I have many conversations daily with consumers about their credit. One of the first questions I ask is “what are your scores, and where did you get them”.
Where did you get your credit scores?
Yes, it’s important to know the source of the score. Because quite frankly, they is a difference. Internet credit scores, or what I call consumer scores are not the same as a credit score a bank pulls.
So the difference in scores can be significant. You can pull a score off of the internet, say from Credit Karma..and it can be as much as 100 points higher than a bank score. This can be not only a big surprise when you apply for a loan thinking you have a great score, but also embarrassing.
So there are different “brands” of a credit score as there different brands of shoes, sunglasses, cameras, etc… Yes the score is 3 digits, but how those 3 digits are calculated are different.
The most popular consumer credit scores are the Vantage Score, PLUS Score, Smart Score, and Credit Xpert Score. Typically banks are using one of the FICO model scores.
But regardless of the scoring model, they all emphasize paying your bills on time, keeping credit card balances low, limit hard inquiries annually, and maintaining a good mixture of credit (auto, credit cards, mortgage).
If you have any questions about your scores, feel free to comment on my blog or you can contact me direct.
Collection accounts are a nasty breed. They can wreck your credit scores when you least expect it. I often hear horror stories of clients that had no idea of a collection on their credit and applied for a loan and were turned down, because of a $25.00 collection account.
The reality is that a collection account can drop your scores regardless of the dollar amount. A $25 collection has the same impact to your scores as a $2,500 collection. It’s the derogatory account that is the issue.
So what do you do? I almost always recommend paying your collection accounts for a few reasons:
- When a collection is paid, it will no longer re-age. Re-aging is a process the collection companies do to the account to keep it fresh on your report. The credit scoring software picks up on this re-aging which recognizes the account as new keeping your scores low. But if the account has not been re-aged in months or years, paying the account will update the account and lower your score. Only pay the most recently re-aged collections or new collections.
- Paid collections have a greater potential for deletion through a dispute process to the credit bureaus. It also has the potential to be removed by the collection company. You need to ask for a deletion at time of payment. If they don’t agree, still pay the account then dispute it to the credit bureaus. They most likely won’t answer the dispute and it’s deleted.
- The older the collection account, the less you may have to pay. The collection companies purchase the debt from the original creditor at at discount. They then attempt to collect the full amount, and the difference is their profit. If they’ve not been able to collect on the debt for and extended amount of time, they will settle for a smaller amount from you. I’ve seen clients settle for as little as 10% of what was originally owed. So don’t let the amount owed on the credit report put you off, there’s always room for negotiation.
I hope this helps shed some light on dealing with collection accounts. They are a nasty bunch but the sooner you deal with them, the sooner you can put them behind you and potentially remove them from your credit report.
A hui hou (until next time),
There are many ways to increase your credit scores and one of the fastest is a process called “Rapid Rescore”. This process originated in the mortgage industry decades ago and is still being used to a limited extent.
Rapid Rescore is actually misleading, the process doesn’t re-calculate your credit scores, it adjusts account information so that when a credit report is pulled it generates a higher credit score.
An example of this would be a credit card balance update. If your credit card balances are reporting to the credit bureaus higher than 30% of the limit, it’s lowering your scores. So when you pay down your card, a Rapid Rescore would update that balance in a few days. Once the balance is updated at the credit bureaus, and you re-pull a credit report, the lower utilization percentage on the revolving account raises your credit scores.
Another example would be the deletion of a negative item such as a collection account. When a collection account is either updated to show paid or even better, deleted. It can have a very large positive impact to your credit scores. At time of payment of the collection, it’s always good practice to request a deletion of the collection. Some collection companies will do this for you. If so, ask for a letter stating this. With this letter the collection account can be removed from your credit report (never to return) with a Rapid Rescore. It can take up to 3 months for the collection company to remove.
So as you can see, a Rapid Rescore can make changes to account information at the credit bureaus in a short amount of time to raise your credit scores.
Here’s a master list of our most popular Rapid Rescore requests:
- Updating credit card balances when paid down
- Removing collection accounts or updating to show paid, $0 past due
- Removing late payments reporting in error
- Removing IRS tax liens once paid (IRS allows the removal now)
- Removing Authorized User accounts
If you would like a free consultation on how you can successfully raise your credit scores in just days, feel free to contact my office direct.
Certified Credit Expert