Millions of Americans have to deal with thousands of dollars worth of bad debt. I say bad debt because believe it or not there is such a thing as "Good Debt". What this book covers is how to EFFECTIVELY deal with bill collectors, and lawyers who are threatening to sue over your debt and legally and ethically improve your credit profile.

HOW TO NEGOTIATE AND SETTLE YOUR DEBTS WHILE RESTORING YOUR CREDIT

So don't get bummed out over your debtBy Joseph R. Bloom

AuthorHouse

Copyright © 2011 Joseph R. Bloom
All right reserved.
ISBN: 978-1-4634-1141-1

Contents

1. How to get, read, and understand your credit report..................................................................................................132. Credit brueau coding system..........................................................................................................................173. Lifestyle changes....................................................................................................................................274. How to rebuild your credit rating....................................................................................................................315. Techniques for dealing...............................................................................................................................with bill collectors 356. Determining your financial status....................................................................................................................437. How and when to make a settlement offer..............................................................................................................498. How to negotiate with a creditor.....................................................................................................................539. Techniques for maintaining a good credit rating......................................................................................................6110. Sample letters to credit bureaus, original creditors, collection agencies, and a state-by-state guide of statute of limitations.....................65

Chapter One

HOW TO GET, READ, AND UNDERSTAND YOUR CREDIT REPORT

You may ask why you need your credit report in order to negotiate your debts. The answer is really simple. You may not know every creditor who is reporting negative information to your credit bureau reports. Additionally, each creditor's address and telephone number will be listed on your report; so it is vital you have a CURRENT copy of your credit reports. The three major credit bureaus are: TransUnion, Equifax, and Experian.

When Congress passed the Fair Credit Reporting Act, they required each of the credit reporting agencies (the credit bureaus) to provide us with a free copy of our credit report once each year.

To obtain a copy of your credit report you must request a copy from each of the three major credit bureaus. You will receive a free credit report, but not your credit score. No need to worry about your score at this time; as you will be making significant changes in a relatively short period of time which will enhance your overall credit scores.

To receive your free credit report, go to www.Annualcreditreport.com or you can contact each bureau separately. Their addresses are:

TransUnion—www.TransUnion.com 1-800-916-8800 P.O. Box 1000 Chester, PA 19022

Equifax—www.Equifax.com 1-800-685-1111 P.O. Box 74021 Atlanta, GA 30374-0241

Experian—www.Experian.com 1-888-397-3742 P.O. BOX 2104 ALLEN, TX 7501

Ok, you have ordered and received your credit reports and perhaps, in some cases, it looks hopeless. You may ask yourself: "Is it worth it to even try?"

"I'll never get my credit in good shape again so why go through this process?" Don't be discouraged. You wouldn't have bought and be reading this book if you didn't at least HOPE to get your life back on track. Yes, it will take TIME, EFFORT, DILLIGENCE, DESIRE, and some MONEY on your part; but re-establishing your good credit rating will save you thousands of dollars in interest payments alone on any future purchase and that is if you can even get a lender to extend credit to you.

I strongly recommend you start a savings account or better yet, a trust account you cannot access unless there is a dire financial emergency. This is the safest way to insure that the money you set aside to settle your debts and improve your credit score are used for those purposes ONLY! Lets be honest, if we had been more diligent and better money managers, none of us would ever have been in a position to need our debts settled and our credit scores improved.

All right now lets learn how to read and understand, the credit reports, so you can take decisive action TODAY! You know about TransUnion, Equifax, and Experian, but you may have also heard you have a FICO score and perhaps you wonder what it means. FICO stands for Fair Isaac and Company. Fair Isaac is an INDEPENDENT company that developed software programs for banks and other lenders to quickly identify what type of credit risk you may be. Credit scores range from 300-900 and the higher the score, the better risk you are and therefore, lenders are more willing to extend credit to you. It is important to know that each of the three major credit bureaus have their own scoring system and that is why when your credit report is run, you will see three different scores. That is because each system rates your credit information a little differently. TransUnion uses the Emperica system, Equifax uses the Beacon system, and Experian uses Experian/Fair Isaac system. Your credit score is determined by several factors including: Income, how long you have had the same job, how and when you pay your bills, how much credit you currently have, the balances available to you, what percentage of your credit you are using (30% or less of your available credit is most desirable for a favorable credit score); length of time you have had credit, the TYPES of credit you currently have, and the number of inquiries on your report

Chapter Two

CREDIT BRUEAU CODING SYSTEM

Here is a complete list of the credit reporting agencies coding so you can better understand what all those numbers next to the items contained in your credit reports mean. The list below lists the score factors and/or the reason for the risk scores assigned to your credit profile. These risk scores are the ones used by TransUnion, Equifax, Experian, and Fair Iaasic as well as for UniQuote a mortgage credit bureau that is available through TransUnion for mortgage companies.

