Comment by travelton | Hacker News Reader

Comment by travelton | Hacker News Reader

My credit was in the dumps a year ago. I had a few negative marks, debt to credit ratio was off, too many inquiries, etc... I didn't find any mistakes. But, I was able to clean up my credit and raise my score by 120 points by doing the following (YMMV).

1. Set up an account at Credit Karma.

2. Review your Credit Card Utilization. If it's under 30%, you should be doing ok. If not, pay off those balances.

3. Look for derogatory marks. If you see any that are older than 7 years, file a dispute to have them removed (you can do this through CK directly).

Generally, I found that, if an account is closed and older than 5 years, if you file a dispute, the creditor won't care and will either ignore the request (resolving in your favor) or mark it as resolved in your favor.

If you have outstanding balances open in collections, call the collection agency. Here's how that went for me... "Hi, I'm interested in discussing an open collection on my credit. I see you are the owner of the debt." After they pull up the information, ask them "How much are you willing to accept to purge this from my credit?" (They are going to tell you they can't do that. But, they most certainly can!)

If you receive an offer for 20% less (with removal from your credit), take it. Use a credit card (responsibly!) if you don't have the funds immediately available.

If not, make sure they have your phone number on file, hang up and wait. Come the end of the month, I guarantee you they will call with an offer. :)

Tip: Use a Google Voice number, so you can field their phone calls, if they go rogue. When you're negotiating, make sure you write down names, case numbers, account numbers, etc.

4. If you have old accounts on your credit report, don't close them! Closing your accounts hurts your score. Instead, keep them open. If you have a credit card that you never use, set up Netflix to bill to that card, then set up recurring bill pay to pay off the balance every month. This will keep the creditor from closing the account due to inactivity. That credit history will keep your "Age of Credit History" up.

Lastly, if Credit Card Utilization is constantly hurting your score. Contact your existing credit card companies and request a credit line increase (don't open a new card!). A credit line increase will not hurt your Age of Credit History, but a new card will.

Never, ever, ever call, respond to, acknowledge or otherwise interact with a collection agency unless you know what you're doing, especially with old debts.

With an old debt, the bottom feeder collections agencies pay like $0.05 on the dollar. Once you make contact, you reanimate the debt for 7 years, and the collector can sell it for $0.40-50 on the dollar.

Not completely true. There's some nuance to it but essentially you have to acknowledge it or give them cause to "revive" it, i.e. pay some of it:

http://www.moneycrashers.com/zombie-debt-collectors/

When you contact a collector you reset the statue of limitations, but derogatory marks can only ever remain on your credit report for 7 years from the date of first delinquency.

"How much are you willing to accept to purge this from my credit?"

Note that settling debt for less than what was borrowed can also result in additional tax burden because the difference between the loan amount and the amount paid is income.[0][1]

[0] - https://www.irs.gov/pub/irs-pdf/f1099c.pdf

[1] - http://www.nolo.com/legal-encyclopedia/tax-consequences-sett...

On top of that, the debt owner is obligated to make sure you receive appropriate tax documents, but in reality they don't particularly care and your documents will get "lost" in the mail. Since most people don't expect this to be taxable income, they're not looking for it.

Then fed and state collectors both delay addressing this until about 2 years before the statute of limitations. You have a ton of interest, fees, and interest on the fees, at which point they slam you with notices and judgements, and wage garnering.

For me they timed it perfectly, getting their last cent about a week before the statute of limitations was up. In the end, a little less than $5000 in debt forgiveness cost me around $18,000.

Also, https://www.reddit.com/r/personalfinance/wiki/index#wiki_cre... is extremely helpful regarding collections and credit.

Calling them up is exactly the wrong thing to do. Always get any communications in writing.

When you say it's exactly the wrong thing to do, I think you're being a bit dramatic. Sure, there's some risk... But, ultimately you have the most leverage in the situation. Pay off the debt with a Visa/MC. If the collection agency is going to screw you, you can screw them right back with a charge back.

Agreed. About few years ago my credit score (which I checked semi-regularly) took a ~150 point dive, because a collection showed up on it from a $120 medical bill I had four years before.

I had had an internship in another state, went to a clinic with a case of strep throat, they took my information, made a copy of my insurance card, I paid a co-pay, and I thought that was it. Unfortunately, the clinic lost (according to them) the copy of my insurance card, the address they had was entered incorrectly, and no one bothered to call me...

Anyway, I called up the collections agency listed on my credit report, the guy seemed reasonable, I got his name and employee number, paid the bill on the spot, and it completely disappeared from my report the next week. It took just a few minutes on the phone -- poof!

I would be careful about making sure you really owe the money in the first place. In my case, this really should have been paid by insurance four years ago, and a call to the clinic confirmed my suspicions that it was staffed by apathetic morons. The collections agency, on the other hand -- a pleasure to deal with! Much easier to just pay it and move on with my life.

And, yes, there's always the "chargeback" option, although, technically, I'm not sure that would be allowed under your credit card contract. You need to pay the debt because you owe it, and showing that you can take the money back if it doesn't disappear from your report might be tricky, if push came to shove. In hindsight, I probably should have gotten something in writing, but collections agencies don't really have a motivation to be assholes for no reason -- if you pay them, they probably don't want trouble later on.

It's more a matter of principle than anything. This is a serious business transaction, and you should always have a contract for such things. Even if 95% of collection agencies are perfectly reasonable, there's a good chance you'll get one that isn't at some point.

Issuing a chargeback for a valid charge is credit card fraud.

>If the collection agency is going to screw you, you can screw them right back with a charge back. If the agency is messing with you in some way, it's not a valid charge.

If you have an agreement in writing (ha, good luck), or more likely a recording (make sure to have consent) saying "If I make this payment of $x, you will flag my account as Paid As Agreed", they agree, and then either flag it "Settled" (which is an 'adverse status') or don't, then you have material grounds to argue that the charge is not valid.

Note, this isn't saying anything about whether you owe or do not owe the money - that's an important distinction. You agreed to make a payment for money you owed in exchange for a positive credit record. You can debate the ethics or morality thereof (especially if you're negotiating to pay less than owed, and still have it recorded as paid in full), but it is demonstrable that you did not receive what you asked for. The fact that you owed that money is tangential.

Maybe you should watch the show before you comment. Unless your "few negative marks" said that you are a registered sex offender your comment isn't relevant at all.

Also, "improving" your credit score by paying off debt with a credit card seems to be proof that the credit report system is broken.

?? The video started with a 3+ minute segment on credit ratings and how they affect job prospects and other items in life.

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