Most small time collections, say from a grocery store, small doctor bill, credit card bills, or other minor random things, do not pursue legal actions.  In most cases, they simply harass you personally and report the negative item to your credit reports.  At which point you have to then deal with credit repair, which honestly sucks.

The item reported then usually will go through a cycle of sales.  Meaning it is sold from collection company to collection company.  Which may sound bad, but in the long term is beneficial for you because the more it is sold, the less value it has for its current owner.  Always remember, only one collection company can report the item at a time to the credit bureaus.  Dispute all others as duplicate accounts.

However, some companies will pursue other actions against you.  This usually happens more on big ticket items like expensive computers, installment loans, tax debts, etc.  If that happens, they may hire a lawyer to sue you (rare because most times it is not worth the money),  they may file a judgement against you for the amount plus interest, or they may file a lien against you.  Those are the ones you want to avoid because they are near impossible to get removed from your credit until the statute of limitations runs out.  And the SOL runs out from the time the lien or judgement is satisfied, not from the date is was granted.  In addition, they could garnish your wages which also is bad.

If  you are not sure what actions a company is likely to take, do some research on the matter.  Try Googling the company and their collection habits.  Speak directly with the company and ask them their collection practice.  Remember never to promise or say you have intentions to do anything with the account.  Just probe for more info.  Ask other people if they have experience with that company.  It really does help to know how far you can go in a bind when you don’t have many options.

If you have several collections that you are working on, then I recommend getting Equifax 3 in one credit monitoring that notifies you of changes to all 3 reports.  I have been a member for many years and it has been really helpful in my credit repair.  It lets me know immediately when something changes.  If you don’t have that, then you have to wait around to get updates from the 3 bureaus by mail most of the time.  Also, you can refresh your Equifax report an unlimited number of times.  That helps because you can keep submitting disputes real easy.

First thing you should do is look for any collections that are more then a few years old.  Dispute them as statute of limitations expired.  Even if you know that it hasn’t been over 7 years since the first delinquency, do it anyway.  A lot of companies go out of business or don’t respond fast enough and the collection gets deleted.

Then, for those accounts that are fairly new, dispute them stating that you have no knowledge of the account.  If it allows you to enter a message, ask them to delete it.

Then, if those don’t remove the items… wait a little while, then dispute again stating the account contains multiple inaccuracies and to verify all information.  This should be done AFTER all of the above.  If the collector cannot verify all info, they have to delete the account.

Don’t worry about doing all of these disputes.  It won’t hurt anything.  Unless you are disputing an installment account with a long payment history, your score may drop while it is being investigated.  It will go back up when it is done.  Do each step in that order and wait for the results before starting each next step.

While you are doing that, DO NOT communicate with the collection agencies.  You can accidentally say something to them that can restart the statute of limitation 7 year period.  If you so much as mention any intent to pay them or take care of the account, it can restart the clock.  The 7 year period starts on the date of first delinquency.  Make sure you get that date directly from the credit bureau and not the collector.  That 7 years is the date the item can no longer legally be reported.  The 7 year mark is your final option to get a stubborn item removed. 

If the steps above do not work, then you can mail a letter requesting verification of the debt to the original creditor and current collector.  You can find these letters online.  Print and send.  By law they have to respond.  If they don’t pursue the matter.  Verify all the information they provide is the same as with the bureau.  Any descrepency, send it to the credit bureau by mail with a dispute.

If none of that works, and you really need to make an improvement on your credit report, offer a settlement without the demand for removal.  But, make sure they agree to mark the item as paid in full (no mention of settlement on your report… that looks bad) and provide you with documentation.  Agreeing to any sort of settlement or payment plan restarts the 7 year clock.  So this should be a last resort.  Once the item is showing as paid, your score may go up a bit.  Having a collection showing as paid is nowhere near as beneficial as having it removed.

If you have medical collections, note that they are not as bad as other collections.  Banks take them less seriously.  Still bad, but not as bad.

Take care of bigger debt collections prior to small collections.  New collections are worse then old collections.  Prioritize by that.

If you have an installment or revolving account with late payments, try all of the above.  If that does not work, submit a dispute saying the account was never late.  If they did not keep proper documentation then they have to remove the late marks.

