Credit FAQ's

[Pam]

I am putting together an FAQ application for CB.

 

We have the acronyms covered, so please don't post those.

 

If you'd like to help, please post in this thread with a Question, and an Answer. Questions posted without answers, or with incorrect answers, will be deleted. Any off-topic posts will be moved to feedback. Please keep this on-topic, relevant, and accurate. Any answers provided will be verified by management.

 

The categories are:

 

Auto Loans

Bankruptcy

Collections & Debt Validation

Credit Reports & CRA's

OC's, Verification, & FACTA

Mortgages

Rebuilding Your Credit

Student Loans

[CB] Posting, Searching, & Acronyms

 

 

Please make sure your FAQ includes the following information (preferably in the same format, to make it easier on me, as I'm getting old, you know.)

 

CATEGORY

Question

Answer

 

I am hoping that this will make it easier on the newbies, in combination with the search feature and the Newbies section. For those of you who have BTDT, this is your chance to Pay It Forward, so to speak

 

Thanks!

 

Pam

[Kona]

Good idea!

[Pam]

[RacieRacer]

 

Daniel should post a section about re-con.

 

I'm considering posting something about split-files - the symptoms & the cures.

[Pam]

ttt

[LukeDuke]

great idea.....cant wait....

[Kona]

I could write something on how to get along well with Chase....but that isn't one of the categories, or is it?

[MarvBear]

__^__

[BBQ123]

Credit Reports & CRA's

Question: What are the three major credit reporting agencies?

Answer: Equifax, Experian, and TransUnion

 

Credit Reports & CRA's

Question: Can I get my credit report for free?

Answer: You are entitled to one free credit report from each of the three major credit reporting agencies once a year via annualcreditreport.com. You can also get a free report if you are denied credit based on a report from a credit reporting agency.

Edited July 30, 2006 by BBQ123

[radi8]

Perfect example, BBQ (thanks!)

 

 

Others?

[BBQ123]

Rebuilding Your Credit

Question: Can being added as an authorized user on someone else's credit card help my FICO score?

Answer: Yes, but only if the account you are added to as an authorized user is in good standing and only if the card reports for authorized users.

 

Credit Reports & CRA's

Question: What is the difference between a hard, soft, and promotional (PRM) inquiry?

Answer: A hard inquiry is one that results from an application for credit, or in some cases a request for additional credit such as a credit limit increase. A soft inquiry is one that results from reviews by existing creditors. A promotional inquiry is one that is used by lenders looking to make offers such as pre-approvals for credit cards or loans. Only hard inquiries affect FICO scores.

 

Student Loans

Question: Can I get rid of student loan debt by declaring bankrupcy?

Answer: No. This has not been possible since the late 1990s.

Edited July 30, 2006 by BBQ123

[captain_cavey]

Question: Should I dispute with the CRA's using a free annual credit report.

 

Answer: NO.Disputing using a free annual credit report gives the CRA's 45 days instead of 30 days to answer your dispute .Always dispute using a paid report .

[stickyfingers]

Credit Reports & CRA's

Question: Can I get my credit report for free?

Answer: You are entitled to one free credit report from each of the three major credit reporting agencies once a year via annualcreditreport.com. You can also get a free report if you are denied credit based on a report from a credit reporting agency. Note that any disputes (see the "disputes" section) resulting from your request for your free credit report extend the dispute period from 30 to 45 days.

Suggested addition. Comes up a lot.

[stickyfingers]

Question: Should I dispute with the CRA's using a free annual credit report.

 

Answer: NO.Disputing using a free annual credit report gives the CRA's 45 days instead of 30 days to answer your dispute .Always dispute using a paid report .

You can get reports without paying...

[BBQ123]

Collections & Debt Validation

Question: How can I stop collectors from calling me at work/home?

Answer: Send a limited cease and desist letter to the collection agency via certified mail.

 

Credit Reports & CRA's

Question: What do FICO scores range from?

Answer: FICO scores range from 350 to 850.

 

Rebuilding Your Credit

Question: Can a secured card help rebuild credit?

Answer: Yes. A secured card can help you rebuild your credit and eventually help you acquire unsecured lines. In addition, many secured cards can become unsecured cards with positive payment history.

Edited July 30, 2006 by BBQ123

[MarvBear]

Wishing and a hoping.

 

Some one should write.

 

Question: How to post a signature picture in Signature line.

