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You’ve made up your mind: It’s time to tackle your debt. You have researched ways to get out of debt, perhaps weighing the pros and cons of snowballs over avalanches to pay off your debt faster. Maybe you’ve thought about calling a credit counseling or debt settlement agency, or even a bankruptcy attorney, to see what they can offer.

Before you decide on your plan of attack, though, there’s one crucial step you won’t want to miss. It can make or break your efforts to get out of debt: Get your credit reports and scores. (You can use Credit.com’s Free Credit Report Card for an easy to understand overview of your credit report along with your credit scores.)

Here are three reasons why this step is so essential to your success.

You’ll Have a Starting Point

Any debt counselor will tell you that consumers struggling with debt often underestimate how much they owe. If that describes you, don’t feel too badly. You’ve probably just been focused on making sure you can make the monthly payments. But in order to create a plan to get out of debt you’ll need a list of all your creditors and what you owe. Your credit report can help you identify who you owe, along with recent balances. (You can get free copies of your credit reports once each year from all three credit reporting agencies.)

You may also find debts listed on your credit reports that you had forgotten about, such as collection accounts. Forget to include those in your plan, though, and your efforts may be derailed if those collectors suddenly decide to pursue you for payment but you can’t afford to pay them.

Plus, no matter which approach you choose to get out of debt, you’ll have to know what you owe. Your credit report can help you with that task.

You’ll Understand How Your Debt Impacts Your Credit

If you’ve been making your monthly payments on time, you may assume your credit is “good.” But, in fact, the balances you are carrying may be dragging down more than just your net worth; they may be hurting your credit scores.

You won’t know that by looking at your credit reports, though. Your credit report just contains information about your accounts, balances and payment history. It won’t analyze whether your debt may be too high.

Your credit score, on the other hand, will show you the impact of your debt means to your scores. For example, in our Free Credit Report Card, one of the five factors that make up your score is “debt usage.” That factor takes into account how close your balances on your credit cards are to your limits, for example. As your balances on your cards approach the limits, your credit scores suffer.

Getting out of debt will usually help your credit scores in the long run. But in the immediate term, your goals — get out of debt and build better credit, for example — may be at odds. Take bankruptcy, for example; it’s not great for your credit, but it may be the fastest way to become debt free. Understanding where you are now, as well as how debt relief options may affect your credit, can help you make a more informed decision about which approach is best for you.

You Can Track Your Progress

Paying down debt is usually a marathon, not a sprint, and most of us are going to need encouragement along the way. Monitoring your credit score each month is one way to get that regular dose of motivation. Over time, as your balances decrease, your credit scores will hopefully get stronger. But even if your credit scores suffer because you choose to settle your debt or file for bankruptcy, keeping track of your score can help you monitor your progress as you work to rebuild your credit and your financial life.

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  • kelly

    that sounds like a fake post.

  • Jbrag

    I received a windfall of 6000.00 dollars and i want to pay off 2 credit cards entirley but my husband wants to pay down on one for 11000.00 which would be the best idea.

  • Jeanine Skowronski

    You can find tips for negotiating with creditors here:




  • Ch

    I owe a creditor $3500.00. I am making a small payment every month because I am unable to make the agreed upon Pmt. Will/can I be sued even though I am making some kind of Pmt even though it is small? The creditor is cashing my checks every month.

    • http://www.credit.com/ Credit.com Credit Experts

      Making a smaller payment doesn’t necessarily protect you from a lawsuit . . . You can read more here:
      Can I Pay a Creditor Less Than I Owe?

  • Tlb

    I only have one credit card debt and it is 2400. We have just that amount n our savings. Do I roll it over on to an interest only credit card or pay it off and be broke?

    • http://www.Credit.com/ Gerri Detweiler

      What interest rate are you paying on the credit card? How quickly do you think you could replenish your savings if you paid off the card?

  • Alex

    I have a combination in debt of 13k I only make about 20k a year and have a two kids and a wife to support at same time but want to pay off the debt do you have any ideas for me? My debt is 9k in auto that was repossessed, and the rest is credit debt

    • http://www.credit.com/ Credit.com Credit Experts

      Alex —
      Talks with a bankruptcy attorney about your options. Often an initial consultation is free. but with debt that is more than half of your income and three dependents, it sounds as if you should explore this even if your wish and intent is to repay.

  • http://www.Credit.com/ Gerri Detweiler

    You may. Whether and how long they can try to collect the deficiency depends on state law but it most states they have 4-6 years to try to collect a deficiency.

  • MM

    I’m trying to get my credit score up 100 points so I can be approved for a mortgage now if I pay everything down to 30% or almost completely down before the first of this month could my credit score raise by next month?

    • http://www.credit.com/ Credit.com Credit Experts

      By 100 points? It’s unlikely. Do you know if your credit utilization (amount of debt relative to your limits) is the main factor holding it down? Here’s how to get two free credit scores, along with an analysis of why your credit is what it is. If you’re looking at a conventional mortgage, another option might be an FHA loan, which is easier to qualify for.

      We wish we had better news.

  • http://www.fifocapitalcoralsea.com.au/ fifocoralsea

    There are really only three strategies to pay off debt:

    1) pursue the payments that cost you the most in monthly payments first or
    2) pay of the highest interest debt first or
    3) pay off the debt that has the smallest balance owed.
    Either way, you can take the monthly payments formerly used to pay off the now from the paid-off account and apply it to the next debt. I see the logic in paying off a debt that has a lower balance, lower interest, but highest monthly payment among all debt owed – in order to free up more money month-over-month. Mentally paying off the smallest balances gives one a sense of achievement; logically, Paying off the highest interest debt means less money going to 1%ers and more savings for you to pay off your remaining debt. Bottom line, people aren’t sheeple in developing a strategy to pay off their debt and even giving this matter consideration makes them more responsible and accountable than people who never deal with this issue.

  • tls

    Trying to buy a house paid off several cards and paid on others these payments are still not showing on credit report. How often do they report

    • http://www.Credit.com/ Gerri Detweiler

      They usually report monthly, shortly after the closing date of the billing cycle.

  • jENNY


    • http://www.credit.com/ Credit.com Credit Experts

      If you can get the amount of credit used relative to your credit limit down to 30% (or lower), that is likely to have the greatest impact on your credit score. You may also want to consider putting some of this money in an emergency fund. The most heavily weighted factor in your credit score is paying on time, and an emergency fund will help make sure you are not late because you needed to wait for a paycheck.

  • MountainSpirit

    Unfortunately, some Insurance companies also use our credit score in addition to our driving/claim history to determine our rate. I even had a prospective employer check my credit score

  • Paul H

    True but the banks had to pay the money back to the government with interest. Moreover, the government made a profit from that bailout.

  • http://www.credit.com/ Credit.com Credit Experts

    Your score may come up soon. It sounds as if you have dramatically improved your credit habits. And, scores fluctuate. Also, the statute of limitations may not be the same as how long the score can be reported. We wrote about it here:
    Does Your Old Debt Have an Expiration Date?

  • http://www.Credit.com/ Gerri Detweiler

    This should not be on your credit reports at this late date. Get your free annual credit reports and dispute the items that are too old. If necessary get a consumer law attorney or the Consumer Financial Protection Bureau involved. This article should help as well:

    Does Your Old Debt Have an Expiration Date?

  • http://www.Credit.com/ Gerri Detweiler

    Settling a collection account doesn’t usually raise your credit score right away. Please read this: The 7 Biggest Questions About Debt Collections & Your Credit

  • http://www.Credit.com/ Gerri Detweiler

    I am not an attorney but my understanding is that yes, they can request information to enforce the judgment. I would really encourage you to meet with a consumer bankruptcy attorney. Even if you don’t want to file you should understand what the judgment creditor can and cannot do to collect. Please read this article:

    Creditor Gets a Judgment Against You – Now What?

  • http://www.Credit.com/ Gerri Detweiler

    I am not sure what you mean by you don’t know why. Do you think you have been billed incorrectly? Who is trying to collect from you – AT&T or a collection agency? Have you tried to dispute it?

  • http://www.credit.com/ Credit.com Credit Experts

    What sort of ticket did you get when you were 13?

  • http://www.Credit.com/ Gerri Detweiler

    Thanks for the kind comment. The short answer is “I don’t know.” My understanding is this process is spelled out in Ohio state law so I am at a loss in terms of who would have the ability to waive those costs. You may need to talk with the state attorney general’s office or get a consultation with a consumer law attorney in your state. You can find an attorney with expertise in student loans here.

  • http://www.Credit.com/ Gerri Detweiler

    He needs to talk with a consumer law attorney. Their actions may be illegal but it’s not going to be something easy for him to handle on his own. If he can’t afford an attorney he may be eligible for help through Legal Aid.

  • http://www.Credit.com/ Gerri Detweiler

    I am really sorry to hear what you’re struggling with. I doubt you’re going to find a legitimate loan in your situation. Have you talked with a credit counseling agency? They may be tied into community resources that can help you get back on your feet…

  • http://www.Credit.com/ Gerri Detweiler

    What’s your goal? If it is to clean up your credit, paying collections won’t do much unfortunately. They are considered negative either way. But paying them can keep them from getting sold to another collection agency, which could create still another account. This article should answer your questions, but if not let us know: The 7 Biggest Questions About Debt Collections & Your Credit

  • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

    They cannot levy an account to collect on a judgment that is not associated with you.

    You may want to connect with an experienced debt collection defense attorney in order to be certain of your rights.

    Remember that the judgment is not going anywhere, and is likely growing with interest too. The sooner you can put a plan together to resolve the debt, the better.

  • http://www.credit.com/ Credit.com Credit Experts

    It will depend on things like your income, current obligations and so forth. We wrote about the issue here: How Soon Can I Buy a House After Bankruptcy or Foreclosure? Good luck to you, and good for you trying to get your credit back on track.

  • http://www.Credit.com/ Gerri Detweiler

    In most states they can try to collect after the statute of limitations has expired, but if they try to sue you you can raise the statute of limitations as a defense. We wrote more about that in this article:

    Does Your Old Debt Have an Expiration Date?

