Household debt increased $344 billion over last year to $14.64 trillion. Growth was evident in auto loans (+$8 billion) and student loan balances (+$29 billion), but credit cards saw the “second-largest quarterly decline, “ the NY Fed reported. First and … Continue reading →
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TOKYO (Reuters) -Shares of Toyota Motor touched a record high on Tuesday as investors flocked back to automakers and other relatively cheap cyclical stocks while ditching tech companies that shone earlier in the pandemic. Toyota’s shares rose as much as … Continue reading →
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GLENDALE, Ariz., May 17, 2021 /PRNewswire/ — For the second year, Mountain America Credit Union committed to donating $50 to Fighter Country Foundation for every goal made by the Arizona Coyotes. During the 2020-2021 NHL regular season, the Coyotes scored 150 … Continue reading →
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The NFCC often receives readers questions asking us what they should do in their money situation. We pick some to share that others could be asking themselves and hope to help many in sharing these answers. If you have a question, please submit it on our Ask an Expert page here.
This week’s question: I had a car repossessed 2 years ago and the finance company recently sent me a letter offering me a settlement offer that would allow me to settle my account in full. The amount they are willing to accept is about 30% of the balance owed. How should I go about rebuilding my credit and resolving this repo? I’ve heard that paying a settlement offer doesn’t always improve your credit.
There’s some truth to what you’ve heard about debt settlements in general. Settling your debt is usually considered a last resort strategy because of its adverse effects on credit. And creditors will notice that you breached your contract and did not pay what you owed in full. However, in some cases, settling a debt can be a permanent solution to deal with a debt that you couldn’t otherwise pay off. When you settle a debt, your account balance is brought to zero and reports as “settled in full,” allowing you to start rebuilding your credit.
How a Settlement Affects Your Credit
When it comes to how a particular action affects your credit, there’s no way to determine how much your score can increase or decrease. It all depends on how high your credit score is when the event happens. The higher the score, the more severe the damage. Since you defaulted on your loan two years ago, there’s probably some extensive damage in your credit already. This includes a history of missed loan payments, the defaulted loan and any collection activity on this account. Although paying a loan in full would be the best alternative, it won’t give you the credit boost you expect. Your negative credit history will remain on your credit report for seven years after the day of the last activity on your loan. So, in comparison, a debt settlement would be a better option than not paying at all, and depending on your credit, slightly worse than paying your car in full.
Another thing to keep in mind when considering if settling this loan is right for you is that credit scoring models favor recent information more favorably. So the adverse effect of any negative information you have on your credit reports will diminish as time goes by.
Debt Settlement Beyond Your Credit
Most people worry about how debt settlements will impact their credit. But, settling debts have far-reaching consequences that could be costly to consumers. Whenever a lender forgives a portion of your debt greater than $600, the IRS will collect taxes on the forgiven amount. After you pay the debt, the lender will send you a Form 1099-C with details about the forgiven debt. To determine how this could affect you, ask a certified tax advisor.
Start Rebuilding Your Credit Today
Improving your score after a repossession will take time. It would be best if you focused on adding new positive monthly activity to your credit reports. The most important thing to do is to always pay all your other accounts on time and focus on keeping your credit card balances low. You should also avoid getting new credit unless it’s essential. Your credit journey and rebuilding strategy will be unique to you and your current circumstances. So, I encourage you to work with an NFCC Certified Financial Counselor to review personalized strategies and create a plan to find the right solution for you. Good luck!
The post Ask an Expert: Should I Settle My Car Loan? appeared first on NFCC.
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CEDAR RAPIDS, Iowa (KCRG) – Ariane Makaya might be one of the first people to greet you when you walk inside GreenState credit union. © Provided by Cedar Rapids KCRG-TV GreenState Credit Union says it’s looking to hire dozens of … Continue reading →
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The House Thursday passed legislation making a series of reforms to debt collection requirements. While NAFCU supports efforts to stop abusive debt collection practices, the association had raised concerns about language contained in the bill that would expand the definition … Continue reading →
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A new state law approved Thursday by Gov. Andrew Cuomo will bar debt collectors from accessing stimulus funds in bank accounts, a measure that had been sought by consumer groups. The law would cover the federal stimulus approved in 2020 … Continue reading →
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NEW YORK – April 26, 2021 – (Newswire.com) Can your financial ghouls of the past pay you a visit through social media? Rule changes to the Fair Debt Collection Practices say yes. (We know—as if you needed anybody else trying to slide … Continue reading →
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Did you know that sometimes credit reports can become “mixed” or “confused”? This situation is rare, but it is good to be aware of nonetheless. In a recent Credit Countdown video, credit expert John Ulzheimer explained what these terms mean. Plus, he also describes some other types of rare credit file issues.
Keep reading for more on mixed files and watch the video version at the end of this article.
What Is a Mixed Credit File?
A mixed credit file erroneously contains information from more than one consumer within the file. This is due to a mistake at the credit reporting agency where the matching logic software that is used to match a consumer’s information to their credit file ends up matching the wrong consumer’s information with someone else’s credit file.
If you have a mixed credit file, that means you have someone else’s data in your file that should not be there, whether the information is good or bad. Of course, it can be especially problematic if the incorrect information is derogatory.
The good news is that mixed credit files are extremely uncommon. On the rare occasions when mixed files do occur, it is often between two people who have the same names and addresses and possibly similar Social Security numbers, as may be the case with family members who share a name and live at the same address.
Mixed credit files are also sometimes referred to as “confused” files because the credit reporting system has confused one consumer with another.
What Is a Duplicate Credit File?
A duplicate file simply means that there are multiple credit reports in your name at the credit reporting agency. According to John, having duplicate credit files can be an issue if one of the files generates a credit score that is lower than the others.
Professionals in the credit industry may refer to instances of duplicate files as “dupes” for short.
While duplicate files may occasionally cause problems, the credit reporting agencies have ways to resolve the issue by merging the dupes.
Mixed files occur when the credit reporting system’s matching logic incorrectly attaches one consumer’s information to a different consumer’s credit file.
What Is a Fragmented Credit File?
Another type of inaccurate credit file is known as a fragmented file or a “frag.”
Fragmented files lack some of the information that is supposed to be on your credit report, so only a fragment of your credit file is present.
Missing information on your credit file can, of course, prevent your credit score from being as high as it should be, since you might be lacking important credit history, or it may be otherwise not fully representative of your full credit profile.
Conclusions
Mixed files, duplicate files, and fragmented files are all cases in which your credit report may be inaccurate. It should be stressed that these situations occur very rarely, so they will most likely not apply to you. However, if you find yourself dealing with one of these file types, contact the credit reporting agency so that they can resolve the issue for you.
Head to our Knowledge Center for more articles like this, or visit our YouTube channel to see more videos on tradelines and credit!
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Abstract: United States: Consumer Financial Protection Bureau provides sample disclosure language and guidance regarding its new rule imposed upon debt collectors of landlords. Debt collectors, as defined under the Fair Debt Collection Practices Act, are now obligated to provide affirmative … Continue reading →
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