You might think all that sounds silly… that there is no way a collection company would let those things happen.  But here is what I have learned and personally experienced…

The credit bureaus have strict legal guidelines.  The collector has to respond within a certain time and they have to have verifiable documentation to support their claim.  Collection companies go out of business a LOT.  Items are not deleted when that happens.  Only if you dispute the item.  Collection company staff makes mistakes in the reports, then the delay to respond causes the item to be deleted.  Or the company may just not respond fast enough and it is deleted.  The company may have thrown out or misplaced the supporting documentation so the item must be deleted.  Sometimes the account may have been sold to another company and the one on your report must remove the item.  There should never be any item reported by more then one company on your report.  One should be deleted.

Also note that submitting disputes by mail require the credit bureaus to do a more thorough investigation.  Results tend to be better when done by mail.

For medical collections for something like a local doctor or dentist, I have found that meeting with them in person and very nicely requesting a letter of removal in exchange for full payment often works out well.  Local people are more willing to help a person out that is making an attempt to pay.  You may have to convince them that they are capable of requesting the item be removed.  A lot people think they can’t.  If they are stubborn, simply say “well I prepared this letter which requests removal of the item from my credit report.  All you need to do is sign it for me.”  They have nothing to lose except your money so chances are, they will sign it as long as it is well written and easy to understand.

I found that it was really helpful to create an Excel spreadhseet with my collection account information in it.  Each item has the following important information, each in their own columns, color coded, so I can easily monitor changes and progress.

• “CB” – Credit Bureau (E, Exp, TU) – tells me which bureaus the item is reported on.  Not all items are on all 3 bureaus.
• “DR” – Date Reported – tells me what date the item was last reported.  That gives me an idea of how active the collection company is in reporting.  If they don’t report in years, that is a good indicator they are not very pro-active in reporting.  Or they could have went out of business.
• “DLA” – Date of Last/First Activity/Delinquency – Get this date from the credit bureau. This is the date that the 7 year clock starts at (10 for bankruptcy).
• “DOR” – Date of Removal – use the DLA to calculate 7 years and the date of removal.  This is the very latest date anyone can ever report that item to the credit bureau.
• “Company Name”, “Account Number”, “Address”, “Phone Number”, “Original Balance”, “Current Balance”
• “Settlement Amount”, “Settlement Date”  - this is any settlement amount offered to you or by you.  Use the comment tool to keep notes of any correspondence and monitor the creditors actions.
• “Notes” and comments – Always keep track of information such as if an item has been sold to another company (keep all contact info), any correspondence regarding the item, your dispute activities and results, etc.

Monitoring those items will help you to anticipate a collection companies next move.  You can tell the ones that are serious and the ones that are more laid back and easy to deal with.  A company that offers you a settlement amount is always going to be the most flexible as that is a sign that they realize they may not get all, if any, of the money from you and are willing to take what they can get.

Keep in mind that as an item is sold from company to company, each following buyer has less of an investment in the item.  As it is sold, the previous company takes a loss on the original amount in an attempt to regain some of its funds via sale to another collection company for a lesser amount.  So, if you have an item that has been sold 3 times or more, then you should be confident that if you need to offer a settlement amount, the will most likely accept far less then the original balance. 

Also, the older an item gets, the more a collection company realizes it is unlikely they will ever collect that money.  So, if you really need an item removed, know that time is your friend.  The older an item is, the more power you have in the situation.  They know that in 7 years, they can’t do anything about it.  However, you should also read this blog about the different collection actions that could be taken against you.

Remember, if nothing works immediately, wait a year or so and do it all again.  Things change that you cannot see and what might not have worked at one time, may work later.  It took me 13 years to completely repair my credit.  I saw immediate changes in the first year (many items removed), continued changes throughout the remaining years, and this is the year (August) that I finally get the last item off of my credit… my bankruptcy.

Read my other blogs on credit bureaus and consumer credit for more information on how things work.