 

Answer: (someone else provide clear concise instructions)I can't.

[Pam]

ttt

[DiggingOut]

correction to (probably a typo in) post #15: 300-850

[IDare]

Collections & Debt Validation

 

 

What is a charge-off? (CO)

 

A "charge-off" is an amount owed which has been classified as a "loss" for accounting purposes in the creditor's financials.

 

On consumer debts, government regulations REQUIRE accounts to be charged off after a certain period of delinquency in order to keep financial institutions' records realistic and healthy. For example, if a credit card company claims it has a billion dollars in business on the books, it makes a huge difference in their financial standing if three-hundred million of that billion is UNCOLLECTIBLE. Statistically, it's recognized that the longer an account goes unpaid the less likely it will ever recover. Thus government regulations have been developed which require that if a consumer credit account remains delinquent for a specified period of time, it must be classified as a charge off, loss, etc.

 

More in-depth understanding read:

http://www.fdic.gov/regulations/laws/rules/5000-1000.html

 

UNIFORM RETAIL CREDIT CLASSIFICATION AND ACCOUNT MANAGEMENT POLICY

{1}

 

{1 The agencies' classifications used for retail credit are Substandard, Doubtful, and Loss. These are defined as follows: Substandard: An asset classified Substandard is protected inadequately by the current net worth and paying capacity of the obligor, or by the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful: An asset classified Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loss: An asset, or portion thereof, classified Loss is considered uncollectible, and of such little value that its continuance on the books is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value; rather, it is not practical or desirable to defer writing off an essentially worthless asset (or portion thereof), even though partial recovery may occur in the future.

Although the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Office of Thrift Supervision do not require institutions to adopt identical classification definitions, institutions should classify their assets using a system that can be easily reconciled with the regulatory classification system. }

 

 

The Uniform Retail Credit Classification and Account Management Policy establishes standards for the classification and treatment of retail credit in financial institutions. Retail credit consists of open- and closed-end credit extended to individuals for household, family, and other personal expenditures, and includes consumer loans and credit cards. For purposes of this policy, retail credit also includes loans to individuals secured by their personal residence, including first mortgage, home equity, and home improvement loans. Because a retail credit portfolio generally consists of a large number of relatively small-balance loans, evaluating the quality of the retail credit portfolio on a loan-by-loan basis is inefficient and burdensome for the institution being examined and for examiners.

 

Actual credit losses on individual retail credits should be recorded when the institution becomes aware of the loss, but in no case should the charge-off exceed the time frames stated in this policy. This policy does not preclude an institution from adopting a more conservative internal policy. Based on collection experience, when a portfolio's history reflects high losses and low recoveries, more conservative standards are appropriate and necessary.

 

The quality of retail credit is best indicated by the repayment performance of individual borrowers. Therefore, in general, retail credit should be classified based on the following criteria:

- Open- and closed-end retail loans past due 90 cumulative days from the contractual due date should be classified Substandard.

- Closed-end retail loans that become past due 120 cumulative days and open-end retail loans that become past due 180 cumulative days from the contractual due date should be classified Loss and charged off.{2}

 

{2 For operational purposes, whenever a charge-off is necessary under this policy, it should be taken no later than the end of the month in which the applicable time period elapses. Any full payment received after the 120- or 180-day charge-off threshold, but before month-end charge-off, may be considered in determining whether the charge-off remains appropriate.

 

That is just an excerpt. I have added emphasis on certain points. You should follow the link to read the whole thing. It's good to know.

 

CO's obviously are bad news on your CR. They can have a severe impact on your credit rating, especially when they're relatively new. They can remain on your credit report for up to 7 years. Their effect on your credit score will fade over time, however. And sometimes they can be removed sooner rather than later by various dispute/verification and other processes, which you can learn about in the Newbie forum.

 

If the account was charged-off, do I still owe the money?

 

In most cases yes, the money is still owed and subject to collection attempts by both the original creditor (OC) and/or a collection agency (CA). Charge-off doesn't eradicate the debt. It simply changes its position on the creditor's books.

 

If it's worthless, how can a CO be sold?

 

A charged-off account is like a depreciated asset, like an executive's desk that's 7 years old. It may be worthless on the books, but at the same time it might still have significant market value. So if the creditor can get money for that CO either by collecting on it themselves or selling it to a debt purchaser, they may choose to do that.

 

Can interest continue to accrue on a CO?

