Should I pay my Collections ?

It is very important that you understand how the paying of collections impacts your credit report.

For this discussion let's imagine you have a $65 medical collection that has a date of last activity greater than two years.

I know what you are thinking let me just pay them the $65 and get this taken care of.

Here is the scenario when you pay this collection:

The collection agency collects your $65 and then updates your credit report to a zero balance indicating that you no longer owe this debt. Now for the bad news you just lowered your score. When the collection agency updated your credit report to a zero balance it also updated the date of last activity.

In summarization, you just paid money to lower your credit score

70% to 80% of all credit reports have issues….  contact me to review your personal ( or someone you know or care about ) report.

Why Your 750 Credit Score Is Not Good Enough In 2012

For the vast majority of the last decade, if you had a 750 score you could get approved for any loan or credit card  (assuming you had reasonable income, too). 

How to get a credit score of 750?

1.      Set up a consultation with Score Well Credit to review a current and accurate report.

2.       Know the different credit scoring models

Monitoring your score is a useless endeavor if you don’t know what type of score you are looking at.  But I’m willing to bet there’s a good chance you don’t even know your real FICO. You can read more here

3. Keep your credit utilization super low!

Spread your spending across multiple credit cards if necessary. Or if you’re only using one or two accounts with relatively low limits, then make more than one payment per month to keep your utilization low.

4. Have multiple accounts

In order to get into the high 700’s you will need to have multiple lines of credit, a diverse mix. That might mean a few revolving accounts (credit cards) and a couple installment loans (loans where you owe the same amount each month). Utilities don’t show on your credit report unless you are delinquent on them, so if you banking on those to give you diversity then think again.

Converting fear into fees

They say sex sells, and I’m sure they’re right. But I doubt it outsells fear. From burglar alarms to bomb shelters, Americans shell out billions annually to protect against all manner of evil: some real, much greatly exaggerated. But wherever fear can be churned up, you can bet there’s someone not far behind making a buck.

Such is the case with credit monitoring.

Credit monitoring is a billion-dollar business, with more than 12 million Americans paying for “protection” against ID theft. 

Why you don’t need credit monitoring

These services are more sizzle than steak for at least three reasons…

1. You’re not liable if someone opens credit in your name. 

If someone forges your signature on a credit application, check, or anywhere else, you’re generally not responsible for the charges. As with anyone stealing anything, the thief is liable. And if the thief isn’t caught or can’t make restitution, it’s a problem for the institution that accepted the fraudulent charge, not you.

2. Credit monitoring doesn’t prevent ID theft.

By definition, credit monitoring can only monitor transactions that have already occurred. What you want is to prevent them from happening in the first place.

According to Experian, “Fraud alert messages notify potential credit grantors to verify your identification before extending credit in your name in case someone is using your information without your consent.”

Because ID theft is so highly publicized and so frightening, a crop of companies now offer to help – for a fee, of course. Pay them every month and they’ll help protect your identity…But here’s something the ads don’t say: The technique many services use is something you can do yourself in less than five minutes absolutely free.

Score Well Credit can help !!

Everyone in the insurance industry - including the broker sales force - has a role to play in educating consumers about the use of credit scoring: IBC | Canadian Underwriter

Everyone in the insurance industry - including the broker sales force - has a role to play in educating consumers about the use of credit scoring: IBC | Canadian Underwriter

Why You Should Never Co-Sign for Your Kids - Current Rates, News and Information about Credit

Why You Should Never Co-Sign for Your Kids - Current Rates, News and Information about Credit

Problems with Mortgage Companies' Credit Reporting

Mortgage loan companies and mortgage servicing companies do not always accurately report on consumers' credit history after such events short sales, foreclosures, and payment modification plans.

In a short sale a lender allows the home owner to sell for less than the amount owed on the mortgage. Effective July 15, 2011, an owner selling a house or apartment building with four or fewer units in a short sale will not owe the lender a deficiency balance (Civil Code Section 580e). Therefore, after a short sale, the lender should not report the consumer owes any money on the mortgage loan.

If a purchase money lender forecloses on four or fewer units, the lender may not seek a judgment for the deficiency balance. Civil Code Section 580b. This law applies to both 1st and 2d mortgages. Any post-foreclosure report to the credit bureaus should make clear that the former home owner is not subject to a lawsuit and judgment. A report that a debt of $100,000 (the deficiency balance after foreclosure) is “due and owing” is misleading because the lender has no recourse to the courts to collect the $100,000.

Under the Home Affordable Modification programs, a lender typically agrees the consumer may pay less on the mortgage during a trial period. Under these programs, if the owner was current on the mortgage payments before entering into the program and makes the required reduced payments during the trial period, the lender may not report late or inadequate payments to the credit bureaus. Once a permanent modification plan is in effect, if the owner makes the required mortgage payments, the lender may not send adverse reports to the credit bureaus.

Credit File vs Credit Score

I tell people to focus on credit reports over credit scores because there are simply so many scores out there. Among generic models, there is the VantageScore model and multiple FICO models.

Each credit score model may differ in terms of the weightings of certain factors or how it is constructed. For example, a model might place a greater emphasis on the balance of your credit card. Simply, “your credit score” is not just one score.

However, all the credit scores come from one place: your credit file. So rather than comparing your various credit scores all the time, it’s more productive to make sure the information in your credit file is up to date and accurately reflects your prudent debt management steps.

Yes, credit scores do matter. They are an important part of our financial well-being and having a good credit score can literally save you thousands of dollars over the course of a loan. Plus, having a “directional” idea of your credit score can be useful, especially if you are going to apply for a loan in the near future.

ScoreWell Credit specializes in educating you on your credit file, coaching and providing you with accurate information and most importantly……  removing outdated, unverifiable and incorrect data on your report.