It seems to me that they have set out with the goal of forcing you to obtain a new credit report before allowing you to have their dispute mailing address.  They are very strategic about it.  Especially Experian.  They have it set up so that if you are entitled to a free credit report, you can only view it one time.  Then if you do not make note of the file number and need to dispute another item at a later date… you end up having to pay for a new report.  They will not provide you with the previous report number.  They then set up their website so that you cannot get the mailing address for disputes without a file number.  And to top it off, you cannot access their phone customer service without a file number either.  So they give you no options for obtaining the mailing address for a dispute.

You might wonder why they would make it so difficult.  Well, did you know that when you file a dispute online, there are less requirements for the way they process your investigation?  Did you know that if you file by mail, they are required to do a more thorough investigation?  You are more likely to get the desired results when you file by mail. 

Also, their goal is to force you to buy their products.  So if they hold their dispute address for ransom, and you can’t find the dispute address anywhere, you have no choice but to pay for yet another credit report.

 That is why they make it so hard to get ahold of their mailing address.

So… let me help you all out here and save you the trouble I went through.  Here is their heavily gaurded mailing addresses! 

TransUnion
P.O. Box 2000
Chester, PA 19022-2000

NCAC (Experian)
P.O. Box 9701
Allen, TX 75013

Equifax Information Services, LLC
P.O. Box 740256
Atlanta, GA 30374

Sometimes, we just have to do what we have to do to get by.  I am sure a lot of you can relate to that.  So I wanted to share some information with you that I learned while going through that time.

If you are in a situation like I was… no money and you owe taxes… the IRS does have options.  The IRS can work out a payment plan for you if you request it.  If you absolutely cannot make payments (like me at that time), they have something called a “currently non-collectible status” or “currently uncollectible status”.  This puts your tax accounts into a hold status.  It stops all collection processes until you get back on your feet.  However, it does have some down sides that you should be aware of.  While in that status, the statute of limitations for collection of taxes is also put on hold.  But the most important thing (and they failed to tell me this at the time) is that they might place a lien against you for that tax amount.  They did not tell me that would happen until after I had agreed to being put in that status over the phone.  So I ended up with two federal tax liens. 

That was the beginning of my tax problems for, which ultimately led to me filing for and receiving the IRS Offer In Compromise (explained in other bogs).  My OIC caused those tax liens to be released, but they are still on my credit.  If you can avoid the tax liens… do so.  It’s extremely difficult, if not almost impossible, to tax liens removed.  And they make your credit look pretty bad.

I thought I would share this information in case someone else out there is struggling too and feels like there is no hope.  You might have to take some hits in some areas, but sometimes you just have to take a few steps back to go forward again.

According to the IRS, he will not have to pay that money back to the IRS unless he moves or sells the home.  Then he will have to pay the full $8,000 back.

I want to give some advice regarding divorce and the First Time Homebuyer Tax Credit.  If you are thinking of divorce, it is best for both of you to stay in the home until the divorce is final or you have transfered your rights and interest to the home over to your spouse.  Lucky for me, we were able to get the divorce done fairly quickly before the IRS came after me for having moved out of the house.  I do not know what triggers them to act on that or how long it takes them to demand the money, but if they did… it would have made things extremely complicated.  I do wish that I had stayed in the home because it really worried me. 

It also caused me to wait until the last minute to file our 2010 taxes.  I still have not filed because I have not transfered my interest to him yet.  I can’t remember what it’s called… maybe a Quitclaim Deed?  I have been too scared to file my taxes because of my new address and I am not trying to do anything to alert them of the move before he has full legal posession of the house.  I also want to send in a copy of the divorce and transfer documents with the tax return to avoid any issues in getting my 2010 refund.

A reader shared this link on one of my previous posts.  I found it to be extremely helpful.  It is the IRS rules and guidelines for divorce and repayment of the First Time Home Buyer Credit and also how moving or selling the house affects repayment.

http://www.irs.gov/newsroom/article/0,,id=206293,00.html

Hope this helps!  And remember, share your experiences with this too.  I’m sure others would find it very helpfull.

I monitor the traffic to my website and monitor the search terms people use to find my website.  I see that a lot of other people have also been searching for information regarding Equifax credit scores dropping while a credit item is being disputed on their credit report.  So if you happen to find this blog and the same thing happened to you, will you please share your experience here or in the other post (link above).  I would really like to know if this is happening to a lot of people.  If it is and everyone shares their experiences, maybe we can do something about it. 

