Cleaning up Credit: Collections and PFD advice.

[02cdjohn]

**I think I originally posted this in the wrong forum. My apologies.

Hello everyone! This is my first time posting on this Board. I've been reading it for a while.

For the past six months I've been trying to clean up my credit reports. I started with all TU and EQ in the low 550s. Since then I have raised them to 609 and 604 respectively.  My goal is to have a 680 by the end of the summer., follwed by a 700 by 12/31/2010. The following are currently hurting my score:

--2 collections (one is with Verizon for $293. It is years old. In fact, on my transunion and experian reports it says that the removal date is 05/2010. The second collection is for a medical bill, $467. This just started reporting in March 2010).

--I am utilizing 89% of my revolving accounts.

- i do have five 30 day lates and 2 60 day lates from 3 years ago. SInce then, I have paid ALL accounts on time! So my last late was a little over 3 years ago. I got one goodwill out of HSBC, but Sallie Mae will not budge. The lates with SM occured as I was consolidating my loans...

The utilization problem is easy to fix and I've already begun to address it head on. When I use the fico simulator if I get my utilization down to 33% my score is estimated to be 650-680 with the 2 collection accounts still reporting. Based on the plan I developed and have been sticking to so far, I should have my utilization down to 33% by July 15, 2010. From there, I will aim to reduce my utilization to 20% by September 30, 2010 and finally less than 10% by December 2010.

Where I need some assistance is with the collections. I hope to purchase a new car (2010 Volkswagen Jetta) by mid-June 2010. I plan on visiting my local credit union and seeking financing before heading to the dealer. Although my utilization will only be down to approximately 47-50% by mid-June, my overall score could still increase by a decent amount if I can get these two collections removed.

In regards to the first collection I referenced above (Verizon), I never opened the account. My mother took my ssn and opened the account. since 2003 I have refused to pay it (sorta regret it). I almost paid it last year, but figure I could wait it out when I saw that it would drop off in May 2010. My question is--When in May will this drop off. I plan on seeking auto financing in mid-June. I don't want to wait another month before the CRAs decide to stop reporting the account. My strategy was to dispute the account as obsolete or past SOLs online on Monday May 3rd. My question is--if I do this, is it guranteed that the CRAs will remove it, or will it still take 30 days?

In regards to the second collection account as referenced above (medical bill now at Aargon Collection), I would like to offer Aargon a PFD. I've searched the threads and found that people seem to have luck getting PFDs with Aargon. However, it seems like a lot of people straight up call them and arrange an agreement letter via fax. I really want to do this, but I'm a bit afraid. So I drafted the PFD letter to send via mail on Monday April 26. My question is--in my PFD should I offer a settlement or agree to pay in full. If I agree to pay in full, will they assume the debt is valid and then not want to accept a PFD?

advice please.

[Anonymous]

Hi and welcome to the forums.

I would leave the Verizon account alone.  It is due to fall off next month.

For the medical, contact the OC and see if they will pull back the account from the CA if you pay them in full.

Get your revolving down to 10% of below.  Even without negatives on your report this is killing you.

[LIGHTNIN]

Agree with guiness56 110%

CU's are the best to finance a auto loan,IMO I would wait until you get your util under 10% to get a better rate.

Also buying a auto on the last business day of the month, is the best way to go.Because the salespeople have to make quota.

The salespeople have to make a certain quota just to keep their jobs and they have contest for the best parking spots,to drive

a loaner car for the month and for vacation trips...because of the economy vacations maybe out.So on the last day, a sales person

may need to sale just one more unit, to make a quota and therefore you both will get a deal.

[02cdjohn]

How would I go about asking the OC to pull back the account. Is there a letter I send, or will a phone call do. Is there something that people typically say that get them to pull it back. The OC is a hospital.

Also, if the OC pulls it back from the CA, will the OC take my money and then report me to the credit bureaus? If the OC doesn't do this, would I get the collection off my credit report by disputing it, or will it automatically fall off?

[Anonymous]

If the hospital is close enough to go to I would go in person.  Otherwise, try calling.

Just tell them, I want to pay you the money I owe.  Will you pull the account back from the CA?

If they agree, you would probably need to dispute the CA with the CRAs.  But I would give it 60 days before doing that.  Sometimes they will remove it on their own.

If the OC is not currently reporting, they probably won't.  However, when you talk to them, include them not reporting in the deal.

