Credit reporting questions

[mikester]

So - My little bro calls me up and tells me he's been denied for a loan because of a collection freshly applied to his credit report for something back in 2000 that he's sure he paid with cash.

Back then he paid everything with cash. That being the case tracking the payment seems next to impossible plus it's over 5 years old now so he doesn't have the records that go that far back to show it paid - but he's sure he paid it.

Regardless he needs it off his credit report so he's talked to these people and they have agreed to settle for a relatively small amount ($150). A small amount to pay to get this resolved. What does he need to do to make sure it can't come back to bite him again and that it is actually *RESOLVED* on his credit report.

I know he can get a letter from the company showing satisfaction; pay with a check and request the canceled check back from his bank for backup and such but is there anything else?

Also - who know where you can get a free credit report? I know in some states you're entitled to a free credit report per year but I don't know where to get it.

Thanks!

[widebody911]

IIRC, it's a federal gig that you get a free report each year. Go straight to one of the main credit agencies, not one of the 'free credit report!' things you see advertised all over the 'net.

I've had an interesting credit report experience. I keep getting collection 'settlment offer' notices for some 'debt' but I have no idea what it is. I've been getting these for over 5 years. I called, they told me I had to send a letter. I've sent letters to the company twice now asking them what the basis for this collection is, they've never replied. The kicker is, the last time I checked, this collection wasn't on my credit report, either!

[widebody911]

https://www.econsumer.equifax.com/consumer/landing.ehtml?^start=&companyName=2Q04P_cpo

http://www.transunion.com/

http://www.experian.com/consumer/index2.html

[mikester]

Did a little research and here you go:

https://www.annualcreditreport.com/cra/index.jsp

[84porsche]

The best start for him is deal directly with the vendor and the more in writing and the more proof he has is always better. Also, you will have to clarify resolved with them. You don't want them to keep the days late on the credit report etc and all the negative feedback so to speak. If they refuse to deal with him, then use a credit reporting agency, pay the 29 bucks for a statement and let them fight your battle but remember you have 3 credit reporting agencies so its important to look at the whole picture.

[motion]

I had the same thing happen to me. Some BS event from several years ago. They wanted $50 to remove it from my report. I sent them the $50. They sent me a letter stating they would remove it. That was 5 years and 1,000,000 phone calls ago. It is still on my credit report. Loan guys always tell me not to worry about it, but I know it still affects my FICO.

Bottom line, sometimes you are just screwed when it comes to credit reporting. I'm sure we all have our horror stories. This has got to be the single most frustrating issue that will end up costing you thousands and thousands of dollars in increased mortage payments because they affect your FICO score and therefore affect the rate you ultimately get on home loans, refis, car loans, etc. I wish the government would do more to regulate credit reporting.

[RANDY P]

It must be affecting the FICO. If this is a home loan he's applying for, the original date of collection must be followed.

Typically after 2 years it's not considered in the U/W guidelines. They'd approve it pending payment of the collections either through the loan or borrowr paying it off PTF.

Unfortunately, it would have to be removed totally off the report for the FICO to not be affected. It's part of two U/W stipulations - Length of time since the collection was taken out and the FICO. If it's not one thing denying you, it's the other.

Remember, it's the overall picture you're painting with credit approval. If every tradeline, agreement you have has bad derogatories, they'll typically consider you high risk.and will not believe you when you say it isn't your fault - In contrast a good overall repayment history with maybe a blemish or two (like the creditor you didn't pay since you feel like you got "ripped off" ) the bank will probably believe you when you insist you weren't aware of it (my favorite) or simply claim it's customer protest. Either way, it's not the end of the world if a blemish or two shows up.

Ultimately, it's about the ability to borrow money. If you're relatively clean it's not an issue.

rjp

PS: for the record, I wish they would outlaw the FICO system. It's BS.

rjp

[Steve Carlton]

The FICO scoring system deducts more points for the recency of a derogatory item's reporting date. A fresh derog can lose you maybe 100 points; 5 years later it may be worth only a few. If your brother pays them anything, it should be in exchange for a "deletion letter." To be safe, he should get it in advance of paying. The letter won't do him any good if he stiffs the collection agency, because the bureaus will verify the authenticity of the letter. The letter will serve as his documention in case the collection reappears, but it almost certainly won't anyway. He's more likely to get what he wants before the collection is paid, he'll have almost no leverage after.

If he just pays them $150, what he'll likely wind up with otherwise is either a "paid collection" or "settled account," both of which will haunt his score for a few years. About 50% of the collection agencies will barter a deletion letter in exchange for partial/full payment. They're in the business to make a profit on the "bad debts" they purchase at a huge discount.

Your URL for the free credit report is the correct, legitimate one. That program rolled out recently, and I would suspect by now residents in all 50 states can get the free reports. You can get all three bureaus through that site.

If he gets the deletion letter, he may want to get a "rapid rescore" on his FICO in less than a week. Whoever pulled his credit report may have the ability to get it done; they might have to call their vendor to ask if they don't know. I can refer you to a place that can do it as well if they can't. If he's not in a rush, he can submit the letter to the bureaus that are showing the collection, but I suspect that process might take 30 days. Normally the collection agency sends the letter, but the failure rate on that is high and it often takes 60-90 days for the item to drop off.

A lot of loan transactions are overly dependent on FICO scores, and that fact can either help you or hurt you. Also, don't count on the FICO score you obtain from the bureaus to match what score the lenders get. I've seen big differences!

A huge factor affecting FICO scores is balances relative to credit limits. If one has a way to (ideally) pay the balance down to 5-10% of the credit limit on each account, you'd be amazed how much the score can increase.

What kind of loan is your brother trying to obtain?

[Joeaksa]

Originally posted by widebody911
IIRC, it's a federal gig that you get a free report each year. Go straight to one of the main credit agencies, not one of the 'free credit report!' things you see advertised all over the 'net.

I've had an interesting credit report experience. I keep getting collection 'settlment offer' notices for some 'debt' but I have no idea what it is. I've been getting these for over 5 years. I called, they told me I had to send a letter. I've sent letters to the company twice now asking them what the basis for this collection is, they've never replied. The kicker is, the last time I checked, this collection wasn't on my credit report, either!

Thom,

There are some scams going around recently where people try to collect on debts that were paid off years ago. Just had one happen in Phoenix and the person took it to the local TV station. They went after them and it went away. Turned out it was a fraud but too many people just pay for it rather than investigate.

You might call the local City Atty and ask about this. Borders on harassment if you have tried to work it out and they do not work with you.

JoeA

[mikester]

The loan is just a signature loan for a few bucks to get him through a rough time. He's done it before with success but this time this item hurt him and he already has been turned down for the loan. Family has helped him instead.

It's a shame - the kids gone through a few times of unemployment which in the end has likely been a benefit to him as it lowered his income so much he qualified for financial aid for school. He took advantage of it and went to ITT and got an AA. Now he's moved down to Central Fl to keep his education going at another ITT campus but he had to leave his job and such to make the move. He just was offered another job with a good company with a great salary near his school's campus in Orlando. He needs to get an apartment though and his credit score could be a problem.

He starts the job towards the end of the month and needs to pay his bills and get a few bucks to get into an apartment. Right now he's commuting from Dad's house in Tampa to Maitland/North Orlando (hard commute). He stays with a friend on school nights though so he's making out fine. Family has helped him with some cash in the meantime.

I'm real proud of him the last few years. He's really turned a lot around and he's done it on his own.

Thanks for the help guys.