Collections can harm your credit score.

Recovering Your Credit Score After a Collection Item

By | Collections

An account that lands in collections is typically the result of a series of missed payments. It’s also one of the quickest ways to sink your credit score. After all, much of the criteria that determines your credit score depends on your payment history — and even one collection account could send your score into free fall. Unfortunately, the history of your collection item will remain on your credit report for seven years after the date of the first missed payment, affecting your loan approvals and interest rates.

The effect on your credit score will vary, depending on the amount of the account in question and the level of your score when the collection occurred. A low-dollar collection item will likely affect your overall score much less than a larger one. Generally, the higher your score when the collection takes place, the more points you’ll tend to lose.

Although you could wait seven years for the collection item to fall off your report, it’s better to be proactive and approach the problem head-on. With hard work and persistence, you can reverse some of the damage done to your credit score. Read on for our top four tips for recovering your credit score after you have an account transferred to collections.

1. Focus on the Positive Information

The negativity on your credit report won’t disappear overnight, but you can lessen the damage by boosting the more positive elements of your score. Payment history comprises as much as 35 percent of your total credit score. Resolve to keep all of your credit card and loan payments current — and make sure that you keep those “positive” accounts open, even when you aren’t actively using them. The length of your credit history is also a substantial factor in your credit score, so the older and more timely paid accounts you have on your credit record, the better. Gradually, these critical, everyday efforts will result in a steadily improving score.

2. Open Up New Accounts

Another way of tilting the balance in your favor is to open up new accounts, which you can in turn use to build up some more positive marks. A secured credit card is an excellent option if you’re trying to rebuild credit because it offers minimal risk to both you and the card issuer — you can only “charge” what you’ve agreed to deposit into the account. When you pay off the new accounts every month, your score will rise — and the collection item will gradually factor less and less in the overall calculation of your credit score. Just make sure that you aren’t taking on too much too soon — the key is to focus on one or two new accounts that you will easily be able to pay on time every month.

3. Pay the Outstanding Balance

Unless you’re dealing with a very understanding collection agency, you probably won’t be able to get the collection account deleted from your credit report. Still, it doesn’t hurt to ask. In a “pay for delete” letter, as it’s known in the business, you can offer to pay the collection account in full in exchange for its removal from your credit report. Worst-case scenario? The agency turns you down and the account remains on your report, but potential lenders will still be able to see that you at least paid the balance due on the account.

4. Write a Goodwill Letter

Another possibility is to pen a letter to the collection agency, detailing the financial hardships that led to your account landing in collections. You will want to be specific about the particular circumstances, as well as the steps you have taken to regain your financial footing. Wrap up the letter with a request that the collection agency consider your special circumstances and delete the account from your credit report. If you do not hear anything within a few weeks, follow up with a phone call. Sometimes, persistence can pay off.

It’s important to also consider whether the account transferred to collections has been reported correctly. If it wasn’t — or the collection item belongs to someone else — you may have an excellent case for disputing that item with the credit bureaus. The pros at Ovation Credit would be happy to review your situation and, if necessary, file a dispute on your behalf. Reach out to our team and learn more about how we help consumers like you.

Debt Collection: Dealing with a Collection Agency

By | Collections, Debt

It is never fun when a bill gets sent to a debt collection agency. But, sometimes it puts the ball in your court and gives you a chance to achieve true credit repair. Whether you just couldn’t afford to pay your debt or you didn’t agree with it, once it is “in debt collections,” there is power in your hands.


Your Rights Against a Debt Collection Agency

There are many things you can do and say when dealing with a collection agency. First, you have the ability to make an offer to pay off the debt for less than the full amount. This could run down as low as 10 percent but it depends on how long the collection agency has tried to get you to pay it and what they paid for it.

It never hurts to make an offer. You can also negotiate a “pay for delete,” which means you clear the debt and get it taken off your credit report. With the help of a credit repair agency, this uncommon tactic becomes much more possible. It appears that the smaller agencies are more likely to agree than the larger ones.

Making Contact with a Debt Collection Agency

The debt collection agency will likely contact you before you realize you need to contact them. Or, the creditor you defaulted on will notify you first. You can send a cease and desist letter to force an end to any communication if you do not wish to deal with the agency. You also have the right to dispute the debt through the credit bureau(s) that list it on your file.

You should always start the communication off by confirming the amount you owe and requesting a written copy of these details. If the debt collection agency reports a different balance — a credit repair company can push for it to be removed from your file.