[Anonymous]

Others have provided solid advice about approaches to clean up the derogs. I'd like to offer advice about your pending new vehicle aspirations. Obviously there are a lot of variable that affects whether one can or cannot afford a new vehicle. Ultimately, the buyer will be the final judge. In the meantime, I recommend you to begin formulating methods to track and compare cost of ownership. An Excel spreadsheet is a great way to do it. Cost of ownership involves depreciation, various taxes & fees (sales & use taxes, excise tax, registration, license plates, etc), loan costs, insurance, fuel expenses, vehicle routine maintenance, unanticipated repairs, emissions testing/certification, vehicle enhancements (audio system, roof rack, moonroof, deflectors, masks, sun shades/vent visors, etc). Look at near term residual or resale value. This is especially insightful if you play devil's advocate where later down the road you financially get in a pickle and may need to sell it. Will the vehicle be worth more or less than the outstanding loan balance? Give yourself an easy, or easier way out if the worst would happen rather than risk a newer ding on your credit reports. Obviously there are a lot of things to look at. Your low FICO scores that will likely subject you to high financing rates and insurance premiums. As such, I would take a very hard look at these two items before emotionally wrapping yourself up into making the new vehicle purchase. There is an auto loan calculator available on bankrate.com, or you can easily create an amortization chart in Excel with just a few clicks if you're using the 2003 or 2007 editions. Analyze the cost of the loan by calendar year and rolling 12 month intervals from date of origin. Perhaps there are tax deduction strategies that could be helpful to you. (I'm not a financial adviser, tax attorney or CPA, so consult the proper professionals.) What I am trying to convey is to think outside the box and thing big about the implications of making the purchase. Sometimes less is more, and short term sacrifices evolve into better discipline and really nice longer term benefits. I would take a similar approach in analyzing insurance premiums. Insurance agents can give you quotes without pulling your credit report. Simply be honest with them about your past credit problems and low FICO scores. Withhold your SS# or don't give them permission to pull a credit report. Doing so could end up hurting you, especially when obtaining quotes from multiple insurance agents. A suggestion I will pass along that may benefit you is to find out how are the most experienced insurance companies licensed to do business in your state. Generally speaking, insurance companies with a diverse amount of underwriting experience in your state will have lower rates -- even for those with not-so-good credit. In the end, these sorts of analyses will produce tangible and comparative data that you can hold, feel, smell, etc. The devil is in the details. Use it to your financial advantage to ascertain if this is a wise purchase for where you're at in life today. You are likely to save yourself several hundreds, if not thousands of dollars over the long term if you patiently wait for your FICO scores to modestly improve given a few points in interest rates can make a big difference. Ultimately, you don't want to bite off more than you can chew and struggle to pay for and maintain the vehicle then end up with a newer ding on your credit report. Arm yourself so you can make a highly informed decision. Be prudent, remain disciplined, and stay positive. Things will change for the better. Best wishes.

[MarineVietVet]

Hi forty5ford,

It might just be me but when someone posts a long comment in one continuous block with no paragraphs I find it very difficult to follow or even read. I'm not criticizing just asking for help next time for the sake of my eyes.

[RobertEG]

As for the expected drop off dates, you really need an accurate determination of the DOFD on the OC account that led to the collection.

Your CR drop off date is the month after the 7 1/2 years period, calculated from the single DOFD date, expires.  I am always skeptical of an "anticipated" drop off date mentioned in a CR.  CAs are required to provide the DOFD to the CRAs, under FCRA 623(a).  However, dates they report are notoriously inaccurate.  Calculate the DOFD first from your own OC account records. You may in fact have an earlier "drop off" date.

PFD to a CA is often refused.  Many CAs will simply cite their reporting agreement with the CRAs, in which they have agreed not to delete CAs based on payment.  The hgher your offer, the better the chance that they will take the money and delete.  Dont expect an immediate reply to a PFD offer.  It is just a conditional offer that has no requirement to ever even respond.  You need to first send the PFD offer, they will take time to consider, and if they accept, you must then remit the agreement under your PFD contract.  They must then report the deletion to your CR.  With your money then in pocket, they can take time to post a deletion status update to the CRA.  It is a many-month procedure.  If you sent a PFD offer today that was ultimatley accepted, you paid, and they then posted it to your CR, I would not expect  that you could accomplish this before mid-June.

[RobertEG]

I know of no provision of the FCRA that requires a CA to delete their prior, accurate reporting based on a so-called  "call back" of the collection by the OC.

If the OC is willing to accept payment after assignment of collection activies to a CA, and the CA has reported this, then, of course, the debt is discharged, and the CA can no longer collect.  But FCRA reporting and credit scoring is not based simply on the debt paid, with all derogs thus deleted.    In my opinion, under the FCRA, all the credtitor is required, and in fact, authorized to do,  is update the status of the debt to paid on their OC account, and so notify the CA to update their reporting to show zero balance.  I see no authority for the OC to require s third party CA to delete their own, separate, and proper accurate reporting.

[Anonymous]

MarineVietVet - I fully agree.  After I made the original post, I was distracted by a lengthy phone call.  After the conversation ended, I attempted to edit the post by breaking it into paragraphs, but I couldn't get the system to do it.  My apologies.