Current Credit Karma Score: 587 Transunion, 565 Equifax
How I got in this hole: I'm a former alcoholic with 2 years clean and sober. Before I realized I had a problem, I severely tanked my credit with 6-7 charge offs and $60k+ in debt. Since that time, I've paid off 2 out of 6 charge offs (settled with Amex, after they sued me).
The good news: in the last year, I got a good paying job, got on a strict budget and now have the free cash to settle the remaining 4 charge offs.
Remaining Charge Offs:
-Chase 1 - $10k - Collections Agency - ARS National Services Inc.
-Chase 2- $18k - Collections Agency - ARS National Services Inc.
-Citibank- $2.1k - Collections Agency - United Collections Bureau, Inc.
-Capital One- $750 - Collections Agency - GC Services
-I also had a Paypal loan for $1000 but it is not showing on my credit report (should I pay this?)
Open Credit Cards:
Discover - Credit Limit $500 - Balance $0
Nordstrom - Credit Limit $500 - Balance $0
Goal: I need a credit score of 600-650 to rent an apartment. When I went completely broke, I had to move back in with my parents. Now I would like to move out with my girlfriend in about 6 months from now. From what I've read online, I need a 600-650 credit score to not get rejected.
To be perfectly honest, I stuck my head in the sand when it came to my credit because the debt felt insurmountable and just focused on working and saving.
In the recent letters I've gotten from collections agencies, the offers to settle the above debts are about 25-40% the original debt. This means I can settle my outstanding debts with my current savings of $10,000. I do not have enough money to pay my outstanding balances in full.
1. Last weekend, I sent USPS certified Debt Verification letters to the 4 collection agencies that hold my debt.
2. After I receive verification, I am going to respond with letters asking for a Pay for Delete (although this does not seem likely) or anything I can get (maybe mark account as closed instead of charge off?) in exchange for paying to settle account.
3. Pay collections agencies with a money order or cashiers check
4. Send goodwill letters to all companies reporting negative items on my credit report asking for forgiveness?
5. Pray for the best
6. I'm considering opening a secured credit card to add to my 2 open credit card accounts to start building a positive credit history again.
I understand that this will not improve my credit score, but my logic is I figure when I am looking for an apartment it will look better that I have settled all my outstanding debts.
One thing that gives me hope is that on my TransUnion report I pulled from annualcreditreport.com it looks like my settled Amex accounts are projected to drop off in 2021, much sooner than my unsettled accounts (projected to drop off in 2024).
I've read every article I can find about credit repair on Google, Reddit, etc. that lead me to this forum. I called a credit repair consultant before I started saving and he told me that after I settled all my accounts to wait 12 months and my score would bounce back faster than I would expect. He also was nice enough to not offer me his services and advise me to take care of this myself.
Any advice on other actions that I could take to boost my score to 600-650 (or if it's even possible after settling my accounts). Thank you!
HI Concord, Welcome to the forums!
First things first - congratulations on your sober living. Overcoming such a battle is commendable.
Second - congratulations on your decision to repair past credit mistakes. You already have some funds available to begin the process so you're in better shape than you might think.
With regards to that credit fixing:
1) Ignore Credit Karma scores. You need to obtain and monitor your FICO scores for all three burueas. FICO scores are what the overwhelming majority of lenders use to determine credit worthiness. Learning where you stand in FICO land is required for successful rebuild. Credit Karma scores are based on the Vantage 3 scoring model which is a completely different, and quite useless, animal that does not respond to changes on your credit report the same way as FICO. The only thing Credit Karma is good for is montoring your actual reports so you may stay abreast of any changes.
To get started, you can view all 3 FICO scores at Credit Check Total (https://www.creditchecktotal.com/) - sign up for the $1, 7-day trial. Be sure to cancel the trial if you are not willing to pay the monthly fee for monthly scores & reports. I highly recommend you invest in a monthly FICO monitoring service. You can opt for Credit Check Total, myFICO, or Experian Credit Works -- those are a few of the best known sources (myFico is the more expensive of the 3 but it also provides scores from like 27(?) different FICO models). Right now, the most important score for you is FICO 8.
2) Can you provide the Date of First Delinquency (DOFD) for each of the debts you've listed? This will help determine what your best steps forward would be. The DOFD is the date (month / year) the debt first became delinquent and was never brought current, leading to its charge-off status. I'm assuming the DOFD was pretty recent - like 2016-2017-ish, based of the 2024 removal date noted on your Transunion report. (FYI: Transunion generally removes 6 months early (6months before the 7 year mark). Experain is 3 months early. Equifax is 1 month early but you have to request it.)