  • http://www.Credit.com/ Gerri Detweiler

    Is it reported as an installment loan on your credit reports? Then either approach is probably fine, though you may want to get a few months of payments reported to demonstrate payment history. We wrote about that indirectly in this article: How to Make Sure You’re Getting Good Credit Advice

  • http://www.Credit.com/ Gerri Detweiler

    I am sorry, while we’d like to help that’s a question for your bankruptcy attorney.

  • http://www.Credit.com/ Gerri Detweiler

    I hope the article wasn’t misleading. While it is possible that some collection agencies will do what are called “pay for removal deals,” the majority won’t. That’s because they are contracts with the credit reporting agencies don’t allow them to remove accurate information in exchange for payment. You can always ask. There’s no specific language that you have to use; it’s just a matter of talking with them and explaining that you’re willing to pay if they are willing to fix your credit.

  • http://www.Credit.com/ Gerri Detweiler

    Are these collection accounts? If so please read this: Removing Collection Accounts from Your Credit Reports

  • http://www.Credit.com/ Gerri Detweiler

    What kind of debt is it? If it’s a collection account or an installment loan (such as an auto loan) you may not see a boost, but if it is a credit card balance near the limit you should see improvement in your scores. Here’s how to monitor your credit score for free. I recommend you monitor them to find out.

  • http://www.Credit.com/ Gerri Detweiler

    There should be contact information for each collector on your credit report. But if not, you can ask the credit reporting agency for that information. This article may help: Will Settling a Collection Account Hurt My Credit?

  • Ed Grossett

    so your saying paying off a debt isnt a good thing

  • jakevince331

    I had an accident and was hospitalized for 21 days when I was 19 or 20 years old, unemployed and completely uninsured. Couldn’t find a job for a while, basically didn’t even give a second thought about the medical bill… Anyways, now I am 24, have a full time job and I’m saving up to go back to college, all the while I have this huge weight on my shoulders — a medical bill of over $60,000 — of which I am only paying $25.00 towards only because I am afraid that they will garnish my wages if I stop paying. I can’t let that happen because then I wouldn’t be able to afford school and rent. It’s just a horrible situation because even if they cut the amount in half, I make less thank 20k a year and I’m at a point in my life where I need to save money so that I move out, pay for my education, and basically start my life, but I feel like this is really holding me back and I feel like there are no good options for me.. Oh and here’s the kicker — I have now been working at that very same hospital for two years and now pay for health coverage through their group insurance plan. I am thankful to have it, but it can’t help me with what is already done, but then again, I couldn’t have afforded it even if I wanted it back then. It’s simply not right for so many people to have the financial stability of their futures jeopardized because they cannot afford or do not have access to the healthcare that was not only promised to them, but the healthcare that they deserve for being tax-paying citizens of to the RICHEST and most POWERFUL nation in the free world. There is simply no excuse for this…..

    Anyways… I will get off my soapbox now. I just really needed to vent because this debt has been really getting to me for a while. Sorry for rambling, but I am open to any advice or comments regarding my debt if anyone would like to chime in. Thanks!.

  • http://www.Credit.com/ Gerri Detweiler

    The credit reporting and the statute of limitations are two different issues. We wrote about that in the following articles. I think they should answer your questions, but if not let me know:

    Does Your Old Debt Have an Expiration Date?

    What Happens If I Never Pay an Old Debt?

  • Tiffany

    Ok I have a few debits that are to come off credit.. so what does that mean so from Jun-Aug of this year I have 3 that is suppose to fall off does that mean I dont owe them anymore and is that gonna boost my score?

    • http://www.Credit.com/ Gerri Detweiler

      Whether they can still try to collect on them depends on the statute of limitations, which may be different than the length of time they can appear on your credit reports. We wrote about that here: Does Your Old Debt Have an Expiration Date?

      As for whether your credit score will go up, it probably will though it depends on everything else in your credit reports. Are you monitoring your credit scores? Here’s how to monitor your credit score for free.

  • http://www.Credit.com/ Gerri Detweiler

    What is the status of the account now? If it’s already in collections, this article should help: Will Settling A Collection Account Hurt My Credit?

    • Barb

      Actually out account is in good standing.

      • http://www.Credit.com/ Gerri Detweiler

        If they are willing to waive the late fees I see no reason they have to report them, But if they insist on reporting the debt as settled for less than the full balance then yes, it can hurt your credit scores. However, I am still not clear what type of account this is. A checking account or credit account? The latter would typically appear on a standard credit report while the former would usually be reported to a specialty bureau like Telecheck or Chexsystems. Ultimately, though, it is the financial institution’s choice how to report. I personally wouldn’t let something very negative hit my credit over a couple hundred dollars. (If you think the fees are unfair you can always complain to the CFPB. They may not be able to do anything but it doesn’t hurt to go on record.)

  • http://www.Credit.com/ Gerri Detweiler

    I’d suggest you first get your free credit score from Credit.com to see how your debt is affecting your score. It will also give you an action plan for your credit.

    If your main short-term goal is to improve your scores, then paying down your cards with the highest utilization to the 20 – 25% level would be a good idea.

    But if you have some cards with significantly higher rates and you aren’t in immediate need of new credit, then you may want to focus on paying off the debt with the higher rates first as that will save you the most money.

    Make sense?

  • http://www.credit.com/ Credit.com Credit Experts

    Congratulations to you for overcoming your substance abuse problems and starting a successful business. Getting a secured card and paying it on time is a good start to establishing credit. You’ll want to keep the balance at 30% or less of your credit limit (less than 10% is even better). That should be your top priority — your most recent history is weighed heavily in determining your creditworthiness. You’ll also want to take a look at your credit report — you can get one for free each year from each of the three major credit reporting bureaus — and correct any information that’s inaccurate.

    Here are some Credit.com resources you may find useful as you establish credit:

    How to Build Credit the Smart Way
    How Long Does Negative Information Stay on My Credit Report?
    7 Facts About Collections and Credit Scores
    How to Get Your Free Annual Credit Report
    How Do I Dispute an Error in My Credit Report?

    And please let us hear from you about how you’re doing.

  • http://www.Credit.com/ Gerri Detweiler

    When you continue to pay on it then the statute of limitations gets extended as well. Typically the statute of limitations will be based on the date when you last made a payment.

  • Lyndon

    I checked my credit score in January and the high score was 685 and the low was around 634. I paid off around 5 different medical bills and my low score dropped to 585. That is almost 50 points. How long does it usually take to get back up at least to where it was before? It has been about 2 months and it rose to 604 and stayed there for over a month. Can I expect or at least hope that this will rise in the next month?

    • http://www.Credit.com/ Gerri Detweiler

      Paying collection accounts typically does not help your credit scores unfortunately. (And I assume that’s what those medical bills are?) Have you tried reviewing your free credit score with Credit.com? If you do, you should information about what’s affecting your scores and what you can do about it.

  • Bonny

    my question is, I had a family member become a uatorized user on my card and several others cards of mine also. and now he wants to add them into his bankrupsy. 1. can he do that 2.how will it effect my credit?

    • http://www.credit.com/ Credit.com Credit Experts

      An authorized user of your card has no responsibility for repayment, thus balances on cards in your name are not the family member’s debt even if the charges were his. According to Experian, an authorized user’s poor credit history does not affect those of the primary user. You can read more here:
      Can an Authorized User Hurt Your Credit?

  • http://www.Credit.com/ Gerri Detweiler

    First, as to your score, I have no idea. Have you requested your free annual credit reports to see whether any new information has been added? It’s just impossible for me to speculate as to what the problem may be.

    As for the judgments, I recommend you read some of the articles we have written on this topic. There is no simple answer to your question but hopefully this will point you in the right direction:

    Help! I Found a Judgment on My Credit Report and

    Creditor Gets a Judgment Against You – Now What?

  • http://blog.credit.com/ Kali Geldis

    Hi Dana — It’s hard to know exactly what’s impacting your credit scores without a fuller picture, but here are a few thoughts on why your score may be dropping. When you apply for a car loan, there is a hard inquiry on your credit report that drops your score a bit temporarily. That inquiry will age off of your report and you’ll see your score rise again. There are five major factors that play into your credit scores (you can check them out here: (http://www.credit.com/credit-scores/what-is-my-credit-score-how-is-it-calculated/). The Credit Report Card (http://www.credit.com/free-credit-report-card/) is a free tool that grades you on these five major factors, so you can pinpoint what may be causing your score to drop.

    As far as the collection accounts go, if you do not think you owe the debt, you can ask the collector to verify the debt, which they legally have to do. This can give you more info as to what the debt might be for/ who you owe. Then, if you still think the debt is not yours, you can dispute it with the credit reporting agencies if they start appearing on your credit reports.

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  • Lauri Flaquer

    Great blog Gerri.
    I did exactly what you are recommending and realized that I was 30K in debt, at almost 30% interest. I decided to bite the bullet and get out from under it.
    A year and a half later, I was debt free. I used the system you are offering here and was FIERCE about spending any money until I paid it all off.
    My advice is watch those statements like a hawk. I noticed that even after I paid everything in full, they were still adding service charges. I called an d fought them. Of course they were a mistake. Beware of mistakes that put you right back in debt…. Yours and theirs!

    • http://www.Credit.com/ Gerri Detweiler

      That’s fantastic! I am shooting you an email – maybe we can share your story on the blog. 🙂 Either way, CONGRATULATIONS!!

  • http://www.Credit.com/ Gerri Detweiler

    I am not sure exactly what the situation is, but they are probably being excluded from the utilization calculation so it probably won’t help if that’s the issue. And if there is negative information (such as a charge off) that won’t change by paying them off.

    If you can elaborate we may be able to provide a more detailed answer.

  • http://www.Credit.com/ Gerri Detweiler

    First of all, they are wrong. The charge off can be reported for 7.5 years from the date it was charged off. Period. However, if they sue you and get a judgment that can be reported for a long time (sometimes indefinitely). If you are not sued, then continuing to pay your credit cards and student loans on time will be the best way to rebuild your credit. If you are sued and they get a judgment, though, your credit scores will drop further.

