Dear Ryan,
I did not give a debt collector my bank account number, but I saw they tried collecting from my account. Is there any other way for them to get my account information, legally? Or should I pursue legal actions against them?

My Response

Hi [name removed],
There are a couple of things you should do before pursuing legal action. First, you need to verify and be certain that it was actually this company that was attempting to collect from your bank account. I say this because unless you gave them your bank account information, there is no way they could have legally obtained it. Furthermore, they need your permission before they can take any funds from your account. Second, if you have determined that it was indeed this company, I would call them and yell at them for awhile about this issue. I would do this before pursuing legal action because lawyers aren’t cheap and you don’t want to be hasty about getting a lawyer and filing suit.

Hope this helps,
Ryan

Hi Ryan,
How soon will my credit score improve after I pay off my debt?
I am trying to figure out what is important. I was hoping you might be able to give me some insight.
Thank you in advance.
[name removed]

My Response

Hi [name removed],
I wouldn’t expect a huge jump in your credit score after paying debt off –the FICO score is, of course, largely based on you having debt. However, this is not to say your score won’t raise after you pay off debt. This is because you will be lowering your debt to credit ratio. Your debt to credit ratio should remain low if you want to maximize your credit score.

Hope this helps,
Ryan

Hi Ryan,
If you sell a property using a short sale, how does this affect your credit score? How many pionts will it reduce your score? Would I be better off credit-wise by just letting the house go into foreclosure?
Thanks!

My Response

Dear [name removed],
A short sale will destroy your credit — anywhere from 50 - 100 points. A short sale won’t hurt your credit as bad as a foreclosure but the difference isn’t that much. If you can get the lender to do a short sale, I would do that.

-Ryan

Take Home Point

A short sale is when a mortgage lender agrees to basically lower the amount due on a loan. This usually happens when the amount due is more than what the house is worth and the homeowner is unable to pay their mortgage . When this is the case, the lender lowers the loan amount so the home owner can sell the home for market value. You might be asking yourself, why would the lender do this? Well, they do it to avoid a foreclosure. Keep in mind that in the event of a foreclosure, the lender would then be responsible for selling the house and even then, they are likely only to get market value for the house. Therefore, a short sale will in the end cost the lender less than a foreclosure.

Dear Ryan,
A majority of my credit reporting issues are, unfortunately, alot of medical bills I’ve been unable to pay over time. Not sure how these are seen in terms of the statute of limitations, but I recently received a letter from the collection agency that owns all of my accounts, and that partial payments were no longer accepted. Strangely enough I had previously paid off two of the accounts, online, with receipts for each.

Even more strange, of the 5-6 accounts they listed, their 2nd page showed a totally different amount as ‘principal’ due, excluding interest to date, from the first page listing all the accounts. The oldest debt being reported is 2006, which I believe may very well be close to it’s statute but I’m not sure. I’m not sure if I should respond, correcting these folks of their totals, or dispute it in general.

My Response

Hi [name removed] -
The statue of limitation is 7 years in most states — it doesn’t matter if it’s a medical bill. Also, a collector who says that “partial payments” are no longer accepted is lying. Collectors are, for the most part, scum –they will tell you anything to get you to pay. They are simply trying to scare you and I bet would be more interested in cutting a deal with you if you were to say, “Well then I suppose you get nothing”. Keep on pushing them and they will eventually take an offer.

In regards to the paid off accounts and the incorrect account balances. You need to print out the receipts you have and any other documentation that proves these accounts are paid off. Mail these documents to the collection agency and tell them that by federal law you have the right to request that they provide solid proof that the debts are yours. In many cases, they simply cannot do this –either because they were lying or because they don’t know how to do their books. Hang in there.
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Best,
Ryan

Hi Ryan,

Thank you,
Monica [last name removed]
on behalf of the Federal Trade Commission

Hi,
I read your blog and thought that it was interesting regarding secured credit for people with imperfect credit. I am currently in the process of repairing my own personal credit from a student loan default and they are in the rehabilitation process. I am extremely interested in located a secured card that doesn’t report as secured on my credit report. Can you please suggest some to look at?
Thanks!
[name removed]

My Response

Dear [name removed],
Absolutely. I recommend that you check out some of cards offered on Credit.com. Most of these cards will not show up as secured on your credit report. Here is a direct link to their secured cards.

Hope this helps,
Ryan

Take Home Point

If you have ever said to yourself, “How am I suppose to build (or repair) my credit when no one will issue me a credit card”, the answer is a secured credit card.

Secured simply means that the credit line is secured by you (i.e., you have to deposit the money before they will issue the card and when you close the account, the money is returned to you). Thus, the credit card companies will issue the card to people with poor credit because it doesn’t represent any risk. The advantage to you is that they (in most cases) report monthly as simply a credit card on your credit report.

