Category Archives: lending

What Happens When You Are Purposely Avoiding Creditor Calls

Do you have a lot of debt, and collections agencies are pursuing you over this debt? Are you avoiding all calls from creditors and debt collection agencies, and throwing away their letters without reading them? If you are wondering what can happen with this debt, when you are actively avoiding any contact with said creditors and debt collections agencies read on.

First and foremost you should indeed be careful in deciding to speak to any debt collector. You should however read any and all written correspondence with these debt collection agencies and creditors. Be on the lookout for any errors or factual discrepancies or anything else that has been misrepresented. If you find any of these errors you should dispute them via mail, as errors can restart the debt clock as far as the statue of limitations goes.

If the debt is very old, you should be aware that if you make any sort of payment after being harassed by debt collectors that you will be restating the debt clock and statute of limitations on the debt. Normally after 7 years of no payments and no contact with a creditor, the debt will fall of off your credit report. Yet making a payment or admitting the debt is yours can restart this “debt clock” all over again, giving your creditors 7 more years to pursue you, and 7 more years for the debt to haunt you.

If your debt ends up in a collections agency, how the collection agency deals with your account will hinge on a few factors. The first being that they are legally allowed to pull your credit once per month. Your credit report will let them get a general feel for your finances as they stand, if there is any indication that you are making a decent income or paying on other accounts, they may decide to pursue you to the maximum extent that they are allowed by law. The next factor rests on how large the debt is, large balance accounts warrant more time and effort, while small low balance accounts yield little for the collection agency to expend to much effort.

Your debts will show on your credit report as being in collections. This is a huge red flag to any lenders that you do not honor your debts, so your lending in the future may be hampered. If the dent is large the creditor may seek a judgement against you. After a judgement has been filed on you, that too will appear on your credit report, further damaging your credit score and credit standing. The creditor can then take any legal remedies to collect on the judgement, depending on the laws of your state.

If you owe a bank due to a bad check or an overdrawn bank account, this could lead to further issues than described above. Most times these issues get reported to ChexSystems or TeleCheck, which are debit history agencies. If you get reported to these agencies, you could be denied a checking or savings account at any future banks, not only that but any banks you currently have in good standing can be shut down at the banks discretion if they see you appear in these systems.

Your only options are to work out a payment arrangement, or do nothing and wait for 7 years until the debt falls off of your credit report.

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Why Different Credit Bureaus Show Different Scores

Today more than ever your credit score matters. Today’s economy and finances are credit score driven. Did you know just 1 point can mean the difference between paying hundreds and even in some cases thousands less in interest and fees on a mortgage? It is true a 679 instead of a 680 could cost you dearly. Yet figuring out your exact score can be a real headache, or rather your exact representative credit score. Why? Simple, each credit bureau might have different data on you.

Each of your creditors might report to different credit bureaus, in fact creditors are not required by law to report on you at all. Many do but some do not. Paypal credit comes to mind here, they do not report at all, that is unless you default on payment then sometimes they do. Smaller creditors are even less likely to report to all 3 credit bureaus, mostly due to the costs of reporting the data. The costs to report the data are not offset for smaller creditors. Major creditors however tend to report to all 3 credit bureaus. I always tell clients that I have who care about their credit scores to choose which creditors and lenders they use carefully and to ask before hand if they report to all 3 major credit bureaus.

Now even if every account gets reported to all 3 credit bureaus, your score may actually differ between one or more of the credit bureau reports. This is due to the fact that while bureau might have exactly the same information, it does not mean that each bureau calculates the score the same. Also each lender can pull a different score. Sound confusing? Its realy simple actually. There are two major scoring models FICO and Vantage. When you pull your own credit score you are likely to see your vantage score and not your FICO score.

Your vantage score is made up of 6 components: payment history (32%), utilization (23%), balances (15%), depth of credit (13%), recent credit (10%) and available credit (7%) and your vantage score will range from 501 to 990. Your FICO score on the other hand will have just 5 components: payment history (35%), length of credit history (15%), amounts owed (30%), types of credit (10%) and new credit (10%). Your FICO score will range from 300 to 850. There are also variants of the FICO and Vantage scoring systems such as FICO8 and FICO9 for example so even two lenders pulling your FICO score may end up getting different numbers on you.

The types of lenders you go to can also effect your score. Each type of lender uses their own in house variant of the same scoring system. Auto lenders for example are much more likely to weigh your auto payment history when calculating your credit score under the FICO or Vantage scoring model. If for example you had a car get repossessed, even if your credit report was perfect otherwise, your score for the auto lender might be terrible while the same scoring model such as FICO ran for a mortgage would be much higher. Many lenders have proprietary systems such as algorithms that will calculate a custom score based on in house criteria based on their unique credit products, services and past experiences.

You should there for expect your score to vary between 5 and 20 points higher or lower than the score that you see when you pull your own credit score online. Just because one lender says your score is for example 679 does not mean the next one will. This is where rate shopping comes into play. Rate shopping is where you get more than one quote by having multiple lenders pull your credit report. FICO only counts one inquiries made in the 30 days prior to scoring so that you can rate shop without harming your credit.

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