the other coast. I had a month left of my lease and let him stay at my old place and in return he gave me a pretty sweet apartment for dirt cheap. I also kept the phone on in my name with the agreement that he would pay the last month's bill. That way he would have a phone to use to look for a new apartment.
Well the friend kind of screwed me and never paid the last month's phone bill. Years later I got a letter from a collection agency that had tracked me down and wanted a couple of hundred dollars. I paid the bill immediatly, eventaually getting the money from my friend and figured the whole thing over.
Now years later I want to get a housing loan but that bad debt is really hurting my credit score, and it's going to make my loan about a percentage point higher. Which will make an already hard purchase out of reach. Am I screwed? Is there any way I can fix that credit ding? Do I have to wait another 4 years before it drops off my file?
Your first mistake was actually paying the collector right away. Most collection agencies will make a deal with you to remove derogatory stuff on your credit report if you make a condition of payment. But since you already paid, you now have no leverage. Still, you should try contacting the collection agency, and asking them to remove the info.
Another problem is that since you did pay, that made the derogatory information 'current'. I'm not quite sure how that works. this is a good book on how to fix credit. It's definitely worth $11.
posted by delmoi at 1:42 AM on October 6, 2006
Another problem is that since you did pay, that made the derogatory information 'current'. I'm not quite sure how that works. this is a good book on how to fix credit. It's definitely worth $11.
posted by delmoi at 1:42 AM on October 6, 2006
Sadly I paid the collections agency 3 years ago, as soon as they contacted me about the debt. (Well first I called them up to figure out what it was all about, but when it made sense I paid them off.)
So are you saying that by doing the right thing, paying my debt as soon as I knew about it, I screwed myself?
posted by aspo at 1:44 AM on October 6, 2006
So are you saying that by doing the right thing, paying my debt as soon as I knew about it, I screwed myself?
posted by aspo at 1:44 AM on October 6, 2006
Does the "pay for deletion" also work on small claims judgements? (sorry to piggyback question) I have one from when I went to tech school several years ago, I owe them $1000, they did a discovery of assets and pretty much discovered that I have none.
Since I've ignored the stuff for a long time, and I'm now getting to a situation where I'd be able to pay and I'd like to repair my credit from when I was stupid and 19. I already found a pretty good form letter template for the pay for deletion, which I'll probably run past "my lawyer uncle" to take a look at and have him tell me what he thinks before I send it out.
posted by gregschoen at 1:51 AM on October 6, 2006
Since I've ignored the stuff for a long time, and I'm now getting to a situation where I'd be able to pay and I'd like to repair my credit from when I was stupid and 19. I already found a pretty good form letter template for the pay for deletion, which I'll probably run past "my lawyer uncle" to take a look at and have him tell me what he thinks before I send it out.
posted by gregschoen at 1:51 AM on October 6, 2006
No, you screwed yourself by not checking that your debt was paid in the first place. That would have been the right thing. You then failed to mitigate as well as you could have. You have my utmost sympathy for this situation, but unfortunately you had screwed up long before you paid the agency.
posted by grouse at 1:54 AM on October 6, 2006
posted by grouse at 1:54 AM on October 6, 2006
aspo, oops. I missed the part about you already paying it. Yes, by paying without negotiating a deletion, you've screwed yourself... it won't correct for 4 more years, the same as if you'd never paid at all (well, it reset when you paid it, so you're slightly worse off that way as well).
I hope you at least negotiated it down from the original debt before paying it.
posted by empyrean at 2:03 AM on October 6, 2006
I hope you at least negotiated it down from the original debt before paying it.
posted by empyrean at 2:03 AM on October 6, 2006
aspo, oops. I missed the part about you already paying it.
Oh, good call, I missed that too. Maybe you can call the people that you paid and see if you can't twist their arm into submitting the deletion form. (see: maildrop)
Perhaps if you did negotiate down the original debt, offer to pay the difference of the full amount to clear it off your report. (see: payola)
Maybe you might want to contact an attorney and see if you have any recourse to get it cleared up. (see: lawyering up)
Disclaimer: Definitions may not be, and are probably not entirely correct
posted by gregschoen at 2:23 AM on October 6, 2006
Oh, good call, I missed that too. Maybe you can call the people that you paid and see if you can't twist their arm into submitting the deletion form. (see: maildrop)
Perhaps if you did negotiate down the original debt, offer to pay the difference of the full amount to clear it off your report. (see: payola)
Maybe you might want to contact an attorney and see if you have any recourse to get it cleared up. (see: lawyering up)
Disclaimer: Definitions may not be, and are probably not entirely correct
posted by gregschoen at 2:23 AM on October 6, 2006
No I didn't negotiate it down, it was a few hundred dollars and it was a fair debt. (Well about 2/3rds of it was late fees, but I accept that.) Unlike grouse I just don't feel that some minor screw up (around 60 dollars people!) made 8 years ago should still be affecting my life for a total of 12 years. Oh and grouse, fuck your sanctimonious bullshit. I wasn't asking for people to tell me I was stupid 8 years ago, I already know that.