  • http://www.credit.com/ Credit.com Credit Experts

    You don’t say what sort of loan this is, but in general, making only minimum payments extends the repayment time and increases the amount of interest you pay. But believing your creditor has received enough and stopping payment won’t make your problem go away. It sounds as if your balance is going down slowly. Continuing to pay until the debt is gone (unless you can reach some other settlement with your creditor) is the best way to preserve your credit and to avoid being sued over a debt. For more, see What Happens to Your Unpaid Debt.

  • http://www.credit.com/ Credit.com Credit Experts

    For the medical debt, you do have a few options, although limited. We’ve covered medical debt (and student loan debt) quite extensively here at Credit.com and the following resources can at least provide a few options to consider:

    The Ultimate Guide to Solving Your Medical Bill Problems
    Is it Ever Too Late to Negotiate a Medical Bill?
    How To Fix Your Medical Bill Problems

    As far as the student loan debt goes, your options are a bit more limited so you’ll have to find a way to pay them. Unlike medical debt where you may be able to file bankruptcy as a very last resort, your situation would need to be considered utterly hopeless to qualify for the undue hardship rule to be eligible for bankruptcy. Fortunately, there are other options that are less severe. For advice and help with managing/paying off student loan debt, the following resources can help:

    How You Can Ease the Burden of Student Loan Debt
    How to Pay Student Loans You Can’t Afford
    The Ultimate Guide to Student Loans

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  • Mike

    I would like to know if it is legal for a debt collector to set up a monthly due date and amount without my authorization and notify the credit bureau of late payments.

    • http://www.credit.com/ Credit.com Credit Experts

      If the account has been sold to collection, they’re legally able to report the collection account but collections don’t show “late payments,” they show that there is an unpaid collection debt. If you agree to make payments, as you make payments the balance remaining balance will update accordingly. That’s to say, the account is already delinquent so “late payments” on a collection would’t show up as a “late payment.” Meaning, a collector may set up a payment plan, but if you don’t pay it or agree to it, they can’t technically report that you’re late on making the payments — as explained, collections don’t have late payments.

      If you haven’t agreed to make payments (and have not yet made any payments), the debt will remain and the account will go by the date the last payment was made. Meaning, if you DO agree to payments and you make a payment and then default on the payment plan, this will update the delinquency date on the account, which means the account will reset to the new delinquency date (rather than the original delinquency date the account first went to collections).

      If you’re dealing with a collector, Credit.com offers a number of resources that can help. To get you started, the following will help explain your rights, steps for dealing with a collection, and how they’ll impact your credit:

      Debt Collectors Killing Your Credit? Here’s What To Do
      Will Paying a Collection Account Remove it From My Credit Report?
      Seven Ways To Defend a Debt Collection Lawsuit

  • JSW

    George Bush put two wars on the national credit card and also lowered taxes–resulting in a huge increase in the national debt. You can blame Clinton and Obama in your mind, but the reality is clear that Republicans created the debt problem and now they are screwing the people again being unreasonable in taking responsibility for their errors and throwing the credit of the United States and the future of all of us into a giant crap-shoot. It is not about our healthcare which they want to take away, it is about the health of the nation that they do not want to responsibly share in paying for.

  • http://www.credit.com/ Credit.com Credit Experts

    Newt – the statute of limitations to collect a debt is different than the statute of limitations for a debt to be reported in your credit report. Just because a debt has passed the statute of limitations to collect, doesn’t mean that it will be removed from your credit report. SOLs vary by state, but in your example for Texas, the collection would show up in your credit report for 7 years from the date the account first made it to serious delinquency status (180 days late). If a debt collector tried to collect on a debt, you could inform them that the SOL had passed and you had no legal obligation to pay. However, the record of the collection would remain in your credit reports until it expired. For more on how long negative information remains in your credit report, the following should help: How Long Does Negative Info Stay on My Credit Report?

  • http://www.credit.com/ Credit.com Credit Experts

    Most negative information remains in your credit report for 7 years but there are exceptions. Collections, for example, remain in your credit reports for 7 years plus 180 days from the date the account was delinquent leading up to when it was placed for collection. You can read more about how long negative information remains in your credit reports here:

    How Long Does Negative Information Stay On My Credit Report?

    Keep in mind that if the collector decides to sue in order to collect the debts, the collections could turn into judgments. So that you’re aware of the possible repercussions, we’d encourage you to read the following:

    Seven Ways to Defend a Debt Collection Lawsuit
    Creditor Gets a Judgment Against You — Now What?

  • http://www.credit.com/ Credit.com Credit Experts

    Hiring a credit repair company to help you repair your credit can be tempting but unless you truly understand what they do and how they do it, it’s not a strategy we’d recommend. Before you decide, make sure you read the following: Do I Need a Credit Repair Agency?

  • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

    It would be a good idea to look into whether the debt is legitimately owed. A couple of ways you can do that would be:

    1. Cross reference the collection account with your sister’s credit report. You would be looking for the original creditor and/or any subsequent reporting by this debt collector, or a debt buyer who may have placed the account with the collection agency.

    2. Send the debt collector a request for validation of the debt. The collector should cease collection efforts until they have responded to your request. Send this verification letter within 30 days of having received the collection notice. If they respond, you will be better able to understand the nature of the debt, and determine if it should be paid.

    It would be good to know how long the debt has gone unpaid, who is collecting, and the original creditor. If you can post answers to those questions in a follow up comment I can offer more feedback.

  • http://www.credit.com/ Credit.com Credit Experts

    Natas – Can you share a little more about how much debt you’re talking about? If the debt is significant – meaning, there’s no way you’d ever be able to repay the debt — there are options, but they’re last resorts. Bankruptcy for example, is one. In which case, it may be worth speaking to a bankruptcy attorney to alleviate some of the financial burden.

    If the debt isn’t too severe, it’s a good idea to focus on clearing up the old negative collection accounts and if possible, negotiating a settlement or payoff to keep them from causing more damage later on. Based on what you’ve shared, you’re down to one last collection debt to clear up, which is a great step in the right direction. Keep in mind, however, that paying collections doesn’t necessarily improve your credit — but it does keep things from getting worse. For more information, the following resources will explain how paying collections affect your credit reports and credit scores:

    Will Paying a Collection Account Remove it From My Credit Report?
    Will Paying a Collection Improve My Credit Score?
    The 7 Biggest Questions About Debt Collections & Your Credit

    Repairing the damage caused by financial disasters will take time and the addition of new positive credit patterns (to help show credit scoring models that you’ve recovered from the financial problems caused by the divorce.) For specific, step-by-step advice on how to recover from past credit problems, Credit.com offers a number of educational resources that can help:

• How to Rebuild Your Credit
    11 Tips to Rebuild Your Credit
    How Long Does Negative Info Stay on My Credit Report?

    Regarding the community property laws, you may want to speak with an attorney familiar with the laws in your state for specific legal advice. To explain how it works, in community property states a spouse can be held jointly liable for debts that were incurred during the marriage — even if the spouse wasn’t on the actual loan. This is typically handled during the divorce proceedings when a judge will order one or the other of the parties to pay certain debts incurred during the marriage. Even then, however, if the judge orders your ex-spouse to pay a portion of the debt and he doesn’t, the divorce decree doesn’t supersede the original terms on the loan. Essentially, if he doesn’t pay, it only hurts your credit — not his, if he wasn’t on the accounts. (Unless the collector files a lien or judgement against you both, which they would be legally able to do in a community property state.) Keep in mind too, that typically, in community property states, the only time the lender would go after your spouse would be if you died or stopped paying and they were unable to collect the debt from you.

    In the end, if your ex won’t help you pay the debts, and you want to improve your credit, it’s going to mean clearing up the past collections and focusing on adding new, positive information to your credit reports. In which case, the resources mentioned above can help get you started in the right direction.

  • colicoli

    It is definitely better to go with the 0 pct. balance transfer, especially if you only pay the minimum or a little bit more than the minimum. Check what your transfer fee is. I just did a balance transfer from one of my credit cards to a zero pct. offer and the transfer fee was 3%. I did the calculations and after the transfer, even with the fee, if I remain paying the same amount each month i will finish paying the balance 2 or three months in advance or saving a couple of hundred dollars in interest. I would definitely transfer your high interest (16.99) card with one of the others. 11.99% is not bad considering the average interest rate is about 15 or 16 pct.

  • Sue

    my son was laid off from his job and unable to pay off his credit cards the debts were turned over to collections agencies & leins have been placed against his home. He would now like to pay these off. What is the best way to go about this? I’ve heard he should send a letter to the creditors to ask for the debts to be marked “paid in full” with the credit bureaus in turn for paying off the debts in full and to wait for a written response before doing so. The collection amounts are much higher than what my son remembers as being owed initially, can anything be done about that?

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  • Jeriah Hershberger

    You are brilliant!!And have risen “above”credit scores you have no need for them.

  • Gerri Detweiler

    Under the Credit CARD Act, creditors are generally required to apply amounts paid over the minimum payment to the highest rate portion of the balance.

  • Gerri Detweiler

    Very true. We’ve written extensively about this issue. http://blog.credit.com/2012/03/slew-of-tax-tips-to-clean-your-1099-c-mess/ It’s created a lot of headaches for consumers.

  • Gerri Detweiler

    What type of accounts are not showing up?

  • Gerri Detweiler

    If you want to save the most money, pay off the highest rate debt first after the interest free period is up.

  • Gerri Detweiler

    Lelleana – According to the Department of Education, if you successfully complete rehabilitation then the *default* will be removed form your credit reports. However, they add: “Delinquencies (late payments) reported before the loan defaulted will not be removed from your credit report.” You can learn more here: http://studentaid.ed.gov/repay-loans/default/get-out

    You also asked: “I thought that once they sell it to a creditor, they can’t list it on my credit. I thought I couldn’t have the same debt listed more than once.” Unfortunately, that’s not quite true. The original creditor and the most recent collection account may still be reported. It’s when multiple collection accounts are reported for the same debt that there’s a problem. We wrote about that here: http://blog.credit.com/2012/08/credit-report-double-jeopardy-means-double-damage/

  • Cathy

    You have 29 % because you either have bad credit or carry too much debt. I have no cards over 6 % and my new car loan is 1.7 (after they came down by 2,000 on the price. Pay off your debt, learn from this.

