More on rebuilding credit, the third toughest job


Two things come first:
1.Taking care of myself and my relationships, and
2. Finding responsible doctors.

That seems to be ok for now. So, among other business-y things, I’m working on rebuilding my credit rating.

I didn’t mention in a prior post that there are 2 aspects to building credit:
– Addressing negative credit
– Building positive credit

Here’s the progress I’m making. These links and resources are for the US. (I’m sorry for my overseas friends who need this info — if you like, I’ll link to yours and you can link to mine, if you are able to research your country’s policies.)

Negative credit

If a debt is less than 7 years old and it was always yours to pay, it still is. There’s no getting around that. However, it’s worth doing a sanity check on those debts, because, for one thing, they might be more than 7 years old but still showing up, and for another, they might not be yours to pay.

Start with a reality check

I went over everything twice, once to let the white flashing lights and internal screaming happen in peace, and again later when I’d calmed down to see what was really there.

If you owe it, you might pay less

There were a few smaller debts that were definitely mine, definitely in date, and still owed. I called those companies, to make sure the amount and address I had were correct, and paid them off as soon as I could. One creditor had just sent it to collections, which means they had to take a few cents on the dollar, and they’re a small company. I offered to pay it straight to them and she almost cried. (I now have a friend in Maine..)

I find that business people are super nice when they find out you want to pay them, after thinking they’d lost that money forever! They made it as easy as possible. If I’d had debts in 4 digits instead of about $100 each, I believe I could have negotiated for a discount and payment plan by talking directly to the company. I never spoke to a collection agency; I might have found a good one, who knows, and settled cheaply.

If you don’t owe it, point them to who does

I sic’ed a hospital and ambulance company onto Medicare for medical bills that should have been directed to them anyway. They were 4-digit debts, so it was a relief to discharge them; however, more to the point, they were not my debts to pay.

I’m happy to pay my bills when I can, but it’s silly to pay things I don’t owe. I had to check things against the impenetrable Medicare and Medicaid language, but I haven’t heard from those creditors again, so I was right — my health insurance had to pay for that ambulance ride and the emergency care.

If it’s over 7 years, you probably don’t owe it

The biggest bill is out of date. Imagine how my head spun when I realized that! it turns out I have one major debt still on my credit report, but it’s from 8 years ago. Since they’re only allowed to stay on the report for 7 years, I wanted credible guidance for wiping that off my report.

How to handle creditor errors

Most online pages tell you to report to one of the Big Three agencies and trust them to take care of it. I found out the hard way that the Big Three are not the definitive players in the financial world; they’re only 3 out of (possibly) a dozen or more. Furthermore, the Big Three don’t have an obligation to report the change to other credit agencies.

Here’s what you really need to do:

1. Make 2 (or more) copies of your documentation of the error.
One copy is for the company that made the error: in my case, the bank that forgot to take off the bad debt after 7 years. Extras are for any disputes you want to file with the credit reporting agencies (Equifax, etc.) Happily for those of us with limited attention, the company that made the mistake is responsible for making the correction with every single reporting agency it reported your problem to.
This documentation can be the credit report you got from CreditKarma or your mortgage application, or it can be from whatever documentation you have that shows the very last payment you made, or the very last time you told them that you’d pay, whichever comes later. That date is when the clock started ticking.
(This is why it’s vital NEVER to make promises to financial institutions. Either pay, or don’t pay, but don’t tell them ahead of time. Your word binds you as much as paying money does. Tell them as little as possible. My formula is, “I understand that you want to be paid. I would, too. I can’t do that right now, but I will let you know when I figure out what to do.” This is honest and clear, and totally avoids any suggestion that I owe them or will pay them.)

Despite anything they say, it’s not about your honor, it’s about their profits. Your survival does not matter to them; getting paid does. Remember that. It’s all about money for them, because that’s the way the laws are written that govern them.

2. Mark up your copies, either in a colorful ink or by taping notes to them, whatever works for you. Be specific about the most important problem; in my case, this would mean circling the dates of the last payment in red ink, adding the note, “This is over 7 years old.”