3) Find out what the Statute of Limitations (SOL) is for your state. If any of your collections are out of SOL, you have more leverage with negotiating a settlement as the collection agency can no longer pursue the debt through legal recourse (they can't sue you). If your debts are still within SOL, you want to take care of them right away to prevent being sued.
4) Are your reports showing both the charge-off from the original creditor and a collection tradeline from the collection agency for all debts?
I ask because although you may have success with removing the collection accounts, you will likely see no success in removing the charge-offs from the original creditor (at least, not those original creditors) - it will remain as a derogatory account for the full 7 years post DOFD. You can try, after satisfying the collection, to send Goodwill letters to the original creditor asking that they update the charge-off account to reflect a 'PAID' status, but it will still remain a charge-off and negatively impact your score. It will, however, look better upon manual review of your credit reports if it does note that the debt was eventually paid after charge-off - your logic is not flawed.
5) Your plan to go about removing collection items is solid. We can give more detailed advice for each step if you are able to provide the DOFD for each account - same goes for that PayPal loan.
6) You need to let one of your current, open cards report a small balance of less than 8.9% of its limit. You are being penalized (scorewise) for having no revolving credit usage. Never let all cards report $0. So I'd throw a small charge on that Discover card (less than $44.50 which is 8.9% of $500) and let it report, then pay it in full. Repeat this every month. Alternatively, you can actually use the card and pay the balance down less than 8.9% before the statement date. The card will report the balance of your account as of the statement closing date. If you want to get a third card, you can, but it's not completely necessary right now. You can certainly wait until you make some headway with your collection items. How old are the two active cards?
My #1 tip: Try to stay optimistic, remain diligent, and practice patience. This will seem like a very long journey and you will probably have some incredibly frustrating and discouraging moments. Keep posting your progress (and setbacks) here, ask quesitons, and read others' posts - there's a ton of support in these forums. You'll get there.
Waiting for response to your debt validation requests may result in no response, and thus an extended period of limbo.
You might not receive any response.
There is no period for response to a DV request, even if timely. A timely DV imposes a cease collection bar, and the debt collector can choose not to send validation and simply discontinue active attempts to collect.
If the DV is not timely, meaning it is not sent within 30 days after their initial collection ("dunning") notice, it does not impose any cease collection bar, and can simply be ignored.
If your DV requests were timely, the cease collection bar imposed on the debt collector will also prevent them from any negotiation of terms, such as a settlement for less or a pay for deletion offer, so you will be in limbo if you seek any of those collection activities until the debt collector has first provided validation.
If the debt is indeed valid, if you dont receive a response within a reasonable period, you might wish to cancel your DV request and proceed with either PFD or settlement offers if you wish to discharge the debt.
Wow thank you for this informative reply! I really appreciate it. Following all the steps you listed. Response to questions:
1. I signed up and pulled my report from https://www.creditchecktotal.com/:
FICO Score 8: Experian 551, Transunion 559, Equifax 558
-Chase 1 - $10k - Collections Agency - ARS National Services Inc. - DOFD: 6/2017
-Chase 2- $18k - Collections Agency - ARS National Services Inc. -DOFD: 6/2017
-Citibank- $2.1k - Collections Agency - United Collections Bureau, Inc. - DOFD: 8/2017
-Capital One- $750 - Collections Agency - GC Services - DOFD: 7/2017
-Paypal Loan - $1,380 - Not showing on credit report. DOFD: 12/2016
3. I am in New York State. Looks like the Statue of Limitations is 6 years. Not close on any accounts.
4. My reports are only showing charge offs from the original creditor. I am not seeing any accounts in collections or collections accounts listed (do not know why).
5. Okay awesome. My biggest question right now is: how long do you think I should wait to hear back from the DV letters before contacting Collections Agencies to try to settle accounts?
6. I will do this. The age of the two active cards:
Open Credit Cards:
Discover - Credit Limit $500 - Balance $0 - Opened 12/2011
Nordstrom - Credit Limit $500 - Balance $0- Opened 7/2016 - has 2 Late Payments on record
Thank you for the encouraging words. I have to admit there are times when this seems like a lost cause. Going to do what I can!
Thank you for this advice on DV letters. What is a reasonable period to wait? 30 days?
Glad you got your scores.
1) So, that 'high credit usage' reason code for what's affecting your scores...
Q: Are your charge-offs still showing a balance due?
