Your Debt and Your Credit

There are a number of junctures at which debt management and credit repair intersect. Your debt will have a serious impact on your scores via the FICO scoring model which considers your balance to debt ratio. The higher your balances the lower your score will be and vice versa. Your debt load can cross over into your credit life in other important ways as well

Your Balances and Your Scores

The application of credit repair principles to debt management for the purpose of optimizing credit scores must take the FICO treatment of debt into consideration. FICO acknowledges credit card utilization levels in 20 percent increments; the lower you go the better, but it is handy to know the details. Think of 60 percent card usage as neutral, 40 percent and below as positive and 80 percent and above as deadly. Manage your balances with care.

Charge Off and Collection Accounts

Many people involved in credit repair have another form of debt worth considering. When a default occurs the creditor will typically write off, or charge off, the debt after 180 days. At this point the debt will be sold or assigned to a collector, who will attempt to collect. Prior to reporting the account to the credit bureaus the collector must send collection notice. This creates an important opportunity.

FDCPA and Debt Validation

Under the Fair Debt Collection Practices Act (FDCAP) you have the right to validate a debt within 30 days of getting dunned. Debt validation is an important credit repair tool for two reasons. If the debt has been paid or otherwise resolved, you have an opportunity to put a stop to the collection before it hits your credit report. Secondly, the FDCPA gives you the right to ask for documentation of the amount claimed. If you plan to pay the debt it is worth verifying the balance in case of error. Balance errors are common. Do not make assumptions.

Debt Negotiation Opportunities

Debt negotiation was once a slow and tedious part of the credit repair process. During the last economic boom collectors were loath to negotiate. Money was plentiful. Everyone seemed to be purchasing homes, and collection efforts were enhanced by mortgage lenders who often required that many debts be resolved prior to closing. Things have changed. The economy is slow, home sales are weak and collectors are hungry. If you have the money to make a decent offer, now is the time to give negotiation a try.

Credit Repair Help

If you have outstanding collections and need help making sense out of them credit repair services offer a terrific value. For a small monthly fee a professional will examine your credit reports, identify all of the problem accounts including your collections, research the statutes of limitation, the reporting periods, look for compliance issues, and manage debt validations and credit bureau disputes as appropriate. Proper research prior to taking any credit repair action will avert any unnecessary legal action and give you the information you need to make the most effective settlement offers.

Copyright © 2010 James W. Kemish. All Content. All Rights Reserved.