    • EZ

      Not so. Depends on who your credit is with. All of my loans and cards are at 10% or below except one. I have a credit score in the 770’s but one creditor decided that since I was one day late on a payment they were going to up my rate from 9% to 29.99%. There was nothing I could do about it and they refused to put it back. I even had three years of history showing no late payments and they sent a reply e-mail acknowledging such. Some of them are just crooks and refuse to help anyone. I have fortunately been able to pay that one off but I still to this day curse there name to everyone I speak with about banks and credit cards.

    • DP

      No the banks arbitrarily upped their card rates no discussion with no missed or late payments cause they had advance notice they couldn’t do that much longer. Many of us got stuck with multiple cards like this. And had never paid late. One closed my acct even though I never had paid them late. Banks suck!

  • dianek83

    Though he can choose not to pay the Collection Agency, they can add negative things to his credit report. By Law the Agency can not force your son to pay nor garnish your son’s check, because he’s disabled.

    • Kimberly Morris

      You have to be sure not to co-mingle funds from other sources with your SS, SSI or other disability income. Collections can and will get judgements garnish your bank account and then you have to fight them to get back the SOC SEC etc. income that they are NOT allowed to touch. This happened to a family member in Oregon more than once. It sucks as they don’t inform you they’re taking your $$$ and you find out when all your checks bounce!!! IT takes a couple months to get they money the couldn’t rightfully take back and screws up your finances. These companies will do this knowing full well they have to give back the disability income if you fight for it!!!!! But then some people won’t know their rights and the agencies count on that!!!! I also wouldn’t have any other parties on any account that you put disability money in. Not too difficult to have separate accounts In the same bank and just transfer money when you need to!!!!

  • Phil

    I like the idea of using a credit report to see how much you owe. But why in the world would I care what my credit score is if my “mission” is to get out of debt? A high credit score means you can borrow money easier, which is what got you into the problem in the first place!!
    If you’re going to get out of debt, STAY out of debt. Then you’ll have the money to cover most things a high credit score is needed for (deposits on utilities, etc…).

    • Kimberly Morris

      Many of us end up with unexpected life emergencies and it’s nice to be able to charge something or get a loan when a crisis comes up!!!!

  • http://www.credit.com/ Credit.com Credit Experts

    Maygen – As far as inquiries go, you’re right — all auto, mortgage and student loan related inquires that occur within 14-45 days (depending on the individual scoring model) are de-duped (or combined) in the scoring model logic so that the inquiries only count as “one.” However, the inquiries will still be reported individually in your credit report — it’s the scoring model that does this de-duplication process behind the scenes. You’re still going to see all 15 inquiries reported in your credit reports, but because they all took place within two days (back in January and February) the credit scoring model is only counting them as one inquiry.

    A couple things to keep in mind about inquiries:

    — Inquiries are reported in your credit report for 24 months, but they only ‘count’ in the credit scoring algorithm for the first 12 months. Come February 1, the inquiries will still be reflected in your credit reports but they won’t impact your credit scores at all. 

    — Auto, mortgage and student loan inquiries are “deduplicated” for rate-shopping purposes by the credit scoring formulas so that you’re not penalized for multiple inquirie. This means you can incur any number of these inquiries within a 14-45 day period (depending on the scoring model) and the score will only count them as one inquiry. The best advice here is to do exactly as you did, and make sure all of the inquiries are made in a short time frame.

    For more about inquiries and their impact on credit scores, the following resources should help:

    Should You Be Worried About Credit Report Inquiries?
    How Credit Inquiries Affect Your Credit Score
    Reader: Inquiries Dropped My Score 104 Points

    • Credit

      Most if you need credit counseling. Go to NFCC.gov and find a certified non-profit credit counseling agency near you.

  • http://www.credit.com/ Credit.com Credit Experts

    Helen – whether or not you’ve been making small payments shouldn’t impact your eligibility to file bankruptcy. A lot would depend on your individual financial situation, your debts, income, your ability to pay, etc. One resource that may help:

    When Should You Consider Bankruptcy?

    In the end, if bankruptcy is something you’re considering, it would be worth speaking to a bankruptcy attorney to at least see what your options may be.

  • cc

    Personally, I think you are on the right track. If you have no debt, you can purchase things with cash.

  • Gerri Detweiler

    It sounds like you are doing an amazing job tackling your debt. But in this case, it could be the combination of the age of the vehicle/mileage combined with your credit score.

  • Gerri Detweiler

    Unfortunately there are too many stories like yours. The FTC did develop new rules for debt settlement companies that have helped put many of the unscrupulous players out of business. It looks like the Consumer Financial Protection Bureau will be tackling this as well.

  • Pam

    I hae a question. We had a signature line of credit. We received a letter and it said that they were selling the loan and the new company would contact us. I made the last payment in January. I hadn’t heard from the new company and couldn’t pay the old company as the account wasn’t there when I tried. Now was contacted by a law firm that wants the fll amount. No payments. I have also received a letter from American debt mediators with an offer to consolidate my debt for less than owed. They said I could put this debt in with the program and they would contact the law firm. Does this sound legitimate?

  • captaindandan

    FICO scores; credit reports JUST ANOTHER rip-off. RIP-OFF!!

    NOV 2012, I checked my credit score @ 716. I went looking for a specific vehicle: 1997 thru 2002 Chev. Camaro z28 SS with 6 speed stick shift. PERIOD

    i finally bought one at a dealer in San Diego. (Out of state cars = too risky –if they don’t pass smog; you’re outta luck and cannot register it)

    So the dealer ran the credit, and the bank (Wells Fargo) ran the credit; a couple of places I was debating about buying a Camaro from, they all ran my credit.

    BOTTOM LINE: I finally bought the car $2,100 down, $220 per month….. BUT my FICO & credit scores had dropped to 651 because of ‘excessive inquiries’. Well, folks, I can only buy ONE vehicle! Come on. This went on in March and April and I GAVE up someone hitting my credit–I bought the car end of Feb 2013 why WHY WHY would I keep checking my credit? I already made the purchase.

    A credit repair company told me quote “Getting hard hit inquiries off the credit report is harder than a Bankruptcy.” !!!!

    Lexington Law gave me all my money back but I’m screwed if I need to purchase any big ticket items.

  • Disgusted with Credit Agencies

    So, I lost my job a year ago and at that time had no debt. I almost maxed my cards out before I got a new job. When I make my payments, not only do I send the minimum, but double or triple payments yet my credit score is tanked in spite of NOT missing payments, paying my bills on time and still having money to pay more than the minimum. It seems like you can’t win with these credit companies. They are a royal pain in the rear. When you really need help, you can’t get it and they want to give you credit when it’s not really needed. We really have a backward system. I have a triple master degree and have a good job, so it is just a matter of time before I have this cleaned up, but I would really like to complain about the three credit companies on just how crappy of a job they do when you have someone that does take care of their debts and they still get screwed!

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  • Deanna Templeton

    Credit scores are based on the information reported in your credit reports. Debit cards are not reported in your credit reports, and while credit cards ARE reported in your credit reports — your credit card issuer only reports the balance and credit limit, not individual transactions. This means withdrawing money from an ATM wouldn’t have any impact on your credit score — regardless of the location.

    However, if you use your credit card for a cash advance — depending on the amount of the cash advance, it could lower your score if the withdrawal has a significant impact on your revolving utilization ratio. (For more on calculating your utilization ratio and how it impacts your credit scores, see “What is Revolving Utilization?“)

    That said, using a credit card for a cash advance inside of a Casino may have other consequences. For one, cash advances are expensive — often averaging 20% or more –and unlike other purchases, cash advances start accruing interest immediately — there is no grace period.

    Secondly, depending on your individual state laws and your credit card issuer, you may be prohibited from using a credit card for gambling if you’re purchasing casino chips or lottery tickets. This only applies when using a credit card to purchase them outright, so if you really wanted to you could still technically use your card for a cash advance …..but it’s probably not an ideal option from a financial standpoint.

  • me

    I am debt free except for my house. I use credit cards for everything possible and pay them off in full every month. Once my house is paid for I DON’T CARE what my ‘credit score’ is because I won’t need another mortgage and will continue paying off the credit cards every month. See, when you have a large enough emergency fund to get you through things like a car breaking down, or the roof needing replaced or the furnace blasting out CO2. I did it, you can too.

  • Army Wife

    Out of all of the discussions I read here, no one mentioned the tax effects of settling a debt. When a debt is settled for less than the current balance, the debtor will have to report and pay taxes on the amount forgiven. I am not discouraging debt settlement, but people need to know ALL of the effects of settling a debt. Rest assured that the collection agency will file a form with the IRS informing them of the forgiven amount and while they are supposed to issue the debtor a tax form as well, some do not but the IRS will already have that information on file and they will come after you if you do not report it on your tax return. I had a friend get a $9000 surprise because the creditor failed to mention the tax liability on the forgiven amount. Do not expect creditors to fully inform you about anything – do your research – educate yourself – and don’t be afraid to call local credit repair agencies and ask a couple of questions.

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  • tammy

    my question is…. with a credit score low and a brankruptcy back in 2005 that has been over and done with… chapter 7 … (and I know up to 11 years for it to be on my credit report) and with some not so good payments histories after the bankruptcy… with any where from credit cards, bills, drs. hospitals… where do you start?
    I want to tackle this but not sure where to start… AND is it true that after 7 years most things come off the report… if so… I have things that have like 2 years to go… do I tackle them as well… or is it best to tackle the others first

    • cc

      Check you credit score for errors and take care of them first. Concentrate on paying your bills on time. Look at your monthly bills and see where you can save some money, ie… downsizing cable and cell phone service. By only what you need with cash or debit card. Cut back on entertainment. All of these things are sacrifices, but you will be better off in the long run.

