A LOT of accounts in collections

Anonymous · ‎07-16-2010

i'm trying to get on top of the accounts in collections. i was really bad with my finances in the past and am looking to change. i have a few questions. 1. how long does a deliquent account stay on your credit report? i heard it was only 7 years, but the accounts i opened when i was a teenager have been in collections since 2002/2003 and they are STILL on my report. 2. i heard from Suze Orman that if you just call the companies and offer them SOMETHING, they'll generally take it just to get some kind of payment. i was wondering if anyone has tried this, and if it works. i don't have a lot of money and i'm trying to get my score up to buy a new car sometime soon. and 3. when i pay those accounts off, how long does it take for my score to improve. it's currently at 555 at it's highest. any info would be greatly appreciated.

RobertEG · ‎07-16-2010

First of all, nothing in the FCRA ever mandates the deletion of any account from your credit file. Theoretically, they can retain the account information forever.

There are only two ways an account is deleted from your credit file. First, the one who reported it specifically requests its deletion, or second, it has become so old that the CRA arbitrarily decides to purge it from their records. CRAs dont normally consider doing that on their own until at least 10 years has expired from the date of closing of an account, in order to have fair assurance that no FCRA issues might be ressurected.

The basic understanding of drop-off dates stems from the provisions of FCRA 605(a). This statute is not directed at removal of anything from your credit file, but only on the ability of the CRA to include information contained in your file in any CR they issue after the dates specified in FCRA 605(a).

Take a very simple example. Let's say you had an account with an OC that you opened in 2002.

You had, for example, a 30-day late on that account in 6/2003. then a 60-day late in 7/2003, then a 90-date late in 8/2003, then a 120-day late in 9/2003 that led to a charge-off by the OC, and then, to futher the example, was then referred for collection after the charge off.

The example 30-day late will drop after 7 years, which is 6/2010, so will fall off in 7/2010. So probably gone now

The example 60-day late will drop off after 7/2010. so would drop in August

The example 90-day late would drop after 8/2010, so remains

The example 120-day late would drop after 9/2010, so also remains

The example CO drops after 7 1/2 years from the DOFD of 6/2003, which would be after 12/2010, so it remains.

Identical fall-off for the CA, which is also based on the same DOFD, and would be after 12/2010.

The drop off of the 30-day late late after 6/2010 would not delete the account as of that date, nor the later derogs that can still be reported.

If you make payment, it never erases the derogs from credit scoring before the above drop-off dates, unless you simultaneously secure the agreement of the party you are paying for a prior wiritten contract agreeing to deletion of these prior derogs prior to those dates in exchange for your payment. That is what is called a pay for deletion (PFD) contract with the creditor.

Payment wont improve score. Only deletion of the derogs will do that.

Anonymous · ‎07-17-2010

So does that mean I'm just out of luck? How do I start to rebuild my credit and improve my score? Secured credit cards?

llecs · ‎07-17-2010

@Anonymous wrote:

i'm trying to get on top of the accounts in collections. i was really bad with my finances in the past and am looking to change. i have a few questions. 1. how long does a deliquent account stay on your credit report? i heard it was only 7 years, but the accounts i opened when i was a teenager have been in collections since 2002/2003 and they are STILL on my report. 2. i heard from Suze Orman that if you just call the companies and offer them SOMETHING, they'll generally take it just to get some kind of payment. i was wondering if anyone has tried this, and if it works. i don't have a lot of money and i'm trying to get my score up to buy a new car sometime soon. and 3. when i pay those accounts off, how long does it take for my score to improve. it's currently at 555 at it's highest. any info would be greatly appreciated.

OP, welcome to the forums!

1) Yes, baddies only report for 7 yrs from DOFD, but some OC accounts will have removed any baddie reference by 7 yrs and can report for an additional 3 yrs beyond that as a positive account. For example, I have a paid CO on my report (EQ). It was CO'd in 1997 and still reports today. The baddie references (the CO mention + lates) were removed inside of 7 yrs and reports now as a positive account (albeit in error....report says it is "open" and should report indifinitely).

2) No! Don't do it. Yes, Suze is right. They'll take it sometimes. But what if they don't want your offer? No you've awaken them and put a big red bullseye on you that says, "Hey...over here...sue me!". If you have any unpaid debts, the best thing to do is to wait it out until one of two conditions are met: 1) SOL expired or 2) if not expired, then wait until you have the $$$$ to PIF if you had to. You can always offer a settlement once you have 100% of the money saved up. This way, if they reject your settlement offer and decide to sue instead, you'd have the $$$ to throw at them to avoid any suit. Doing anything like sending a DV, PFD, dispute, offering settlements, etc. will make you a prime target for being sued if within your state's SOL.

3) Paying a CA without their acceptance of a PFD will never improve your FICO score. It doesn't matter if you owe $0 or $10,000, the damage is the exact same per your score. Same principle applies to any CO. If you have a cell phone CO, for example, paying it to $0 won't help your score unless you can get it deleted. However, CC COs, like an old Visa, won't improve your score if paid on the merit of the CO alone, but sometimes that TL, if PIF (and not settled...and assuming you didn't send a PFD), will result in a score increase due to your CC utilization improving. YMMV based on how it reports and how it reports in relation to your other CC balances and reported CLs. If it is maxed out, then you'd likely see an increase once it reaches $0. If under your CL and CO'd, you could see a loss in points if paid. Closed and $0 balance CC accounts don't factor into util.

I'd suggest reading the following:

Common Abbreviations

Credit Scoring 101 - great for knowing what is in your credit score and to see how your score is impacted.

and What Steps Do I Take - great for learning the repair process. Following these steps would get the baddie removed and will improve your FICO score.

Anonymous · ‎07-19-2010

assuming i leave well enough alone, as far as the "sleeping giant" is concerned, would opening a secured card help my score as long as i make the payments on time, and don't max it out? would it counteract the baddies?

llecs · ‎07-19-2010

If you don't have any CCs now, opening a secured would go a long way to improving your scores. It won't counteract, but a lack of a mix of credit is a big score downer and getting one or two secured would improve your scores.

Anonymous · ‎07-20-2010

you are correct. i do not currently have credit cards. i'm glad to hear that it will improve my score opening up a secured card. i found it to be very overwhelming that it would not improve my score to pay off my old accounts. it's a little relieving. i'm glad i found this forum! thank you to everyone for answering all of my questions! all of you are very courteous and helpful!

RobertEG · ‎07-20-2010

I agree, establishing at least some revolving credit is a necessity for FUTURE credit score gains.

But dont expect any immediate gains. Maybe even some short term drops in score.

If you apply for new revolving credit, each inq will be posted to your CR. Each will negatively impact your current FICO score, whetther or not the card is granted.

Any new account, if approved, will enter into your CR at zero age of account, and will thus reduce your average age of accounts (AAoA).

Those are the downsides.

The upside is that you will then have revolving credit upon which FICO can then calculate a % util.

I, once again, agree with the other posters that you must do this for the longer term, for you will never build a healthy FICO score without revolving credit.

But I would expect little or no postivie FICO impacts within the next year.