CODE NUMBER REASON

1. - Amounts owed on accounts is too high 2. - Level of delinquency on accounts 3. - Too few bank revolving accounts 3. - Proportion of loan balances to loan amount is too high 4. - Too many bank or national revolving accounts 4. - Lack of recent installment loan information 5. - Too many accounts with balances 6. - Too many consumer finance company accounts 7. - Account payment history is too new to rate 8. - Too many inquiries in last 12 months 9. - Too many accounts recently opened 10. - Proportion of balances to credit limits is too high on bank or other revolving accounts 11. - Amounts owed on revolving accounts is too high 12. - Length of time revolving accounts have been established 13. - Time since delinquency is too recent or is unknown 14. - Length of time accounts have been established 15. - Lack of recent bank revolving information 16. - Lack of recent revolving account information 17. - No recent non-mortgage balance information 18. - Number of accounts with delinquency 19. - Too few accounts currently paid as agreed 19. - Date of last inquiry too recent 20. - Length of time since derogatory public record or collection is too short 21. - Amount past due on accounts 22. - Serious delinquency, derogatory public record or collection filed 23. - 23 Number of bank or national revolving accounts with balances 24. - No recent revolving balances 25. - Length of time installment loans have been established 26. - Number of revolving accounts 26. - Number of bank revolving or other revolving accounts 27. - Number of retail accounts 27. - Too few accounts currently paid as agreed 28. - Number of established accounts 28. - No recent bankcard balances 29. - Date of last inquiry too recent 30. - Time since most recent account opening is too short 31. - Too few accounts with recent payment history 31. - Amount owed on delinquency 32. - Lack of recent installment loan information 33. - Proportion of loan balances to loan amounts is too high 34. - Amounts owed on delinquent accounts 35. - Payments due on accounts Negotiatte and Settle your Depts While Restoring your Credit 36. - Length of time open installment loans have been established 37. - Number of consumer finance company accounts established relative to length of consumer finance history 38. - Serious delinquency and public record or collection filed 39. - Serious delinquency 40. - Derogatory public record or collection filed 47. - Number of consumer finance inquiries 97. - Lack of recent auto loan information 98. - Length of time consumer finance company loans have been established 98. - Lack of recent auto loan information 99. - Lack of recent consumer finance company account information

Remember, lenders use these scores to determine if they will extend credit to you or not. Therefore it is important that you learn how to read your report so you can effectively manage your credit profile to your maximum benefit.

So now you have read your report and you are even MORE depressed than you were when you started reading this book. Relax, as previously stated, it will take time, effort, diligence, desire, and some money on your part, but not all is hopeless. In fact, you are already in a much better position than you were before ordering this book. KNOWLEDGE IS POWER!

Your credit report will contain the name of the company reporting information on your account, the codes and a brief summary of 30, 60, 90, or more than 120 days delinquent; and amount owed on your report. It will also contain any positive information reported such as "Paid As Agreed".

On the back of your credit report are listed the names and addresses of any company reporting negative information about you. This is what you really want and need in order to start the settlement process while you work on cleaning up your credit reports.

You may have a number of collections on your credit report. Sometimes (and in most cases), there will be several collection companies reporting the same account information. This is because collection companies purchase bad debt in bundles and literally pay as little as 2-10 cents on the dollar, for the right to collect your debt. This is actually good news for you. "Why," you may ask "is this good news for me?" The answer is very simple. In MOST cases, when the loans are purchased, the original documents which detail the agreement and your signature committing you to the debt are never sent to the collections company and even original creditors may not have the documents on file. This gives you POWER. You are now in the driver's seat and can start the process of having negative information deleted from your credit report; and you have the upper hand when negotiating a settlement thus making it more likely to settle your debts for much less than the original loan amount.

The process is somewhat lengthy, but is a much shorter period of time than waiting 7 to 10 years for information to "fall off" your report. As you may see on your report, in many cases some debts, which are well over 7 years old, are still being reported on your account. Recent studies show that as many as 80% of credit reports contain information that is: Inaccurate, Outdated, or Unverifiable. This is to your advantage and you can and will use the law to your advantage.

You will be using two consumer protection laws while involved in this process. They are: The Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA). These laws were enacted so consumers have recourse when information is not being legally reported by companies and recorded by the credit bureaus, and to help us deal with collections agencies which use illegal methods to attempt to collect debts.