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  • http://credit.com logrog

    What are the “rules” i should follow when thinking of a Balance Transfer? I’m confused on several items: Transfer fee, is it worth the transfer to add more to your debt? Credit Score: Is it worth getting a credit score hit because you’re opening a new credit card account? I have $7000 balance on one card, (11.99 interest), 4500 on another(16.99) and a 11000 on another (11.99) I am thinking of combining the lower two into one with a balance transfer..at 18months 0% interest. Any comment or direction would be helpful, thanks

    • Credit.com

      If your goal is to get out of credit card debt, a balance transfer card is a good option — but only if you’re able to pay off the balances (or a very large portion of it) during the 0% introductory phase. The key to making them worth it is to not use the other cards and focus on paying down the debt you transfer to the new card. As far as balance transfer costs, you have to weigh the cost of the balance transfer fee to make sure it’s worth the cost in comparison to what you’ll save in interest costs. In most cases balance transfer fees run between 3-5%, which makes it less expensive than the amount you’d pay in interest if you continued carrying those same balances on your other cards. As far as the hit to your credit score, in the grand scheme of things it will most likely be a wash. The inquiry and new account open may lower your score, but the new credit limit will most likely lower your revolving utilization percentage, which would increase your score. For more on both topics, here are two great resources:

    • Gerri Detweiler

      I think the following article should answer your questions: http://blog.credit.com/2011/10/8-tips-for-a-successful-balance-transfer/ If not, let us know. You may also want to check out our list of best credit cards for balance transfers: http://blog.credit.com/2013/01/the-best-credit-cards-in-america-for-balance-transfers-2013/

    • Bruce Cambigue

      I was 80k in debt 5 years agoI used the balance transfer pay off early technique. If you divide the fee by the amount it gives you the interest rate. Usually about 3% or so. I am credit card free and will pay the dentist the last of the $12,000 to fix my teeth, tomorrow!
      I use balance transfers judiciously but it is way better than paying high interest. Just don’t use your cards again because it has no balance. It is a suckers game!

  • http://yahoo Dale Mann

    I paid off my mortgage yrs ago and have not taken any loans for my property. This seems to have hurt my credit score. It seems none the reporting agencies can understand someone owning their property free and clear, and I am hurt because I paid off so long ago my credit reports state that keeping a mortgage up to date is important and I have no experience in this area, so I am slammed many points for The American Dream of owning and not owing.

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  • Almost Debt FREE

    Its been two years now that i have started my plan of attack to to payoff my debt worth 40G down to 15 G and has been unemployed since two years ago with an income from VA compensation only worth 560 a month ( recently has increased to $1300 a month) plus an stipend from education benefits of $2,175 a month plus unemployment benefits of $800 a month. The money i received monthly is not an “INCOME” when applying for a car loan. I bought a car from a dealer and honestly told them that i am unemployed but I am a full time student and i am going to use my stipend and education benefits and other additional income to buy a used car worth $13,000. I got approved and am only paying $210 dollars a month for 72 months. I am only renting $300 dollars in one little room with free cable, internet and utilities.
    Here’s my question: How come I am always being denied when i applied for REFINANCING my car? I wanted to get a better and lower % rate so I could pay off my debt the sooner. My credit score as of now is FAIR (659) better than two years ago of 550 credit score. What would be the best plan for this?

    • Steve

      Honestly – forget about refinancing. a 6 year loan is not that long, and the fees to refinance would outweigh the interest savings. Better idea: Pay more and get it paid off early.

    • catdogme

      You said it yourself – the money you receive monthly isn’t considered income. So you’re asking for a refi loan with no income and you’re unemployed, and you’re a student. No loan underwriter is going to approve a loan when your income is student loan/grant money. If you are only paying $210/month and your rent is $300, what are you doing with the other $3700 (less your tuition, unless the “education benefits” are your refund check)? $40K in debt does not give you a $3700 bill. If you’re only paying $210 a month, just stick with the payments for now. Concentrate on just using all that surplus to pay down your credit debt.

  • Lee

    I have paid off all my debt, by getting my credit report and paying off everything I saw on it, and paying my bills on time. How long will it take for my credit score to start trending upwards if I continue paying everything on time?

    • tammy

      I heard it will take up to 6 months to show better scores

  • http://credit.com Lenny

    Why is it that cash advances on a credit card are paid down last (purchases are paid down first) I was told that the new credit card regulation to were to higher intrest first.

    • Gerri Detweiler

      Lenny – Under the CARD Act if you pay more than the minimum they are supposed to apply the amount above the minimum payment to the highest rate portion of your balance. Is that not happening?

  • http://msn jean

    I have heard that settling on a balance with a creditor can cost u with taxes. Does the creditor 1099 you for the balance they write off?

  • http://pdpapa147@msn.com terry

    How many years do they have to collect from you. My health insurance told me if they try and bill you after a year they cant. Does that go for everything

    • Gerri Detweiler

      If this is a participating provider, then the contract the provider has with the health insurance companies covers the issue you raised. That contract likely requires the provider to bill within a certain period of time, and if they fail to do so, they can’t try to collect from the patient.

      However, if you received services from a non-participating provider, if you there were charges not covered by insurance (or a deductible), or if you did not have insurance then those protections do not apply.

      In that case the statute of limitations for collecting the debt applies. That period of time varies by state, but is usually at least four years long.

  • C0nstance Deaton

    A few years ago I was in a lot of debt. I had it under control but it was getting harder and my payments were all going to interest. I saw an online debt solution place and called. To make a long sad story shorter , let me try. First they told me to stop paying on any debt I had, to sign it over to them. They sent me papers to fill out and sign. I made them a power of attorney and quit paying my bills. I had to pay them $162.00 a month and I was promised to be debt free in a year and half or sooner. The thing is I sent them $162.00 for 15 months and was told my creditors were being paid off. No one was calling so I believed them even when I called them and asked for proof. When I got to calling everyday I got a letter saying not to send any more money that it was almost all paid. Then I got a letter saying that there would be no more calls or letters from them that they were not going to be in business any longer. I never heard from them again and I called the places I owed and they had never gotten a dime from them. I still owed them and had paid $162.00 to this bogus company for 15 months. To sue them I was told I’d have to file in Florida where they were based and if they’d closed I’d never get my money back. This line gives the name of Time Debt Solutions, so beware of places like this . Thanks.

  • Ivette Meade-Smith

    To get a better understanding can the Credit.com help in informing you whether you should file for bankruptcy, because that’s the point where I’m at whether or not to go that route.

    • Deanna Templeton

      Ivette – Credit.com doesn’t offer one on one bankruptcy counseling but one option you might wish to consider is to reach out to a non-profit consumer credit counseling service, first. I personally like CredAbility.org (formerly CCCS of Greater Atlanta). They provide one on one counseling online or by phone — 24 hours a day — and after reviewing your personal financial situation with you and crunching numbers, they’ll be able to tell you whether or not bankruptcy is a route that would be best for you. Bankruptcy should be a last resort but in some cases it’s the only option left.

  • Jackie Wullkotte

    My son is on social security disability because of very severe medical issues. He had a loan with a company and wound up not paying his debt to them. It was turned over to a collection agency and because of his health issues and lack of income, he never paid the debt. He was more stable last year and began paying a monthly amount to the collection agency. Last month, that collection agency turned it over to another collection agency and he continued his monthly payment to the “new” company. Now, however, another collection agency has contacted him for the same account but a much higher amount of money. He told them he was paying that account to another collection agency but they were very rude, threatning and implied it was going to court and a judgement would be against him and the court could settle it. Any suggestions on how to handle this as the loan is getting closer to being paid off and he is positive that he had only one account with the original company. Thanks for your help!

    • Michael Bovee

      Jackie – Please post any additional information you have about the last debt collector that made the threats. Your post describes potentially one of two things:

      1. Debt collection abuse
      2. Scam posing as a debt collector

      I want to help you get to the bottom of this, but it would be good to confirm who and what you are dealing with first.

  • kelly

    What is the statute of limitations on bill collections? I had a contract with a health spa about 18 years ago that was never fulfilled. several months ago, i started receiving collection notices from a collection agency for this bill. I also had a credit card with a large company about 10 years ago, that was also unresolved. i recently started receiving phone calls and letters for this bill from a collection agency. how many years can the company try to collect and report on your credit and then sell to a collection agency who can also try to collect and report on your credit. Can they continue to report a debt on your credit for so many years.

    • tammy

      not sure if this is true… BUT… I heard that if there is any activity rather you do it or they do it the years start over again… AND there is no time frame… I have a question myself… that states this… but I heard that there is no time frame that they can come to you at anytime… even after the “7 year” time frame… that it will always be there… again this is not 100% I heard this…

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  • Mike

    I was told that debts past the statute of limitations where I live are better off unpaid. They said I should just tell them never to contact me unless it was serving papers on a collection lawsuit and use the statute of limitations as my defence if any tried suing. Are these debts indeeed uncollectable? And if they are no longer valid could repeated attempts to collect after being to told not to contact be considered harrasement?

    • Credit.com

      If the statute of limitations (SOL) has passed you’re not legally obligated to pay the debt. The SOL will vary from state to state so you may want to check with your state attorney general’s office to be sure that the SOL has in fact passed. The laws also vary depending on the type of account (written contracts versus open contracts, for example).

      If the statute of limitations has passed, you can respond to the collection notice with a written letter stating that the debt is past the statute of limitations and request that they cease all contact. Make sure you send your letter certified mail and keep a copy for your records. This notice only applies to the current collector; if they sell the debt to another collection agency, the notice won’t apply to the new collector. The point here is that notifying the collector won’t stop future attempts from other collectors if the debt is sold. In which case, you’d have to repeat the process.

      Something else to keep in mind — just because the debt may have passed the statute of limitations to sue, it can still be reported in your credit report. Most negative information will remain in your credit reports for 7 years, for collections it’s 7 years from the date the account first went into serious delinquent status — usually at the 180 day late mark.

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  • Tricia

    I have a collection for a medical bill. The collection company is telling me that they can only settle it for 20% of the balance because the hospital (original company) says they can’t go any lower. Is that true? What I have read about collections, it would seem that the collection agency isn’t controlled by the original company because they already bought the debt. How can I get them to negotiate better and stop playing me for a fool?????

  • Melinda

    I lost my job 2 yrs ago and have been working contract since that time. I am making less than 1/2 of my previous income but have continued to maintain my mortgage and cc pmts. From time to time I have had to use my cc to get by. Prior to losing my job I had contacted my creditors to reduce my interest rates and did not get anywhere with them.

    My question is this – If I contact the creditors now to request an interest reduction and let them know of my reduced income will they be allowed to close my accounts and demand payment in full? I have been doing my best to avoid bankruptcy. I incurred the debt and want to pay it off, I’m just asking that they help me out somehow.