3. Write a professional, brief, factual letter to the company that made the mistake.
Here’s a good template from the FTC itself:

https://www.consumer.ftc.gov/articles/0384-sample-letter-disputing-errors-your-credit-report

Under “Enclosures”, I might include a printout of the following page, in addition to my documentation of the error: http://www.consumerfinance.gov/askcfpb/323/how-long-does-negative-information-remain-on-my-credit-report.html

4. [optional] Go to the website of each credit reporting company that told you about this problem. Follow their instructions for filing a dispute about a record, and submit your marked-up copies however they ask you to do so. (You might need to scan them in.)

Format for letter to clear up errors in your credit record

If you have trouble with all the square brackets in the FTC’s link above, here’s a simpler version, based on my issue (you’d change it to reflect yours.) It looks funky here, but I just tried copy-pasting it into Word and it looks perfect:

My Name
My Billing Address
My City, State, Zip Code

Date

Complaint Department
My Old Bank's Name
Street Address
City, State, Zip Code



Dear Sir or Madam:

I am writing to dispute the following information in my file. I have circled the items I dispute on the attached copy of the report I received.

This ____ is inaccurate because _____. I am requesting that the item be removed to correct the information.

Enclosed are copies of ____, ____, and ____ supporting my position. Please reinvestigate this matter and delete the disputed item from my credit reports as soon as possible.


Sincerely,
 my illegible scrawl
Isy Isington


Enclosures:
    Credit report with old date
    Copy of FTC or CFPB page stating 7-yr limit
    Whatever else would help make the point

 .

Sources of info: the good, the bad, and the pretty-but-useless

I found this info at the Consumer Financial Protection Bureau, an outstanding information and assistance site whose job it is to make sure we don’t get too screwed by the financial industry: http://www.consumerfinance.gov/askcfpb/search/?selected_facets=category_exact:credit-reporting&selected_facets=category_exact:disputing-errors-credit-report

The financial industry’s job is to make money, not to be fair or to take care of the needs of non-financially-savvy people. The laws are written that way: their job is to make money, and devil take the hindmost.

The CFPB exists to give consumers a better chance of survival in this top-weighted economy.

Another excellent site for unarguable information is the consumer pages of the Federal Trade Commission:
https://www.consumer.ftc.gov/topics/money-credit

After wading through dozens of pages on consumer debt and credit advice, the best, clearest, most useful information turned out to be at the CFPB and the FTC. I strongly suggest going right to those pages to find answers to your questions.

Also, the CFPB has ways of helping you if you think you’re getting screwed in spite of following the right steps. Look for the helpful links on the page you’re looking at, in the text or over on the right. Don’t make yourself crazy; make an honest effort within your limits, then go to the CFPB site, explain your situation, and ask for help (if necessary, use the term, “as part of an ADA accommodation for my disability, which affects abilities required to do this” — that’s a magic phrase that means you don’t have to jump through as many hoops as a healthy person in order to get help.)

A note on credit reporting that you won’t find on most sites

I found out that there’s a wrinkle to credit reportage in the US that explains why the “Big Three” (Experian, Equifax, etc.) are such a small part of the information yielded in in-depth credit inquiries, like mortgage applications or some brokerage accounts. They’re called credit bureaus. They are an added layer between creditors and reporting agencies: they collect info from the creditors, and pass it to the reporting agencies. You’ve never heard of most of them, unless you’re in the industry.

This is why the info from the Big Three is only the tip of the iceberg. Very annoying. I’m going to mull this, and maybe ask the CFPB about it.

What’s a Statute of Limitations on debt?

Each state has a statute of limitations on debt that’s usually less than the 7 years that a debt can stay on your record. The difference between a statute of limitations and how long it can stay on your record is this: a statute of limitations simply defines how long they have to file a lawsuit against you. They usually have to file a lawsuit within 2-4 years, but they can keep that black mark on your record for at least 7 years.