 

Yes - if the terms and conditions of the credit agreement allow for the OC to charge interest after CO (and when they do, it's usually at their default rate) then chances are good that they CAN - unless there's a conflict with state law.

 

Note: I specifically referred to the OC being able to charge interest under the specified circumstances. It does not necessarily follow that a debt purchaser (JDB) has the legal right to charge interest on a CO if they buy the right to collect on the account. When faced with a JDB demanding payment of interest on an alleged debt you may want to demand competent evidence of their legal right to do so, as well as proof that the amount they're demanding has been arrived at in accordance with all applicable state and federal laws. They should provide this as part of the debt validation (DV) process, which you can learn about in the Newbie forum.

[stickyfingers]

ID. You rock.

 

(btw...either you or, IIRC, HKK had a great post on "what should I know about DV'ing within SOL" - or something to that effect...)

 

Cheers.

[Chendo]

This debt is from 2001 and the CA's are still calling me to collect on the debt- is this legal?

 

Yes, it is legal for them to try and collect on the debt (if they are following the rules)- All states have a Statute of Limitations (SOL) for one to be sued in court over a debt- if the SOL is up in your state they can not take any legal action and make you pay the debt-

 

Well, what is the SOL for my state?

 

You can do a google search for it, or you can go to this great man's website and look it up: http://whychat.5u.com/

 

Now don't forget- All because it's past the SOL for collections, doesnt mean that they can not still try to collect. It will still be on your Credit Reports- A TL (Trade Line) will remain on your Credit Report for 7 years. If you have Bankruptcies, they can remain on your Reports for 10 years - Tax Liens can stay for 15.

[IDare]

Collections & Debt Validation

 

 

If I send a DV (debt validation) letter within SOL, am I more likely to get sued?

 

This isn't a "one size fits all" issue. There are many reasons why creditors and CA's do or don't sue. You might get sued if you DV within SOL. You might get sued if you DON'T DV within SOL. You might get sued PAST SOL. There are no guarantees on anything.

 

It's possible that a DV might draw their attention and get you sued. It's also possible that if you do NOT send a DV, they might figure that you don't dispute the debt so they might as well SUE.

 

There are good points on both sides of the debate about whether to DV within SOL or not. Here's my take on it:

 

I probably would NOT send DV to a CA within SOL if I had many significant risk factors:

• Debt is large - maybe over $1,000
  
• Debt is recent - maybe within 2 years
  
• Debt is still owned by OC, and CA is not trying to collect right now
  
• Debt has been sold to JDB who files lots of suits in my area but hasn't contacted me yet
  
• I can't afford to settle the debt if I'm sued
  
• I own a home
  
• I have easily garnishable wages
  
• My credit score is improving
  
• CA is on CR but has NOT dunned me (aka let's not poke a sleeping rattlesnake)
  

 

On the other hand I generally WOULD send DV to a CA within SOL if I had most of the following circumstances:

• Debt is relatively small
  
• Debt is pretty old - maybe 3 - 4 years
  
• Debt is with JDB instead of OC
  
• JDB is not filing suits in my area
  
• I don't own a home
  
• Difficult to garnish my wages
  
• My credit score sucks
  
• I've disputed the CA on my CR and they've verified - providing FCRA violations for leverage
  
• CA has committed FDCPA violations - and I can prove it
  
• I can't wait til SOL passes to do credit repair
  
• I know I can be sued either way, would rather be pro-active
  
• CA sends dunning letter - DV within 1st 30 days (definitely)
  

 

Some people raise the point that by responding to a dunning letter with DV you may in effect confirm that you're "still alive" and make yourself more of a target than if you just lay low and don't respond at all. But you have to balance that with the fact that if you don't DV within the initial 30 days after receiving their demand letter you lose the advantage of the CA having to cease collections to validate the debt. That's an advantage I wouldn't want to lose. So in my opinion, once you get that demand letter, to DV or not to DV is no longer a question.

 

You need to weigh these considerations and make the best educated decision for yourself.

[LadyT]

Question: What is 'B'?

 

 

Answer: 'B' explained

 

 

Most of the time, as a newbie, I just needed a point in the right direction. I can't explain it any better than this thread does

[lilone]

IDare!

[stickyfingers]

Collections & Debt Validation

 

 

If I send a DV (debt validation) letter within SOL, am I more likely to get sued?

 

This isn't a "one size fits all" issue...

That's the one I had in mind ID!