    I have a loan that will be paid off in about 3 months which will free up addtl money for pmts. THANKS

    • Credit.com

      Melinda – To be perfectly honest, calling the credit card issuers and explaining the situation could lead to them closing the cards or significantly lowering the credit limits as a precautionary action to minimize their risk. They key word is “could.” It may be best to withhold the information about your job loss and just request an interest rate reduction. If the account is in good standing and has a solid history (and you’re a longstanding customer), they may be open to lowering the interest rate.

      Struggling with debt, especially after a layoff, isn’t easy. If it gets bad enough and you’re seriously considering bankruptcy, we’d advise exploring a few more options before going the bankruptcy route. It’s worth contacting a consumer credit counseling service. They’ll be able to review your individual personal financial situation and debt load to determine whether or not you’d be a good candidate for a DMP. If you are a good fit, they’ll work with your creditors to lower you interest rate and lower your monthly payments to one monthly payment you can afford. The caveat here is that the accounts will be closed and you won’t be able to charge on them while you’re in a DMP. If a DMP isn’t a good fit, and bankruptcy is your best option — they’ll be able to tell you that as well. A consultation is free, but make sure you choose a consumer credit counseling service that is accredited by the National Foundation for Consumer Credit Counseling.

      For more information on debt relief issues, here are three resources that may help:
      1. Is a Debt Management Plan Right for You?

      2. How to Avoid a Debt Spiral

      3. 5 Ways to Get Out of Debt: Which Will Work for You?

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  • Jeff

    Everyone worship at the alter of the FICO. Credit score only tells you how well you borrow and pay of debt. It is in no way a sign of how well you do at building wealth. Credit Cards = Slavery.

    • Credit.com

      They can be, but it really depends on how you manage the credit cards. Paying interest isn’t ideal and there are millions of consumers that DO pay their balances off in full each month, and avoid paying interest at all. The other side of that is overwhelming credit card debt. Building wealth is about living within your means and knowing how to leverage the money you do have to your best advantage. Credit is an important part of that. Ignoring the credit aspect in your wealth building strategy can limit your options significantly.

    • gr8scot

      Someone listens to Dave Ramsey 🙂

  • Jim

    few kids are in serious problems due to medical bills which can reduce many people to ruins despite the person who stated that you can avoid all debt by spending within ones means. So, if you’re going to inherit a significant windfall, I’d say stuff the creditors over undue/over charging medical bills.

  • Mary

    I co-signed for a car for an employee. She and the salesman proceeded to use my credit for two or three cars, without asking me. That resulted in multiple requests to the credit companies. I got 20 or more rejections because of her credit, not mine. Now my credit score has fallen over 150 pts. What can I do? I’ve written to them to try to remedy this and now one of them wants me to file a police report.

  • Carol

    Gee, what how did our ancestors live on the cash system? The store owners trusted their neighbors and carried an account for them which they paid off as they could afford to. They bought land, built houses, bought farm animals and seed without a credit card or credit score. People lived okay back then. Look at how messed up life is now!! Foreclosures, bankruptcies, even getting a job could be dependent on your credit score or credit record — since when do you need a perfect credit score to do a menial labor job? Yet, people are getting fired or not hired at all because of their credit scores/records. We’re doing it to ourselves — there’s no trust anymore in our fellow man, no respect shown to people. IN GOD WE TRUST — not the banking/credit industries!!

  • David Smih

    I have a common name and my credit reports have so many error’s listed. I’ve tried to clear it up with reporting companies and have just given up. I have “Jumped thru hoops” with credit reporting agency’s for years trying to clean up the errors not incurred by me and it’s just a waste of time. Those companies can ruin a persons credit without checking their info but let that person try to clear it up and you have to fight more garbage than the IRS has tax laws.

  • Russell

    we just paid off 4 credit cards, closed 2 and dropped our credit limits, would it be wise to increase our credit limits back up to the max because we are getting ready to refinance our vehicle and then after we get a low interest rate, drop our limits back down until we need to use our credit score again for a loan?

  • kt

    i have credit card balance of $32000 in several cards and if i want to settle by $20000 in cash at one time is it possible and how

    • Michael Bovee

      Settling your credit card debt requires you to have missed 3 or 4 monthly payments at a minimum. If your at, or past that point, settling the 32k for 20k is doable depending on who your creditors are, who they have collecting for them, or if the debts were sold off to debt purchasers. You may even be able to settle for a great deal less than the 20k.

      How to settle each account will be similar from one account to the next. Post a comment reply with the names of each original creditor, when last paid, balance owed, and who is collecting now (if not your original lender), and lets go from there.

    • Executive Babysitter

      It’s your debt. Pay it. It’s called integrity!

      • cc

        Consolidate your cards into 1 monthly payment and start using cash or debit card for your purchases.

        • Fran

          Debt cards don’t help when you have to rent a car, they accept ony credit cards.

          • Olso

            They will accept a debit card for car rentals, but the problem is they will hold the cost of the rental times 2 for about 2 weeks until all charges have cleared, which can leave you screwed.

      • sucked dry

        where is the integrity in 29% interest? Where is the integrity in likely having already paid the debt 4 or 5 times and still owing most of it?

        • falconscraig

          Where was your integrity in agreeing to 29% interest in the first place? Were you planning to default?

          • Gerri Detweiler

            Let’s not jump to conclusions here. Prior to the Credit CARD Act many card issuers changed terms on consumers and hiked interest rates for little or no reason.

          • Kelly

            You need to get off of this board. Why are the moderators allowing rude comments like this????

      • Cris

        I agree…..

    • captaindandan

      DO NOT give them any money. By giving them money you are “Reaffirming the debt” AND the statute of limitations starts all over. SEE a personal B.K.Attorney. Give your $20K to your mom or get cashiers/traveler’s checks and keep the dang cash. GET any and all ‘agreements’ IN WRITING–be very careful you could really get scr___wed. GET an attorney. I’m retired paralegal but cannot give you legal advice. SEE an attorney. A BK attorney: if you want to pay do a chapter 13 but people in the legal biz call that BK a chapter 20: cuz you do the 13 and find you can’t make the payments so THEN you do a ch 7. get it 13 + 7 = ’20’ ake care: DO NOT get advice from friends, family or relatives. Seriously.

    • doodfus

      Do NOT post any personal bank, credit, or any kind of information like that on a public website or forum, THAT my friend is just inviting identity theft !!!

    • doodfus

      Also, get it in writing from the collector that they will not sell your debt to another collector that will come after you for the balance, they will get what they can from you then sell it to another and the calls will start all over again.

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  • Don’t know

    A “system” is a creation. Once you are in the system, they got you where they want you. Zero APR for one year is the introduction to the system. In the past, I had a Sears CC and used it for the extra reduction on sale prices on items I needed AND would pay it off next billing cycle. In the past, I had about $1,000 to $1500 in balances because I bought a set of auto tires. However, I ended up paying it off and never used the card again. I also has a CC/debit card and don’t use the CC option. My mantra is: Cash and carry. If I don’t have the cash to cover an item I need, I can get it another time.

  • Elle

    Several years ago (6) I lost my job and defaulted on a credit card, a phone bill and a few other small debts. I have had debt collects sending me letters trying to collect which I still can not afford to pay back. My question is how long can the collection agencies keep selling these accounts to other collection agencies because every time I have looked at my credit when the new collection agency takes over it shows up on my report as a new debt. Can this go on indefinitely, it is like a cycle. What can I do any suggestions.

  • Luis

    I read all these comments, I still don’t know what to do, I’m in collection (cc debts over 180 days late), I been able to settle only 2 (the small ones), but still have others between 3k to 7k, my main concern is if the collector decide to take the collection to the court, is it usual for collector take to the court debt balances up to 7k? , I’m willing to settle all of them, but I have not enough funds, I believe that I cannot do more settlements at least this year. Please comment. Thanks

    • Don’t know

      At least you have started to settling your debt by paying off the small ones. As long as you are paying the minimum on the bigger one(s), you should not have any problem. However, try to pay more than the minimum.

      • Credit.com

        Paying credit card balances off every month is the smartest way to go, so kudos for that. We’ll have to agree to disagree on the cash only mantra though. The cash only principal is great in theory but for the average consumer, being able to pay cash for large life purchases like a home or car isn’t usually an option. The thing about going cash only that is it isn’t always the most cost effective way to manage your finances, even if you do have an endless supply of cash. For example, if you’re able to qualify for 0% financing on a car loan, wouldn’t it make more sense to take the lump sum amount and put it in an interest bearing savings account? This is an extreme case, obviously, but the point here is that credit allows you more flexibility to leverage the money you have. And the biggest downside to “cash only” mantra is that in the event that you do need credit (to buy a house, for example), your options are limited. Many people would rather go the cash only route, and it’s definitely a personal choice– but it’s also a choice that has disadvantges as well. Credit gets a bad rap but it’s not necessarily “credit” that’s bad. It’s the choices we make and how we manage that credit that can either cripple us or help us leverage our financial lives to their fullest.

        • SG

          “For example, if you’re able to qualify for 0% financing on a car loan, wouldn’t it make more sense to take the lump sum amount and put it in an interest bearing savings account? ”

          Not necessarily. Usually, car manufacturers offer rebates in lieu of zero-interest loans.

          • Credit.com

            True, but at one point in the recent past, many consumers were able to take advantage of 0% financing incentives offered to the credit elite (consumers with excellent credit). The question was more of a hypothetical question and when taken in context with the full explanation, the point we were making was that there are downsides to the cash only choice:

            “And the biggest downside to cash only mantra is that in the event that you do need credit (to buy a house, for example), your options are limited. Many people would rather go the cash only route, and it’s definitely a personal choice– but it’s also a choice that has disadvantages as well. Credit gets a bad rap but it’s not necessarily “credit” that’s bad. It’s the choices we make and how we manage that credit that can either cripple us or help us leverage our financial lives to their fullest.”

      • Credit.com

        “As long as you are paying the minimum on the bigger one(s), you should not have any problem” — unfortunately, this isn’t the case with collections. Paying the minimum only works if the account hasn’t gone to collections. If it’s in collections, sending minimal payments (or what you can afford) won’t stop the collection agency from suing.