When I was a young adult, lawsuits were rarely filed for consumer debt. It wasn’t profitable enough, and besides, preying on consumers was considered bad business practice in the long term. Bankers blamed themselves for judging poorly; they didn’t see non-rich people as legitimate prey.

Since then, in the wake of the irrationally predacious financial practices that trashed the US economy from the middle out, suing and criminalizing debtors has become a big business. Please see the comment below from Sage for more on this topic; she has grabbed a couple of links for further info on this.

NEVER IGNORE A SUBPOENA. Ignore anything else you want, but if you ignore a subpoena from a court, you’re turned into a criminal automatically and can be arrested on sight.

Remember, it’s not about you, it’s about money. It’s all about money.

If I got subpoena’d (again), I’d call the court and sweetly but firmly request ADA accommodation regarding time and place, so I’d be physically able to attend. Then I’d show up in court, bank statements and disability “award” letter in hand demonstrating my financial straits, explain that I’d love to settle for, say, 20-30 cents on the dollar (which is the most they can expect, and more than nothing!) and set up a payment plan, but the creditor wouldn’t work with me. (The judge can order them to work with you, and it’s not crazy to look for a settlement that’s much less than half of what you originally owed.)

I’m White and know the lingo, so I have two huge advantages in court. Nevertheless, it’s best not to ignore a subpoena, because doing so automatically criminalizes you. It’s not fair — in fact, it’s blitheringly crazy — but that’s the way the laws are written now.

Positive credit

To build positive credit, you find reportable debts to take on, and pay them off on time every time. There is no workaround to that.

Signature loans

If you don’t have much negative credit, you might be able to take on a signature loan from your bank. Stick the loan in a savings account and set up automatic payments from that account. Never touch it. It’s not yours. It belongs to your future. Consider it Monopoly money, which isn’t legal outside the parameters of the game.

Credit cards for the rest of us

If you entered your illness (or other hardship) with the usual rank of car payments and consumer debts, this may not be an option.

There are a few credit card companies who provide ways for you to have a credit card, usually by putting a certain amount of money in a savings account with them. With some cards, the better your record with them, the sooner they bump up your limits beyond what’s on the card. It’s best not to spend up when that happens, but instead, to let the higher limit ride and stay on target with your payments. The higher limit will work in your favor credit-wise, even if you never use it.

Needless to say, it’s essential to avoid debts you can’t service. Don’t spend more than you do now. Pay that sucker, exactly as the card company tells you to. Every. Single. Month. Without fail. That’s how you rebuild credit.

I’ll use my card for things I buy anyway, and pay it off every month out of my budget for food, gas, clothes, and exactly what (and how much) I’d buy anyway. It’s the same money, it just has to go through an extra step on the backend. More payments to automate, but I can do that.

I aim to wind up with 3 credit cards — one for groceries, one for gas, one for “other”, which will provide an illuminating reality check on my budget’s validity — and pay them off every month. More automation; I can do that. I’ll need 3 cards in order to build up a sufficient positive history as quickly as possible.

If you don’t have a copy of your Social Security card

I applied for a credit card from Open Sky, which has an excellent program for building positive credit without being charged an arm and a leg. https://www.openskycc.com/

They didn’t tell me up front that I needed a copy of my Social Security card. That was one of many things that didn’t make it out of California alive, so I have to replace it.

Some states allow you to apply for a replacement card online: https://www.ssa.gov/ssnumber/

Mine doesn’t. So, I have to download this form from the Social Security Administration,

https://www.ssa.gov/forms/ss-5.pdf

fill it out for a replacement copy (not an original copy), send them my passport (the original, not a copy — gulp), and trust them to get that and the card back to me via snail mail.

For a change, there’s no fee.

It’s an interesting leap of faith. After being so stunningly betrayed, almost to being killed off, by the SSA (which, in Oakland, lost, delayed, destroyed, and poisoned my Disability app for years; I documented their illegal shenanigans, and was granted instant SSDI when I moved East and submitted my records) and the post office (where, in Alameda County, they stole my mail regularly, especially anything from the government and insurance company), it’s definitely an interesting leap of faith to trust these organizations with my most valuable documents and this aspect of my future. I’m hoping that East continues to be East for me, and West remains out West.