If they are, then that would mean the original creditor still actually owns the debt and only assigned collection efforts to a collection agency - which is why there are no separate collection accounts showing up on your reports. This is actually a good thing - less work to resolve. First, contact each original creditor and confirm that they still own the debt and it has been assigned to the collection agency from which you've received notice - sometimes the debt gets reassigned and there may be a delay in your receipt of notice from the new assignee. You want to make sure you are paying the right people.
You stated you received settlement offers from the collection agencies -- so, after confirming the collection agency details with the original creditor, contact the collection agencies and settle the account asap. Since they've only been assigned the debt, they will notify the original creditor that the account has been paid and this will lead to the official closing of the account and a notation that the debt has been settled. The balance will then be zeroed out on your credit reports. You can also take it upon yourself to notify the original creditor after payment, but they probably won't make a move until they receive confirmation from the collection agency. This process can take 30-60 days but you will likely see decent score increases from this action alone due to the utlization reduction. See, right now, (if I am correct in my assumptions that balances are still reporting) the accounts are showing a balance against a $0 credit limit, which means your utilization percentatage for each account is over 100%. That is a major score penalty on top of the ding for having a charge-off. Additionally, the creditor can continue to update the account with a negative mark every month if they choose - further dinging your scores. If you catch it now, you will stop additional account updating of negative marks, zero out the balance, and prevent the debt from being purchased by a pennies-on-the-dollar debt buyer who will then own the debt and place their own collection account on your reports. You'll still have the negative impact of the charge-offs, but their effect on your scores will begin to fade over time - and your scores will start to rise in spite of the charge-off accounts (though they will still be held back from reaching their full potential until after the accounts drop from your reports). Once they are all paid and updated on your reports, you can begin a Goodwill letter campaign to see if it works out. Like I said before, success is rare with original creditor charge-offs - but you never know, I've seen success stories so it is possible.
2) Pay your paypal loan -- either in full or settle it. Just because Paypal doesnt report it doesn't mean they won't sell it to a debt buyer that eventually will.
3) With regards to the DV letters, I'll let Robert provide a more definitive answer as to how long you should wait for a response - -he is extremely knowledgeable in this sort of thing. I would say no more than 45 days but... wait for him.
4) You have some age on that Discover card -- good. After you settle those charge-offs, start using it (don't use it just yet as I recommended before because it will only add to your high credit utilization).
As for the Nordstroms card -- start writing goodwill letters to HQ to see if you can get the lates removed from your reports. Pour your heart out to them - be honest about what you've been through and how you plan to rebuild and progress in life going foward. Goodwill letters work when you pull at the heartstrings. If your first letter fails, send a second... and keep going till you get the response you want.
5) Your choice of a FICO monitoring resource is entirely up to you. All 3 mentioned will serve its purpose. Personally, I used (and still use) Experian CreditWorks during my rebuild because it provides a daily score and report for Experian (updates 3am PST) with monthly scores and reports for Equifax and Transunion for $24.99 / month. My credit was changing so much during that time so having a daily update for at least one of the bureaus was super helpful -- especially when I was expecting a change to my reports; being able to see the results of a positive change immediately was also pretty thrilling. Plus they have a great m0bile app. But it's really up to you. I only suggested credit check total initially because they offer the $1 trial
When a debt collector conducts validation, if they are intending to respond, it would depend upon the steps they must take to conduct the reasonable investigation.
They must either contact the creditor if they dont have adequate account records, but if the creditor has, for example, sold the debt to the debt collector, they may have passed all account documents on to the new owner, and thus the debt collector may be able to investigate without the delay of having to contact the original creditor.
I would wait at least two months before making any decision to rescind the DV request unless you are in immediate need to discharge the debt, such as you are in the middle of a mortgage applicaiton process, and the underwriting requirement requires that the debt be discharged. In that event, earlier rescission of the cease collection bar might be required.
Thank you for this reply - you are amazing.
1. Yes, you are 100% correct. The charge offs are still showing a balance due so I'm showing a huge amount of money owed on a $0 credit limit (100% utilization doesn't show on the landing page, but I can see it under the Reports-> Accounts tab). This is getting me even more motivated to resolve these accounts.
UPDATE (kind of a sad one): so I finally got the guts to call the original creditors today. After reading a million articles online, and calling... unfortunately Chase and Citibank are closed on Saturdays?! And so are the collections agencies! Argh!! I'm going to have to call first thing Monday morning at 8AM. A few things on my mind:
Is this a good game plan for the phone call?:
A. Call Chase, find out if they own the debt. If not, find out if ARS National Services is the assigned collector for the debt.