posted by aspo at 2:35 AM on October 6, 2006
posted by aspo at 2:35 AM on October 6, 2006
I had a utility bill that had been in collection for years until I paid it in the run-up to buying a house two years ago. Though it might have lowered my FICO score a point or two, it had no effect whatsoever on my mortgage loan. Are you absolutely sure this is what's affecting your credit?
If you have not other credit experience to demonstrate your creditworthiness, that could have something to do with it, too. For instance, have you ever had a car loan, or credit cards? If not, your entire credit picture may just not be varied enough to make a little unpaid phone bill fade into the background.
As others have said, shop around for a mortgage, and maybe have a banker, such as someone from a credit union, go over your credit report with you. Perhaps instead of waiting four years for it to drop off your record, all you'll need to do is get a credit card or two, use 'em for, say, one or two years, and then you'll be all set.
posted by M.C. Lo-Carb! at 6:33 AM on October 6, 2006
If you have not other credit experience to demonstrate your creditworthiness, that could have something to do with it, too. For instance, have you ever had a car loan, or credit cards? If not, your entire credit picture may just not be varied enough to make a little unpaid phone bill fade into the background.
As others have said, shop around for a mortgage, and maybe have a banker, such as someone from a credit union, go over your credit report with you. Perhaps instead of waiting four years for it to drop off your record, all you'll need to do is get a credit card or two, use 'em for, say, one or two years, and then you'll be all set.
posted by M.C. Lo-Carb! at 6:33 AM on October 6, 2006
Checkout this FTC opinion on when a delinquency falls off your credit record. Generally, it's 7.5 years from the date of the missed payment (not the date you actually paid the bill collector, as other posters have stated). But it never falls off if you're applying for large amounts of credit (over 150k). I'm not sure if this applies to mortgages or not.
posted by footnote at 7:48 AM on October 6, 2006
posted by footnote at 7:48 AM on October 6, 2006
Yeah, in the case of something that's already been paid your options are few, but they do exist.
What you need to do at this point is pay for a credit report (see the above linked thread for my comments about pay v. free) and find a basis to challenge the tradeline. It's not as hard as you'd think, do some googling around. There's a number of things that can be wrong on an entry.
A person who has written a lot about agressive credit repair goes by the handle flyingifr, plug that into google along with the correct words and see what you turn up. It seems he runs DebtorBoards.com now (Art of Credit continues to be dead, sadly) so that's probably a good place to go look for assistance.
You're going to catch shit, I suspect, from people who think it's wrong to game the credit reporting system to your advantage. I encourage you to ignore them. It's an unfair side effect of the FICO scoring system's attention to account activity age that a person who goes defunct on a loan and then pays it off 6y 11m later will suffer a worse credit ding than the person who never makes good.
Anyway, the overall thing you're going to want to do is challenge the line on some basis and when they simply approve it with no real scrutiny you'll have to challenge the validation method and demand an accounting thereof. You'll find discussion of it on debtorboards I'm almost certain.
The never-falls-off thing that footnote mentions is bandied around but appearances are that with the exception of bankruptcy that doesn't work out to be the case. The CRAs have to show you the information they have on you that might be disclosed to others so that you can verify the veracity. Since they do not show you any derogatory information older than 7 years that would indicate that they don't show it to anyone. Or so was the common belief over on AoC the last time I remember it discussed.
posted by phearlez at 11:06 AM on October 6, 2006
What you need to do at this point is pay for a credit report (see the above linked thread for my comments about pay v. free) and find a basis to challenge the tradeline. It's not as hard as you'd think, do some googling around. There's a number of things that can be wrong on an entry.
A person who has written a lot about agressive credit repair goes by the handle flyingifr, plug that into google along with the correct words and see what you turn up. It seems he runs DebtorBoards.com now (Art of Credit continues to be dead, sadly) so that's probably a good place to go look for assistance.
You're going to catch shit, I suspect, from people who think it's wrong to game the credit reporting system to your advantage. I encourage you to ignore them. It's an unfair side effect of the FICO scoring system's attention to account activity age that a person who goes defunct on a loan and then pays it off 6y 11m later will suffer a worse credit ding than the person who never makes good.