    • Credit.com

      Luis – The larger the dollar amount, the more likely a collector will sue. The chance of them pursuing the debt through a lawsuit is much more likely on a 3-7k debt than it would be on a debt for a few hundred dollars. Believe it or not, there are collection companies that pursue collections for amounts under $10. Example: A Debt Collector Came After Me for $8.97

      I don’t want to discourage you though. Settling the smaller debts is a great step, but if you can’t afford to settle the larger debts right now, setting up a payment plan is a bad idea.

      For one, most collectors prefer a smaller lump sum settlement payment over small monthly payments, and they aren’t legally obligated to negotiate a payment plan that fits your budget. In this case, if you are able to afford some small amount, take that money and set it aside each month until you’re able to save a larger amount and have more leverage to negotiate a settlement. For more about payment plans and why collectors may demand full payment, this article will help: When a Debt Collector Demands Full Payment

      In severe cases where consumers are truly under financial hardship and a collector decides to sue and files a judgment against you, consulting with a bankruptcy attorney would be the next step. It’s not something we recommend unless it’s a very last resort, but in some cases… it’s the only option left.

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  • In Debt

    I have conflicting answers to this question. If I pay off my debt how does it improve my score/credit/credit report? I find many articles saying it will not improve at all, will be worse because I settled and didnt pay my bill in full, and will stay on my report regardless of paying off or settling.

    I am only tackling my debt (which is small misc bills like ATT and a few credit cards nothing over $3k not counting student loans of $17k) because I do want to buy a home.

    What’s the verdict?

    • Credit.com

      “I have conflicting answers to this question. If I pay off my debt how does it improve my score/credit/credit report?”

      Paying off a collection won’t improve your credit/credit score — it’s the fact that the collection happened that hurts. However, paying it off (or settling it) will keep the damage from getting worse. By worse, I mean a creditor suing you and filing a judgement against you (another severely negative hit to your credit report and scores) and possibly garnishing your wages if it’s legal in your state.

      “I find many articles saying it will not improve at all, will be worse because I settled and didnt pay my bill in full, and will stay on my report regardless of paying off or settling.”

      What you’ve read about it not improving at all is accurate, and the fact that it will stay on your report regardless of whether you pay or settle is also true. Paying in full or settling a collection doesn’t remove it from your credit report. The fact that it happened is what matters to your credit and credit scores, and it will remain in your credit report until the item expires as defined by the credit reporting statutes of limitations. For collections, that means seven years from the date the account went into major delinquent status (usually at the 180 day late mark). There is no difference between paying in full or settling the debt for less, in which case — it makes sense to pay less and settle if you can.

      • SG

        Credit.com, “In Debt” asked about paying off debt. No mention was made of collections.

        • Credit.com

          Good point, SG. Thank you for the feedback. However, if you read the question in full context, with the reference to settling versus paying in full and the mention of “misc bills like ATT” (which wouldn’t be reported in your credit report unless it were in collection status), it implies otherwise.

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  • AL

    My finance and I went to get a home loan for a house we will live in together after we get married. It is a nice modest home. I have great credit with nothing negative at all on it and she has no credit at all she does has always dealt in cash and did not beleive in debt. Yet it was almost impossible for us to get a loan. I had more than 4 mortgages already-12 to be exact but they are on commercial loans that I have equity and cashflow out of that rental properties not anything I am living in myself. I also have 3 credit cards with 10-25K limits on them and paid off in full each month and the lender told me I had to combine mortages into less than 4 total before i could get another one at their bank and that my finance had to take out debt for 2 years with credit cards or car loans before we could qualify– what a crock. I have a 800,000 net worth and we could not even get a measly 60,000 mortgage.. i went back to the small bank I deal with and instead of combining mortages and spending thousands for appraisals and crapp– we just did a in house loan with a little more interest but no crapp to deal with come in and sign a few forms and leave with a check in and out and saved alot of time and hassles. I have to say I appreciate the banker that trusts me and does not make me jump through so many hoops. I guess that is why I deal mainly with just 1 bank. A good woman is hard to come by, but so is a good banker. Once you find one of either you should stick with them….

    • Credit.com

      AL – one other option that your lender might not have mentioned is adding your fiance as an authorized user on those high limit credit cards. Authorized user accounts show up in credit reports just like the primary cardholder, and get the same benefit/credit from how the account is managed by the primary account holder. If the accounts are in good standing, have no negative payment information, and have low balances in relation to the credit limits (which it sounds like yours do), then this would help her build a credit history almost “immediately.” The other good thing about authorized user accounts are that they’re a win/win for both parties — the authorized user is not legally obligated for charges made on the account. And if the primary cardholder (you) chooses not to give him the card when it comes in the mail, then you never have to worry about the authorized user running up charges on the cards w/o your permission. It’s a strategy that many parents use for their college aged children, and for couples just like you who either have a spouse/fiance that has no credit, or has poor credit and is trying to improve. You can read more about this topic here:

      Can an Authorized User Hurt Your Credit? http://blog.credit.com/2012/06/can-an-authorized-credit-card-user-hurt-your-credit/

      Piggybacking to Boost FICO Scores: Does It Still Work? http://blog.credit.com/2011/10/piggybacking-to-boost-fico-scores-does-it-still-work/

      • Executive Babysitter

        Note: Not all credit card companies report authorized users to the credit bureaus (many don’t!). Call your credit card company first to ask if they ‘report’ authorized users otherwise it may be an exercise in futility.

        • Credit.com

          This is very true, not all lenders or credit card issuers report at all. And some may only report to one or two credit reporting agencies. The bottom line is that credit reporting is entirely voluntary so it’s up to the individual lender. If you want to know for sure, it’s not a bad idea to call and ask the issuer.

          I have to disagree with you on the statement that “many don’t!” report authorized user accounts. I’d argue that it’s quite the opposite actually, and that there are more credit card issuers that report authorized user tradelines than there are that don’t. Some may not report, but many do.

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  • Joe

    When is transferring a balance from one credit card to another a good thing? I have 3 credit card balances, each at 12%. 2 are below 6000, one is at 12000. My real dilemma is this: Is opening a new account to transfer one of those balances and paying the transfer fee, worth a potential hit on my credit score that i will get when the new card does a credit inquiry? (the card I’m interested in is 18months at 0%)

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  • Gene

    I am a retired widower. No mortgage, no car payments. I have just two credit cards. I pay them and all other bills on time or early each month. I recently applied for a sizeable bank loan for the entrance fee to a retirement village, (my house was on the market for 8 months and did not sell). The bank told me my credit score was just 278. Their rep said that I did not have enough credit history to raise my score. This is perplexing. How can this be? I do have two red marks on my credit history. 5 years ago, at a local hospital I had two separate minor surgeries. I refused anesthesia for each, yet the hospital charged $810 for anesthesia during each surgery. I protested, they would not budge and turned it over to a collection agency. Medicare pays a flat rate, they did not care. Eventually I paid it to keep my credit score intact. But there is no way to contest a charge once it is urned over to a collector. This will remain on my record for another two years. Is this why my score is low (but passable)? Thanks. Eugene Failor

    • Gerri Detweiler

      Gene –

      I would guess it is the combination of factors that are contributing to your score. (Though I do wonder what kind of score they were using since the FICO score range is 300 – 850.)

      With regard to the collection agencies, you may want to try disputing them with the credit reporting agencies since you did have a legitimate dispute. If the collection agencies don’t confirm them the CRAs must remove them. If that doesn’t work, I’d suggest you talk with a consumer law attorney to find out if you have a case for credit damage. We have more information on disputing credit reports in this article: A Step-By-Step Guide to Disputing Credit Report Mistakes

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  • cec

    how can I monitor my credit score daily?

    • Credit.com

      Unfortunately, we don’t offer a daily credit score monitoring service at this time, but Credit.com’s Credit Report Card does provide monthly credit score updates to help you monitor and track your credit score. It’s a free service too.

      Something else to keep in mind is that because credit scores are based on the information reported in your credit reports, your credit scores only change when information in your credit report changes. Generally speaking, credit scores tend to fluctuate a few points from month-to-month but unless there’s a significant change in your credit reports, the changes are usually very minimal. If you’re trying to improve your credit scores, remember that credit scores increase gradually over time as you gradually begin to change your credit management patterns.

    • Terry

      Are you looking to monitor your credit score or your credit report?

      There are credit monitoring services that are available through most banks and credit reporting agencies (e.g., I use Transunions’ service) — mind you, they typically charge between $5 – $20 (or more) per month.

      In the case of the service I use, if there are any changes in my credit report from any of the big 3 credit reporting agencies, I receive an email — the primary reason for this service is to monitor for fraud. Actually, now that I think about it, I am not notified of every change — just the ones that would negatively affect my credit (e.g., new credit accounts, inquiries from credit card companies for new credit, etc.).

      Regarding the credit score, while my credit report from all 3 credit reporting agencies is monitored, I can only receive the credit score from the agency that I use — I guess if you pay enough money each month, you can get scores from all of the agencies…

      Hope this helps.

  • http://yahoo.com Phyllis

    will settling an account for a lessor amount hurt me in the the long run? I’m already behind and the collecton company has offered me a settlement.

    • Beth

      Phyllis – I suggest taking the settlement. The collection will remain on your credit report whether it’s paid in full or settled for less than full amount.

    • Credit.com

      Phyllis — Beth is right. If the account has already made it to collection status, your credit has already taken the hit, regardless of whether or not you pay in full or settle. In which case, it’s best to settle for less if you can. Keep in mind that the collection will remain on your credit report and while some consumers would argue the point of paying it at all, it’s still wise to do so if you can. Opting to not pay can actually land you in court with a lawsuit and possible judgment. If the judge awards the collector and a judgment is filed, that judgment will cause even more damage to your credit for another seven years. The shorter answer here? Settling will not hurt you in the long run, it’ll actually save you from future credit headaches to settle and put it behind you.

    • Gerri Detweiler

      Phyliis – I believe I answered your question in this story:

      Debt Collectors Killing Your Credit? Here’s What To Do

      If you still aren’t sure after reading that, let me know.