Also, has anyone else noticed if TransUnion or Experian do this too?  I do not have score monitoring for them.

I did file a complaint with the Federal Trade Commission.  I think everyone else should do the same.

Some people might not think it’s a big deal if they drop your score during a dispute since the dispute only takes up to 45 days.  But here is why it’s a problem…

I was in the market to buy a new car.  I had a small and very old collection account on my Equifax credit report.  I wanted to try to get it removed before I bought the car.  I noticed immediately after the dispute that my credit score dropped.  Nothing else had changed on my credit report except they changed the comment section to “investigation in progress”.  The dispute was taking too long and there was a car I was in love with so I decided to try to get it then instead of waiting for the dispute to complete.

I imagine that there would be many situations where an unsuspecting consumer might dispute several items, then need to apply for some sort of credit shortly after, and be denied credit because their score was drastically reduced.  I want to point out that it’s never just a few points… it’s a lot!

So anyway, if you have experienced this… please share your story with everyone.  Thanks so much!

I have been doing a lot to repair my credit and periodically have to dispute items on my credit report to get them removed or updated.  Any time I submit a dispute, I have noticed that my credit score drops by 10 points within 24 hours of submitting my dispute.  This happens every time, without fail.  My score does not go back up until the dispute is complete.  Some times that takes 45 days. 

So what if I need to apply for a loan or something within that 45 days?  This seems like unfair practice to me.  I feel as though they are punishing users like myself for doing what we are legally entitled to do.  I am going to have to look into this further. 

Can anyone else confirm this?

—EDIT—

I posted a second blog about this here: http://www.newworld.ws/blog/2011/04/09/anyone-elses-credit-score-drop-after-submitting-a-dispute/

My soon to be ex-husband bought our first home this past April.  Only his name is on the mortgage, but we both got the full credit ($4,000 each for a total of $8,000).  We are now getting a divorce and I wasnt sure if I would have to pay my half of the credit back. 

After some research, I did find out that yes… whoever moves out of the home has to repay their portion (half) of the first time homebuyer tax credit.  However, I also found out that if I legally transfer my rights to the home to my ex within the divorce decree, then that transfers full responsibillity of the tax credit to my ex.  Meaning that he becomes responsible for repayment of the full $8k should he move out of the home, sell, or foreclose.  As long as I legally transfer all my rights regarding the property to my ex-husband, then I am off the hook.  But it has to be legal and included in the divorce decree.

I figured there is probably someone out there in the same awful situation and could use some advice.  I obtained that information from the IRS and also my divorce lawyer.

The Haitians were also hit by a tremendous earthquake which brought the area to ruins.  Many of the people are now living in tent cities and camps with unsanitary and detiorating conditions.

If the human race has learned anything, it should be that major catastrophes that cause the deterioration of living conditions and sanitation are almost always the primary cause for disease epidemics.  It is ridiculous to me that the Haitians would blame the UN for the Cholera outbreak.

Considering that the UN is there to help Haiti, I think the Haitians look barbaric and foolish rising up in violence and adding to the disaster in their country.  The smart thing to do would be to be productive and help restore the community.  Not build barriers of trash and set them on fire.  And certainly not run wild in the streats with weapons promoting chaos, death, and violence.

Our assigned advocate could see that I was clearly led around in circles and that processing times were not acceptable.  After getting the Taxpayer Advocate involved, it only took about 2 weeks for her to push the IRS to a completion date.  We finally ended up getting our tax refund (including the First Time Home Buyer Tax Credit) in September.  So it took them 5 months to process everything.  Had I not been on them the whole way catching mistakes myself, it would have taken much longer.

I want to let you all know that we did apply for the Injured Spouse application as well.  Even though one of us owed previous tax debt, the injured spouse application protected our first time homebuyer credit from being applied to that back tax.  There are no rules pertaining to the allocation of the first time home buyer credit so by filing the injured spouse form, you can allocate the full $8,000 to the spouse that does not owe the back taxes.  Suprisingly, we DID get the full amount.

Hope this information helps!