Anyway, the overall thing you're going to want to do is challenge the line on some basis and when they simply approve it with no real scrutiny you'll have to challenge the validation method and demand an accounting thereof. You'll find discussion of it on debtorboards I'm almost certain.
The never-falls-off thing that footnote mentions is bandied around but appearances are that with the exception of bankruptcy that doesn't work out to be the case. The CRAs have to show you the information they have on you that might be disclosed to others so that you can verify the veracity. Since they do not show you any derogatory information older than 7 years that would indicate that they don't show it to anyone. Or so was the common belief over on AoC the last time I remember it discussed.
posted by phearlez at 11:06 AM on October 6, 2006
The never-falls-off thing that footnote mentions is bandied around but appearances are that with the exception of bankruptcy that doesn't work out to be the case.
Take a look at the footnote in the link I posted... the law seems to permit them to report it forever in certain circumstances. Maybe in practice the CRAs don't keep that info around (I have no idea, but that seem unlikely).
posted by footnote at 11:11 AM on October 6, 2006
Take a look at the footnote in the link I posted... the law seems to permit them to report it forever in certain circumstances. Maybe in practice the CRAs don't keep that info around (I have no idea, but that seem unlikely).
posted by footnote at 11:11 AM on October 6, 2006
I'm sorry if I sounded like I was disputing the fact that you're absolutely right - that's the law, dopey as it is (how many places can you buy a house for under $150,000? Why a set dollar amount on a law that continues in perpetuity? Duh.). But what's also the law is the assurance that you can see and address any information about yourself they report.
If the credit reporting agencies are under any circumstances sending information about you to an organization that has pulled your report, you must be allowed to review that information for accuracy. So... how do you do that? When you order a credit report for yourself to review it contains nothing older than 7 years. So where's that additional information?
The belief I have heard expressed by otherwise knowledgeable people is that it doesn't exist, and that's a business decision by the CRAs to avoid the effort involved in maintaining two levels of reporting as well as the risk of action against them if they report those facts on an under $150,000 loan. Remember, there are many things that CRAs and creditors are prohibited from doing but not required to do. That's the core of pay-for-deletion. A creditor is required to insure that all information that is reported is done so accurately. A creditor is not required to report at all. Similarly, the CRA is permitted to keep older information for the purposes of these larger loans and disclose it under certain circumstances but they are not necessarily required to offer this business service.
posted by phearlez at 1:39 PM on October 6, 2006
If the credit reporting agencies are under any circumstances sending information about you to an organization that has pulled your report, you must be allowed to review that information for accuracy. So... how do you do that? When you order a credit report for yourself to review it contains nothing older than 7 years. So where's that additional information?
The belief I have heard expressed by otherwise knowledgeable people is that it doesn't exist, and that's a business decision by the CRAs to avoid the effort involved in maintaining two levels of reporting as well as the risk of action against them if they report those facts on an under $150,000 loan. Remember, there are many things that CRAs and creditors are prohibited from doing but not required to do. That's the core of pay-for-deletion. A creditor is required to insure that all information that is reported is done so accurately. A creditor is not required to report at all. Similarly, the CRA is permitted to keep older information for the purposes of these larger loans and disclose it under certain circumstances but they are not necessarily required to offer this business service.
posted by phearlez at 1:39 PM on October 6, 2006
Hi phearlez - I believe (but don't have time to look up) that there actually are special credit reports and FICO scores for mortgages as opposed to "normal" smaller amounts credit (e.g. credit cards) that take into account all the info.
posted by footnote at 2:22 PM on October 6, 2006
posted by footnote at 2:22 PM on October 6, 2006
All you have to do is simply write a short note to the 3 credit reporting agencies contesting the item. Usually they will take it off your record without further ado.
Many people I know completely "fixed" their credit within a few short months by contesting all their derogatories, never having to do anything more than sending such letters (now emails).
posted by growabrain at 7:24 PM on October 6, 2006
Many people I know completely "fixed" their credit within a few short months by contesting all their derogatories, never having to do anything more than sending such letters (now emails).
posted by growabrain at 7:24 PM on October 6, 2006
This thread is closed to new comments.
One possibility stated by phearlez is to negotiate what's called "pay for deletion," which, _if possible for you_ , would be worth it in your case since you still have more than half of your 7 year period to go.
To sum up the rest of the thread; if you can't accomplish deletion, paying off a collection can keep the paid off debt on your credit report for another 7 years (and impact your lending potential), while waiting 4 years will let it expire will wipe it clean.
posted by empyrean at 1:13 AM on October 6, 2006