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  • TW

    I have a question: Last week I received a letter from a debt collection agency regarding a medical bill from 6 months ago. When I received the original bill from the hospital, I responded to them, requesting that they first file the clain with my insurance. I did not recieve a new bill nor any other correspondence from them. I called and left messages, with no reply.

    They have subsequently sold the account to a debt collection agency, who is requesting payment (in writing). May I contact the original creditor and make payment arrangements with them or do I have to deal with the debt collection agency? I do not dispute the validity of the debt (although I do dispute the amount since it does not seem to have been filed with my insurance) and I do not wish to deal with the collection agency.

    Since my debt has been sold to a collection agency, does that automatically mean that this is now on my credit report? What are the consequences if I contact the collection agency to get contact information for the original creditor? May I request that they remove the debt from my credit report if I make payment arrangements?


    • Gerri Detweiler

      TW – You can certainly try. I wrote about that in this article: Reader Stops Mysterious Medical Bill From Damaging Her Credit If you have health insurance and the hospital was a participating provider, I would also ask your health insurer for information to make sure they aren’t “balance billing” you.

      As for your credit reports, I’d suggest you check all three to see whether they have been reported. Sometimes a collection agency will give you a short period of time – maybe 15 or 30 days – to pay a collection account before reporting it.

  • TW

    My question is: a debt (that I do not dispute) has recently been sold to a collection agency. May I contact the original creditor instead of the collection agency? I do wish to pay the bill, but I have not been able to reach anyone from the original company. If I contact the collection agency to get that information, what are the consequences? If your account was given to a collection agency, does that automatically mean that this item is on your credit report? May I request the original creditor remove the item from my credit report if I make payment arrangements?

    • Dirk

      Unfortunately, the debt is no longer owned by the original company, it was sold to the collection agency. Rather than try to collect old debts, companies sell batches of it to these agencies for pennies on the dollar. They will sell $100,000 worth of people’s debts for $20,000 and write off the 80k as uncollecible losses.

      Now the collection company will do whatever they can (sometimes illegally) to collect as much of that 100,000 as they can get. So now you have the original company marking your credit report, and the credit agency as well if you do not pay them.

      • peg

        Ok. So Dirk, then does not that show exactly where the original company should be the one sending out these 1099’s (they just wrote off 80k as noncollectable losses). At the very least, the collection company is not entitled to the entire amount which is what they are putting on these forms – they surely have some type of accounting balance sheet showing they paid xx dollars for this xx portfolio that included these 20 accounts so where is it legal and ethical for them to claim the full dollar amount (which undoubtedly includes fees and interest) and even worse the probability that you will receive another 1099-c down the road for the same old debt. If the original creditor did issue a 1099-c, and sold the debt, hmmmm lotta double dipping is all I see.

        • hmm

          — I read somewhere — that as long as you never ‘agree’ in any way to make payments to the collection agency – you are not legally obligated to pay them.

          — You were legally obligated to pay the original business/person. When the original business/person wrote off the debt (your bill), you legally quit owing that bill.

          –The trick is that You must never agree to a payment plan or (i’d even make certain I never spoke to the collection agency verbally in case they are recording the conversation.) — all you should say would be something like this:

          I request that you halt all phone contact at this time. IF you must contact me, you should contact me via certified mail in writing or subpoena me.

          –Many times the state law requires that collectors halt harassing phone calls if the person makes a statement above. & many times the collectors will never take the individual to court – too expensive.

          – as stated above – I’m simply remembering things I researched many years ago. Be certain to do your own research

          • Credit.com

            A word of warning: Be VERY careful of the advice you follow. Much of what you’re advising is horribly wrong, very misleading and terrible advice — all of which can be detrimental to anyone who follows it:

            I read somewhere — that as long as you never ‘agree’ in any way to make payments to the collection agency – you are not legally obligated to pay them.

            WRONG. Just because you never agree to make payments doesn’t mean you’re not legally obligated to pay. If the collection is valid and they decide to sue, they can — and many do. We see evidence of it daily. If this happens, and a judge orders you to pay it to the collector– that’s called a judgment and it will end up on your credit report and cause even more damage.

            You were legally obligated to pay the original business/person. When the original business/person wrote off the debt (your bill), you legally quit owing that bill.

            WRONG. If this statement were true, the collection industry wouldn’t be a thriving $13 billion dollar industry.

            The trick is that You must never agree to a payment plan or (i’d even make certain I never spoke to the collection agency verbally in case they are recording the conversation.) — all you should say would be something like this:

            I request that you halt all phone contact at this time. IF you must contact me, you should contact me via certified mail in writing or subpoena me.

            We agree, you should never agree to a payment plan unless you get it in writing, but in most cases collection companies aren’t interested in payments — they’re not lenders, they’re collectors. In most cases, it’s better to settle the debt with one lump sum payment for less than the full amount.

            Many times the state law requires that collectors halt harassing phone calls if the person makes a statement above. & many times the collectors will never take the individual to court – too expensive.

            This is horribly WRONG. Collectors sue people every day, assuming you’re not going to be one of them is a very bad idea.

            – as stated above – I’m simply remembering things I researched many years ago. Be certain to do your own research

            This is the best advice in the bunch. We agree wholeheartedly. Beware of who’s advice you follow, make sure it’s a trusted source. Following this kind of advice can be detrimental and cause much more damage to your credit.

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  • Fred Law

    “First thing to do” is never get into debt in the first place.

    This is easily achieved simply by

    spending well within your means!

    • Executive Babysitter

      I’m guessing that you’re at least 55 years old and bought your first house for $20,000. Anyone younger than the baby boomer generation faced very different challenges than your generation –

  • Kate

    Closing out credit cards might drop your credit score. You are evaluated by the amount of credit available (credit limit) to you versus the percent of it you’re actually using. 30% usage on each card would supposedly be a good thing in the eyes of the credit-score god.

  • Tom Busch

    My question is: My wife & I somehow have 3 Capital One credit cards, we only need one.
    Will it hurt my credit it we pay off 2 cards and cancel them? So does cancelling a credit card hurt the credit score?


    • Gabriel

      Yes. Leave them open and never use them. Closing extra lines of credit drops your net value. For example if you had 3 cards with a $5,000 limit, your overall limit is $15,000. Closing the two would change your overall available credit from $15,000 to $5,000. Even though you may not have missed any payments on either cards the negative change in your overall credit will impact your credit score.

      Hope this helps.

      • Frank Eggers

        That sounds like a racket. There should be NO penalty for closing accounts.

        Some of us would prefer not to use credit, but we are FORCED to use credit. If we don’t use credit, we don’t have a credit rating or record and are overcharged for home and auto insurance. It is automatically assumed that anyone without a credit record is irresponsible.

        • Terry

          For the most part, I agree with your statement. I have known people who had demonstrated poor credit judgement, who then opened additional credit cards and re-distributed their debt — as they ended up with credit cards with lower credit utilization, their credit score went up by about 100 points. Mind you, to keep their good credit score long enough to use it, they had to have enough discipline to not run up the balances on all their cards…

          Having credit cards and not using them or using them and paying them off, shows monetary discipline and / or restraint. Lack of credit cards shows neither ;-/

          I would be interested in hearing another alternative.

      • http://yahoo Errol Jewell

        Why do some alleged credit experts say to pay off but not close the account and others say cut them up and pay them off and close the account? How do we know who is right?

        • Robin

          The credit counselors generally advise based on the discipline, or lack of, for closing accounts. As previously mentioned, paying off a card and closing can ding your score. If one has the discipline, better to pay off and toss the card in a drawer. Problem is many lack the discipline which is why they are talking to a counselor. They will end up running the card back up and owe more than before. For them, the score ding and closing is a substitute for actual discipline but is a small price for getting debt under control.

        • Chris Peplinski

          I disagree with never using the cards again after paying them off. If you stop using them, the credit card companies can cancel the cards due to inactivity – which would create the same problem you would have if you had cancelled the cards. I have seen this scenario play out with many of my clients. Instead, set a reminder to use each card once every 4 months on a small, normal purchase of yours and then make sure to pay it off immediately. This way your accounts stay active and your credit utilization ratio isn’t affected. Good luck!

      • holly

        I have a couple of credit cards that charge a monthly fee. I would rather pay those off, close them, and take a temporary hit on my credit than have to pay a monthly fee.

        • Robin

          My instinct with a card that has some monthly fee is to run in the other direction. Depends on if you want to keep. Pick the most expensive and pay it off. If you don’t want to keep and low limit, close it. If high limit and you would like to keep, pay it off and then contact the issuer to see what they will do on the fees. If nothing, close it. Many times this will get a retention expert involved that will deal on dumping fees and any other benefits you can get. Do this from a position of strength with a payed off card since the issuer knows you can burn the card then and there.

          • Tamara

            It is worth a call to them about the monthly fee, a lot of times they can waive the fee to keep you as a customer rather than losing your business all together…it never hurts to ask or try.

      • Chris Peplinski

        I disagree with never using the cards again after paying them off. If you stop using them, the credit card companies can cancel the cards due to inactivity – which would create the same problem you would have if you had cancelled the cards. I have seen this scenario play out with many of my clients. Instead, set a reminder to use each card once every 4 months on a small, normal purchase of yours and then make sure to pay it off immediately. This way your accounts stay active and your credit utilization ratio isn’t affected. Good luck!

    • Gerri Detweiler

      Tom – Closing those accounts could hurt your credit scores depending on what it does to your utilization ratios. On the other hand, I hate to see anyone held hostage by a card they don’t want! If they aren’t charging you an annual fee, then I wouldn’t close them. But it they are, consider closing at least one – once you’ve figured out if the possible hit to your credit scores is acceptable.

      • Kenneth

        All credit cards are not equal. Master Card, Visa, and their like fall into the category that most people think of when credit cards are mentioned. There is also ultra high interest credit cards. These are very often issued by a store. Very often they come with great incentives to open one up i.e. no interest payment for a year on your new furniture, $50 off your first purchase, or another similar come on. The hook is that if not paid off within the time frame, you are paying 29.99% interest or greater! Just having one of these ultra high interest “store” credit cards does ding your credit score. By all means consider closing these accounts.

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