Here’s a question concerning 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:
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 two young children. I’ll graduate in the next year with my BBA. 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 health care 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 two 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)
- Car loan: Late on two 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 six 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: 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. Thank you so much for your time! I truly appreciate it more than you know.
Here’s my advice, Lacey:
First, don’t freak out about your job prospects
You say: “My credit will end up stopping me from being able to succeed because I cannot obtain a job as a health care administrator with the credit I currently have.”
That’s probably not true.
While some employers will check your credit, most won’t and others aren’t allowed to by law.
According to a 2012 survey by the Society for Human Resource Management, fewer than half of employers check credit before hiring. In addition, many states limit the ability of employers to check credit. To check the law where you live, see this chart from the National Conference of State Legislatures.
Even if a potential employer does check your credit, you’ll know in advance because you’ll have to give them written permission. That will give you the opportunity to explain negatives, and those that Lacey lists are probably not the kind that would stand in the way of most jobs.
Earlier this year, USA Today interviewed Elizabeth Bille, vice president and associate general counsel for the Society for Human Resource Management. Here’s what she said about what employers are looking for when checking credit:
Typically what they’re looking for are patterns of money mismanagement and debt that the employee has not attempted to resolve. Things like education debt and medical debt aren’t part of such patterns.
Of course, even if your credit won’t impact your ability to get a job, you’ll still want to clean it up. So let’s explore the techniques to do it.
It’s tough to get a negative removed without leverage
Lacey says, “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.”
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 no interest in helping you.
In short, don’t waste your time pleading with a collection agency you’ve already paid; that battle is over.
Having a legitimate delinquency removed from your credit history before 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 you’ve reached an agreement, 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 the late payments 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, other than perhaps remaining a customer.
Lacey has three debts she 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 attempt this with the $100 hospital bill as well, but you seem unclear whether this is a legitimate debt. Call the hospital and find out what’s going on. They must be able to prove you owe the debt. If they can’t, they can’t collect it. Another approach would be to…
Dispute your debts
The Fair Credit Reporting Act allows you to dispute anything on your credit history. Once you file a dispute, the Credit Reporting Agency, or CRA, typically has 30 days to investigate the item, which they do by going back to whoever put it on your report. If that company or lender doesn’t respond or can’t verify the debt, the CRA has to remove it. They are then required to notify the other CRAs so it gets removed with them as well.
Learn how to dispute items with Experian here, Equifax here and Trans Union here. While all these CRAs will try to get you to buy your credit history from them before filing a dispute, don’t bite. Get it free at AnnualCreditReport.com.
Something else important to keep in mind:
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. With few exceptions, most credit wounds fall off your credit report automatically after seven years. But the older they are, the less they impact your credit score. This is good, and reflects reality. Lacey, like millions of us, was once young and reckless. Now, hopefully, we’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.
In short, 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.
What about hiring help?
If you put a dent in your car, you’re likely going to need professional help to restore it. But when your credit gets dented, there’s nothing a professional can do that you can’t do yourself. To make matters worse, the credit repair industry is ripe with rip-offs. So be very cautious when approaching anyone claiming to be able to fix your credit for a fee.
That being said, you’ll notice we do have a credit restoration recommendation in our Solutions Center. While we considered not offering one, we recognize that there are people who don’t want to travel this road alone, so we partnered with Debt.com to offer a solution you can trust.
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I founded Money Talks News in 1991. I’ve earned a CPA (currently inactive), and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate. Got some time to kill? You can learn more about me here.
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