Before attempting to settle any debt, you should write to the credit bureau that is reporting the information and dispute the information as either, inaccurate, out dated, or unverifiable. Sample letters are available in Chapter nine (9).

The reason you start with the credit bureaus is that in order to effectively use the Fair Debt Collections Act to require the company reporting the information to complete the investigation under SECTION 623 OF THE FAIR CREDIT REPORTING ACT, YOU MUST HAVE FIRST DISPUTED THE INFORMATION WITH THE CREDIT BUREAU.

You will use the sample letters contained in this book as templates for your dispute letters. You will be guided through the process of how to write the letter and how to keep things organized so you have accurate records of every action you take. The reason for keeping accurate records is so that IF you are not successful in getting the issues resolved, you can sue the credit bureau and/or company reporting the information if necessary; and you may also be filing a complaint with the attorney general of your state.

The easiest way is to start with a file folder for TransUnion, Equifax, and Experian. You will send your letters to them Certified mail, return receipt requested. This will cost you about $5.00 to $6.00 per letter but is well worth the cost as it provides you with an accurate record of your correspondence with the credit bureaus, collection agencies, and creditors.

Being well organized is critical to being successful. When you have files for each company you are corresponding with, it is much easier to track your successes and failures so you know to whom you need to send additional letters and what specifically you want them to do.

These sample letters are provided as a guide for you to use. By utilizing this format, you are identifying the creditor information you are disputing, the account number in dispute, and the reason for the dispute. You need to provide all of this information in order to request a valid dispute.

Now be prepared to wait from 20 to 35 days for a response from the credit bureaus. They are required by law to complete an investigation within 30 days of receiving a dispute. Be prepared for them to send you a letter stating they have contacted the creditor and the information has been verified and is accurate or, they are not required to keep copies of the documents and for you to contact the creditor. This is quite common and is the usual reply from the credit bureaus because they send an electronic inquiry to the creditor who then sends a standard electronic reply that the information is accurate. Of course they will say it is accurate. If they are reporting information that is inaccurate, outdated, or unverifiable the FIRST time, it will still be the same when the credit bureaus contact them; it doesn't take a genius to figure that one out. In some cases an item or two may actually be deleted from your report and you have already had some minor success. Keep up the good work!

At the same time you are sending out letters to the credit bureaus, you can put together a file folder for each creditor and collection agency listed on your credit report. NOTE: Not every creditor reports to ALL the credit bureaus, so the information may be on one or two of your reports, but not all three.

You will be asking the original creditor to investigate the information they are reporting to the credit bureau, you will be asking the collection agency to validate, and you will be asking the credit bureau to verify the information, (be sure to state which credit bureau they are reporting the information to and include the account number they are reporting). You will also be asking them to provide you with proof of the debt (an original document with your signature on it). See sample letters in chapter 9.

These are important steps in cleaning up your credit report and starting your preparation for negotiating a settlement. Remember, if the creditor or collection agency cannot VERIFY or VALIDATE the debt is yours, they cannot legally report it or attempt to collect it; and therefore must remove it from your credit report.

This brings up the moral issue of "To Pay or Not To Pay". If you KNOW the debt is yours, you have a moral obligation to attempt to settle with your creditor.

While the creditor may no longer have a legal right to collect what you owe, if the debt is yours, you should make every effort to pay it. The only exception to this is collection agencies which purchase debts for as low as 2-10 cents on the dollar and then attempt to collect the FULL amount owed PLUS all types of fees. You should still attempt to settle the debt in order to remove it from your credit report, but do it on YOUR terms!

You should ALWAYS start with the collection agencies and ask them to validate the information they are reporting and attempting to collect. In over 90% of the cases, they cannot provide the required documents and therefore MUST, by law, stop collection activities; and may no longer report the information to the credit bureaus.

You should make every effort to contact the original creditor and work out a settlement with them. For example: You have an auto loan with Bank Two and defaulted on the loan. They attempted to collect the amount due and couldn't, so they repossess the vehicle. They then sold it at auction and your $25,000.00 automobile was sold for $5,000.00. They will attempt to collect the $20,000.00 difference, which is the amount they "charged off". A "Charge Off" means the company could not collect the money within 6 months, so they had to take that as a loss and charge it off as a business loss. The original creditor may still be attempting to collect or they may have sold or assigned the debt to a collection agency. The process is such that your debt may be sold several times to different collection agencies and that is why you may have multiple reports on your credit report for the same account.

(Continues...)

Excerpted from HOW TO NEGOTIATE AND SETTLE YOUR DEBTS WHILE RESTORING YOUR CREDITby Joseph R. Bloom Copyright © 2011 by Joseph R. Bloom. Excerpted by permission of AuthorHouse. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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