Alternative, more realistic credit reporting is in reach!

Another new piece of info I learned is that there is a legitimate, useful credit reporting agency that’s consumer-driven, rather than financial-corp driven. Major lenders, including lenders who work with those of us who are not rich, have signed on to receive their credit reports.

https://www.prbc.com/

This agency is called PRBC, which stands for Pay Rent, Build Credit. You plug in your monthly payments, including phone bills, utility bills, dental bills or court fines on a payment plan, rent, and so forth; any recurring payments — and all of that goes to building your credit history.

These things are normally ignored, oddly enough; only consumer-debt-based payments and tax problems — the most prejudicial and the least useful of the normal person’s financial activity, if you think bout it — are normally included in credit scoring, and somehow this is considered normal and appropriate.

Surgeon wielding instruments like dinnerware

“This won’t hurt a biiiiit…”

Those of us who’ve always paid rent and phone and kept the electricity on, even when we lost everything else, can really benefit from this. I wish I could backdate it 7 years, as that record would do me a lot of good in the mortgage market.

I ALWAYS paid rent. I did without food to pay rent. I let the phone go to pay rent — and I still feel an aching stab of gratitude to the 3 friends who took turns keeping my phone connected, most notably the last one, who stuck around longest and was there when I finally got paid.

I’d have loved to put THAT on my credit report. It would do a lot of good against the debt-based credit I couldn’t maintain when I couldn’t work and had not yet gotten the barely-adequate disability payments that put me back on track for ongoing survival.

If you’ve had to trash your consumer debt in order to survive, but you’re still finding ways to keep a roof over your head and utility bills paid, it may be worth the fairly small effort of signing up with PRBC.

Downside: putting up with more junk mail.
Upside: having your real-life level of responsibility documented in your favor.

I still mull the real value of having credit if you can live on a cash basis and don’t ever want to make payments on a car or mortgage, and you live in an area where getting rental housing doesn’t involve credit checks. As long as you stay in those stringent parameters, there’s no need for credit.

However, I really want to get a bit of property so I can have whatever pets I like. I really want to have the option of replacing my good and sturdy, well-adapted vehicle in the fullness of time, without being obliged to pay the full price up front. We shall see.

For me, it opens up options, and after 15 years of having fewer and fewer options all the time, I’ve rather enjoyed the opening-up of recent times. I’m motivated to generate even more options.

So, I’ve signed up for PRBC and today I’m off to the post office to send off my form and passport (gulp) to get a copy of my SS card so I can apply for an Open Sky credit card and start building positive credit. I hope I can keep it together and on track this weekend to write that letter to my old bank, and get that in the mail next week, to address the biggest stain on my negative credit.

I might be slow on these tasks (this represents 5 months of pixilated — and pixelated — brain-work)…

Pixelated image of Rodin's sculpture of the Thinker, with a blue pixie perched on his arm

Pixilated (pixie, or pictsie) and pixelated (pixel-y) thinking.

… but, by gum, I intend to get there in the end.

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One thought on “More on rebuilding credit, the third toughest job

  1. Excellent post with lots of great resources!

    Just one thing that I recommend you correct is your statement that lawsuits are rarely filed for consumer debt. Actually, suing for consumer debt, especially credit card debt is now big business. Anyone who is notified that they are being sued for debt should definitely show up for court. If you don’t, the court will find for the plaintiff as a default judgement. Then, if you do not pay the debt, the collection agency can take further court action to get payments from you, and you can be subpoenaed to show up for a debtors examination hearing (called an OEX or Order of Examination in some locales). If you fail to show up to court for that, the judge can issue a bench warrant for your ARREST (CRIMINAL CHARGE for failure to comply with a court order).

    Links:
    https://www.avvo.com/legal-answers/what-happens-if-i-can-t-appear-in-small-claims-cou-1673460.html

    http://www.lawqa.com/qa/will-i-get-arrested-for-failure-to-show-in-court-for-debt

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