Little Known Facts on Removing Negatives from Credit ReportsBy Kathy Godin
The credit bureaus don’t want you to succeed. Removing negatives reduces value of their credit reports since they now lack information their customers want.
In spite of the credit bureaus’ stance on this issue, the question remains “Can you remove negative items from your credit reports?” Sometimes. Little known facts about credit reports and credit scores complicate results. Let’s check in with Lillian.
A collection appears on Lillian’s credit report. She wants it removed. She plans to dispute the debt. Will she succeed?
– Dispute of accurate information doesn’t work. Process created to challenge errors only.
– One exception: Creditor doesn’t respond to credit bureau inquiry. They must validate information or credit bureaus cannot continue to report. If creditor went out of business there may not be anyone available to respond.
In Lillian’s case the dispute did not succeed. She wants to improve her FICO credit score so she plans to pay off the collection. Her friend Carol points out that simply paying off the debt will not remove it from her credit report. Why? Negative information appears in two ways on your credit report.
A. Current Debt reflects what you owe and where you’re delinquent right now.
B. Credit History documents your past. Paying off collection will change current debt information, but missed payments stay in your credit history for seven years.
Lillian can negotiate to remove the negative information in exchange for her payment of debt. First she needs to know who owns the debt. When a creditor sends your account to a collection agency, they may pass along ownership of debt. Normally, the original creditor will show a zero balance on your credit report when they pass ownership to the collection agency. Paying for deletion normally works this way…
1. Collection agencies more receptive than original creditor.
2. Payment in full normally required.
3. Written agreement to delete from collection agency recommended before you make payment.
Will Lillian’s FICO credit score improve dramatically? People report disappointment. Some claim no improvement. Possible reasons:
1. Credit history still reflects negative information with original creditor. Your agreement to delete for payment was only with collection agency.
2. Collection was old. The negative affect on your score decreases with time and collection may not be costing you many points.
Bottom line: Be clear as to what you want to achieve. “Improve FICO credit score” is not specific enough. Why do you need a higher score? Buying a house may require paying collection for mortgage approval but talk to your loan officer before you take action.
Kathy Godin, Award-Winning Loan Officer and Branch Manager
Prime Mortgage Lending, Inc.
Where people, not computer robots, answer the phone.
Proudly Serving All of North Carolina