Ask Stacy: Can You Help Me Clean Up My Credit History?

Here’s a question about what to do about bad marks in a credit history. I don’t normally print letters this long, but I’m making an exception because it illustrates typical problems and will allow me to offer specific solutions.

See if you can relate to any of these things…I can.

Hi Stacy,

When I was young, I thought I was invincible and didn’t care too much to keep my credit up. I am now a 25 year old single parent of 2 young children. I’ll graduate in the next year with my BBA with a specialization in Healthcare Administration. At that time I will, of course, need to start my career. Well, my credit will end up stopping me from being able to succeed because I cannot obtain a job as a Healthcare Administrator with the credit I currently have. So, I need help to get on the right path to fixing it.

Here’s a breakdown of the negative marks on my credit:

  • Collection Agency for T-mobile: I disputed this 2 years ago and they still have it reported as disputed without removing it.
  • Hospital bill: I have asked that the collection agency remove this because it’s hurting me and I’ve paid it, but they say it’s not in their policy to remove the debt.
  • $36 collection for a hospital bill: I would like to write them a letter to negotiate this bill and have it completely removed from my credit before I pay it off, but I am not sure how to do this effectively.
  • Verizon Wireless: Unpaid bill for $668 (I was young and ignorant and could not pay the bill, this will keep reporting until 03/2016)
  • Car Loan: Late on 2 payments by 15 days. Ultimately I paid the car off, and I’ve written a letter of goodwill removal for these late payments. Have not heard back.
  • CitiBank Student Loans: There was a period of 6 months that I did not have the paperwork filled out and returned for a deferment while I was still in school, and so this is constantly hitting my credit even though I have them deferred now. Can I do anything to get this removed?
  • $100 from a hospital bill for my daughter that I did not take her to. I am not sure who took her to this hospital, but I never did, so I know I did not sign the papers for this. I did not even know about this 2-year old debt until I pulled my credit report last week.
  • $126 from a payday loan in 2007: I would like to just settle this debt for them to remove it completely from my credit. I am not sure how to go about doing this with a negotiation letter.

I am coming to you because I trust your advice because of your reputation. I am in need of help because I need to become financially stable for my family’s future. As of right now, I do not have much money to spare – I’m a single parent putting myself through college with an $8.50/hour job. So I need to find the most economical way out to get my credit cleaned up the best I can. Can you please help me?

Thank you so much for your time! I truly appreciate it more than you know.
- Lacey

Here’s my advice, Lacey…

Don’t freak out about bad credit

You say “My credit will end up stopping me from being able to succeed because I cannot obtain a job as a Healthcare Administrator with the credit I currently have.”

Poppycock.

While some employers will check your credit, most won’t and others aren’t allowed to by law.

According to a survey released in July 2012 by the Society for Human Resource Management, fewer than half of employers check credit before hiring. One possible reason? It might be hard to find workers. In December 2012, the Corporation for Enterprise Development reported 56 percent of Americans have credit scores of 700 or below.

In addition, many states limit the ability of employers to check credit. To see what the law is where you live, see this chart from the National Conference of State Legislatures.

Finally, even if a potential employer does check your credit, they’ll probably offer you the opportunity to explain negatives. And they’re more likely to care about current accounts in collections than old ones. But if you still want to work on your credit, remember…

It’s tough to get a negative removed without leverage

You say, “I have asked that the collection agency remove this because it’s hurting me and I’ve paid it, but they say it’s not in their policy to remove the debt.”

As I’ve said in prior posts, some collection agencies will say or do anything to get you to pay a bill, including engaging in unethical, immoral, and illegal behavior. Once they’ve collected, they have zero interest in helping you.

In short, don’t bother talking to a collection agency you’ve already paid; that battle is over.

Having a legitimate delinquency removed from your credit history prior to its seven-year expiration is typically only possible if you have something a creditor wants: your business or your money.

If you’re still doing business with a creditor, they may be willing to remove old negatives to keep you happy. For a sample letter, see 3 Steps to Fix Your Credit Free. Don’t expect miracles, but you might try to do this with the Citibank student loan delinquency.

If you owe money, you can sometimes use that as leverage to have negatives removed. If you attempt this, make sure everything’s in writing. Spoken words have no meaning. Until it’s in writing, it doesn’t matter.

The way you do it is this: Call the creditor and negotiate both the amount you’re willing to pay and the terms – in this case, all negatives removed. Once that’s agreed, get a letter with the exact terms signed by a person in authority. Only after that agreement is in hand will you send a check.

Keep in mind this will only work when dealing with the company that put the negatives on your credit report. In other words, if a department store reported late payments, then sold your account to a collection agency, the collection agency can’t remove lates reported by the department store – only the department store can. And since they’ve sold the debt to the collection agency, you no longer have leverage with them.

You have three debts you might try to negotiate: the $36 collection for a hospital bill, the $668 bad debt to Verizon, and the $126 from a payday loan. These are creditors you currently owe that will probably happily settle for half what you owe and might also agree to have negatives removed. You may also attempt this with the $100 hospital bill, but you seem unclear whether this is a legitimate debt. Call the hospital and find out what’s going on.

But as you approach these or other debts, remember…

The older the problem, the less it matters

The day after you get a nasty cut, it’s ugly and it hurts. As the days progress, however, the pain lessens and the scar heals.

Same with your credit. Your payday loan from 2007 is already six years old – in another year it will fade away completely. From your description, it seems many of your other bad marks are old as well.

This is good, and reflects reality – you, like millions of others, were once young and reckless. Now you’re not.

Which leads me to my last suggestion…

The single best way to fix your credit

While disputing, negotiating, and doing whatever possible to remove negatives from your credit report is useful, the best way to fix your credit is to replace the bad with good. Keep paying on time, every time, all the time. Sure, your credit history has old negatives – so make sure it also has new positives.

Bottom line? Do what you can to fix past errors, but don’t obsess. Time heals all wounds. As with your education, your job, and your kids, focus instead on the future.

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