B. Reference the offers I've received in the letters from ARS. These offers state:
-They will settle the debt for 25% the value owed
-They will mark the account as paid in full
C. Ask if I can deal with Chase directly for aforementioned terms.
D. Either way, ask for a Debt Verification letter before payment from owner of debt (make sure it says they own debt, and they will mark paid in full)
E. Once Debt Verification letter is received, pay using Bank of America online Bill Pay service (I'm worried about giving my bank routing info to a collections agency)
F. Repeat with Citibank, and Capital One (I'm thinking close all accounts out at once)
Concerns: letter I received from ARS National Services, Inc. says offer expires today, 11/25/2018. Hopefully they will extend this offer to Monday. I could just pay today using their website, but I'm worried they might not own the debt, I'll make a mistake with a technicality, etc.
2. I can't thank you enough for the motivation. I'm going to pay the Paypal loan too (and be 100% debt free!). The biggest concern here is I've thrown out all debt settlement letters regarding this Paypal debt while sticking my head in the sand. I'm going to settle this one last and hope they send me another letter, or just call Paypal and offer 40% of the debt owed (thinking offer higher % because it's a smaller debt).
3. Thinking these DV letters may have been kind of pointless as the debts are 100% mine.
4. Going to follow this advice down to the letter. Writing goodwill letters to Nordstrom as soon as debts are settled.
5. You have not led me astray yet, cancelling Creditchecktotal and signing up for Experian CreditWorks/downloading the app so I can (hopefully) see some results after paying off this debt.
Okay, here we go and some will scream but I bet I have more experience with it. (great thing to brag about).
Verification letter - 200% POINTLESS unless you are trying to get it deleted from your credit which it's way to much money and to early in statue that it won't get sold and relisted by someone else.
Lets move on to actually settling and being done with this crap.
1. Deal with who currently is handling the debt, if it's ARS, sure it's probably still owned by chase but you will still have to work though ARS because that's who they hired to handle it and it probably works in your favor.
2. If you are getting 35%, you can negotiate 30-50% of currrent balance.
3. Many people think and many collections will tell you if you want to "SETTLE" that means it's 100% pay in full of settlement, that is 1000% false!
ALMOST all creditors and collection agencies are ready to offer 3-12 or even 18-24 months if balance is VERY high.
ARS handles our Citi Accounts:
|ARS National - Citi Advantage||$12,029.89||$4,210.46||12||$350.88|
|ARS National - Citi Double Cash||$28,189.60||$9,867.00||18||$549.00|
This is our actual settlement and as you can see the larger one they could push out over more months.
Start talking with the people at 30% of current balance.
it's a game, some say I can offer you XXX, you say no.
Then they can offer XXX, you say no.
Final approved offer is....
Or some say I'm authorized to XXX
if it's 45-55% you can debate taking it or say then here is my offer, 30% of balance on 12 payments, or if you can do it offer 30% on 3 payments.
They "should" take the offer back to the client (since they are hired to recover money for the bank that still owns the debt)
Sometimes you get a creditor that tries to play into guilt of responsibility or how did this happen.... DONT have those conversations.
1. doesn't matter how we got here, we are talking about getting out!
2. Don't give me a moral speach, I have to live with this on my credit report even after I pay the bank back and really you work at the collection agency, it isn't your companies money that was lost... I just don't play those games... when you remove that BS and stick to a basic business conversation with them you get further faster.
I don't want to say be nasty but I also don't play games with it and if they aren't willing today, I restate, this is my offer and you legally need to present to your client and you can call me when you are willing to do your job and settle this and I hang up... They WILL call you again!
Midland was the WORST I ever dealt with and it went on for OVER 2 months, I constantly hung up on the guy and finally a managers manager called me and I once again stated the things I had been stating for 2 months to the previous guy who always said not possible and I should be ashamed for my responsibilities i was not taking care of and blah blah blah... she said "your ready to commit to that today?"
YES, and it was done and setup 5 minutes later.
USAA is the ONLY bank to date that I have not been able to get them to settle for 30-50% of current balance... they are at 55%.
Almost ALL banks and collection agencies will go 60-70% OFF current balance even though most will say it will NEVER be below 50%, it's just not true.
OH, and NO ONE will do PFD if it's not medical, don't waste your breath.... fight on the back end with letters or credit report loop holes of disputes to get it off once it's settled, all you are doing is lowering your chance of a settlement and lowering the amount off the debt when you start messing with delete stuff.