I used a secured card as my first “credit repair card” and kept it open for two years to accrue some age on the account. This is a great way to start the credit repair process.

Ryan,
I have 120 days past due with my GEMB/LOWES Card so they sold it to another lender who I am paying through a debt counseling co. GEMB/LOWES is reporting my PAY STATUS as 120 days past due although I have not missed a payment with the lender who bought my debt. Can I get this statement removed to read PAID AS AGREED?
Thanks!
[name removed]

My Response

Dear [name removed],
It sounds like you’re using a debt settlement company to pay off your debts. The problem with debt settlement companies is while they will settle your debts (eventually), your credit gets destroyed in the process.

The way it usually works is that you basically setup a savings account with the debt settlement company and pay them an amount you can afford on a monthly basis. Once you have enough money in that savings account to settle debt, they will attempt to negotiate with the collector on your behalf for settlement. The problem is that the debt settlement company requires that you stop paying the debt to the creditor while you are paying them. This is what destroys your credit. I’m afraid that unless you take matters into your own hands and stop paying this company, your credit will only continue to get worse. Trust me, [name removed], you can do this on your own if you follow the steps outlined in my blog.

Best,
Ryan

Take Home Point

Many people arrange for their debts to be handled by a debt settlement company falsely thinking that all of their credit problems are going to be fixed overnight and all they have to do is give the debt settlement company a small percentage of the amount successfully settled. The fact of the matter is that going this route is not easy –in fact, its painful because when you stop paying your debts directly to the creditors, the late payment entries pile up. Remember, the business model of debt settlement works by telling their customers to stop paying their debts and start saving money in a savings account with them. While this is good if you absolutely cannot afford your debt payments (the debt settlement companies will adjust your savings amount according to your affordability), they will not pay ANYTHING to the creditors until they think they can settle the debt.

Dear Ryan,
I have an old Verizon bill for $44 that I didn’t know about. Verizon has sold the account to a collection agency. And the collection agency is listed on my credit report (they list Verizon as the original creditor) I have attempted to negotiate a payment in full for delete with the collection agency but they flat out refused. I have called Verizon and they informed me that the account no longer belongs to them and I should contact the collection agency.

I can still log on to the Verizon account website using my old log on. If I pay the bill on the Verizon website can I then dispute the collection account with the credit bureaus as “not my account” or “paid with original creditor”? If so will this then make Verizon add a paid collection account to my credit report?

My Response

Hi [name removed] -
While I like your creativity (which is usually required when improving your credit), I would not suggest doing this. It won’t work. The collection agency will eventually take your offer if you are persistent. Keep up the good work and don’t give up — you will eventually win

Best,
Ryan

Take Home Point

Persistence, persistence, persistence is the key to repairing bad credit! I know all too well (from experience) that dealing with collection agencies is about the most miserable activity on the planet. Nonetheless, I hope all of my readers will kindly keep in mind that being persistent is the one thing that will enable you to win!

Dear Ryan,
Once divorce, does my ex-husband’s credit score get better since the bad debt was under my name?

My Response

No, credit scores and marriage are not tied together. If you are getting a loan together, they may take both credit scores into account, but that doesn’t mean your actual credit score is affected by your spouses credit.

Best,
Ryan

Dear Ryan,

I went to the hospital several years, and left with a a large bill that I was unable to pay in full. I set up a payment plan with the hospital to pay the account over time. I’ve paid the agreed $25 payment ever month since that time.

I recently received a letter from a collection agency stating that my payment of $25 was due. I contacted the agency and they told me my bill was sold to the hospital over a year ago. This was the first letter I received, and I have made payment through the hospital’s online bill pay the entire time. I have never missed a payment since setting up the payment plan.

What I don’t understand is how the hospital can sell my bill without my knowledge when I did not break our payment agreement? Also, how is the hospital still able to take payments if they no longer own the bill?

I have no idea how to proceed in this matter. I’m a student and need good credit to get loans for graduate school. Any advice you can give me about how to proceed would be greatly appreciate.

Thanks,
[name removed]

Response

Dear [name removed] -
When you made the arrangements with the hospital did you receive the agreement in writing? If so, you need to contact the hospital’s billing department ASAP and tell them that you have an arrangement to pay $25 per month towards this bill. If you don’t have anything in writing, I’m afraid there is very little you can do except for paying this bill as quickly as possible. Offer to pay the collection agency IN FULL if they state in writing that it will not be put on your credit report. If it’s already on your credit report, offer to pay in full if they remove it. Nonetheless, I would attempt by any means possible to deal directly with the hospital and not the collection agency –as collection agencies are scum.

Best,
Ryan