Posted by: thecreditmaven | October 20, 2008

Dispelling Myths Surrounding Credit Repair – Part I

Myth # 1: When I pay off a past-due account, such as a charge off or a collection account, it will show “paid” and no longer be negative.

Common sense tells me if I PAY OFF a debt that I owe I am doing the RIGHT THING. However, common sense is not applicable when it relates to your credit report and credit score. Let me explain:


It is difficult to fully restore your credit without paying your outstanding debts. However, paying off a debt can actually lower your credit score. I’m referring specifically to charge-offs and collections. Charge-offs and collections are allowed to stay on your credit report for a maximum of seven (7) years. Refer to Sec 605 of the Fair Credit Reporting Act


Making a payment on a charge-off or collection account represents new activity and RESTARTS the clock (Yeah I know, it doesn’t make sense to me either). When paying an outstanding debt, you will change the account status to paid collection, paid charge-off,  or paid “and was XXX days late”. This is still considered very negative and will cause your credit score to go down.


If you are trying to get approval for financing, paying a charge-off or collection could further diminish your chances for financing approval. Seek the advice of a credit professional so that they can determine the best way for you to qualify for financing and also resolve the charge-off or collection.


Here’s one for you – I have seen credit reports with charge-off accounts listed. On the same report, that charge-off account was sold to a collection agency. Now there is a charge-off account and a collection account for the same debt. What do you think happens to a credit score then? I’ve actually seen a charge-off listed with 3 additional collection accounts (same as charge-off) on a single report. I’m not going to tell you what the credit score was – needless to say the person didn’t qualify for financing.

Myth # 2: If a negative item is successfully deleted from my credit report, it will just come right back on my report.

When an item has been disputed with the credit bureaus, the credit bureaus attempt to contact the creditor to verify the information. If the credit bureaus don’t hear back from the creditor within 30 days, they will often temporarily delete the negative item.

Should the credit grantor submit verification a week or two after the 30 day deadline to respond, the disputed item will be re-inserted (this is called a soft delete) back on the credit report. Refer to Sec 611 (a)5(B)ii of the Fair Credit Reporting Act – the credit reporting agency shall notify a consumer within 5 business days if an item has been re-inserted into their credit file that was previously deleted. Have you ever heard of this happening?

Note: It is very difficult for a consumer to dispute and effectively remove negative items on his/her credit report. This is due to the credit bureaus (who earn BILLIONS of DOLLARS each year) controlling the dispute process that consumers use (i.e. going online and disputing errors, or by writing letters directly to the credit bureaus).

When ones credit report and credit score are hanging in the balance, I believe it’s prudent and more importantly justified to use attorneys who are well-versed in credit law that can dispute erroneous, outdated and unverifiable information and get it permanently removed from a credit report. It happens all the time. Even those items that get re-inserted.



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