Making an Offer to Pay Off Collection Debt

In most cases, your main course of action is making a flat offer to pay off the debt. Agencies usually pay in the 25-50 percent range when purchasing your debt from the original creditor. Keep this in mind when making your offer. Make sure to only communicate in writing and start with a lower offer to see how they counter.

What you want to avoid is making a payment plan with the agency. This is actually bad for your credit report and score. It means that you will have an entry to bump the bad debt to the top of your report every month. You want the agency to report the debt as “paid as agreed,” as soon as possible as it can take two years before the damage wears off.

Differentiating the Types of Collection Agencies

There are two types of collection agencies that exist, the ones that operate in-house and the external companies that buy your debt. You have more leverage when working with an in-house agency. In some cases, it is even possible to restore your credit line once you cover your debt which looks better on your credit report.

Always confirm whether you are dealing with a first or third-party collection agency. This will tell you how much negotiation room you have when making an offer to pay off the debt. It also indicates whether you can do a “pay for delete,” or if you are better off approaching as someone unable to pay in full. Paying for a removal normally requires you to pay 100 percent of the initial debt.

How Collection’s Agencies Report Debt

You need to be very careful with how a collection agency handles your credit report. The balance, payment date, settlement terms and everything else must be accurate and timely recorded. You can dispute the debt with the respective credit report agencies if the information supplied by the collection agency doesn’t match the details of the debt on your credit report.

Your goal is to pay off any debt you truly owe and obtain a “paid as agreed,” comment on your credit file. This results in the lowest impact possible to your credit score and looks better when future lenders pull your file. You will notice a bump in your FICO score if you pay off a debt in collections that sat for a while.

You want to avoid having it show as anything else. You should also avoid paying off very old collections debt if possible. These entries only show on your file for seven years after the last delinquency date. You make the debt a new factor in your credit score calculation if it already stopped having an impact. Just send a cease and desist to stop further communication and wait for it to drop off your report.


Dealing with a collection agency is not all that bad. Even when you get the odd rude and aggressive one, it’s possible to stop the harassment. The key is to keep to written communication and log each interaction you have while watching for chances to dispute the debt.

A professional credit repair service can help you deal with collection agencies. If you need help removing a collections debt or paying it off cheaper, feel free to consult with Ovation Credit Repair to learn your options (complimentary consultation).


Moving Beyond Stall Letters

By | Ask a Credit Expert, Collections, Consumer Rights, Fair Credit Reporting Act, Fair Debt Collection Practices Act, Your Credit

We hate to be the bearers of bad news, but credit companies have never been your best friend. One of the reasons may be the fact that they hold a lot of control over a certain item that many people are fearful about: the credit report. In a perfect world, creditors would report only correct information on our credit reports and all would account as it should. Unfortunately, this world is far from perfect, and any disputes that we may have are not easy ones to settle.

When filing a dispute, the most common item the consumer will receive is a “stall letter.” When disputes are submitted by consumers, the bureaus will send out a vague response that most commonly says something like, “We’ve already verified this item” or, “We find this dispute to be frivolous.” To frustrate a consumer further, they are not informed how the bureau came to that conclusion, but these are the only statements bureaus are allowed to make as efforts to reject a dispute. An investigation costs money for both the bureaus and creditors, and they will use every power within their means to halt a dispute in the early stages. This irritating tactic is often a defective deterrent that buys time or chases the consumer away.

Do not let their “frivolous” statements discourage your efforts to dispute. Once the credit company realizes that their stall letter is not working – which requires you to send another letter disputing the item more aggressively – what usually follows is a request for proof of your identity. By having proof of identification on hand ahead of time, you can respond immediately and thwart the credit company’s efforts to stall for extended lengths of time. Do not let their evasive methods fool you; these companies are required to look into your dispute and investigate it as many times as you deem necessary, whether you have proof or not. As a consumer, you have the right to verify the information on your credit report and the bureau is required by law to accommodate. The burden of proof lays on them, not on you.

As a consumer, although you have the right to dispute multiple items as you see fit, this is not typically the most effective maneuver. When several disputes are received at once, you are more likely to get stall letters than anything else. The bureau will attack with their frivolous statements once again, but this time they will have reason to believe that your disputes are frivolous or designed to misdirect. Multiple disputes may also trigger internal concerns that slow the whole process.

Our advice? Be smart about what you dispute as a consumer, but never shy away from keeping creditors on their toes.

The Rocky Road to Recovering from Bankruptcy in 4 Easy Steps

By | Bankruptcy, Collections, Credit Repair, Credit Scores, Your Credit

One of our favorite movies of all time is Rocky IV, where he defeats the unbeatable Drago. Rocky gets hit hard, but doesn’t give up, and because of his hard work and training, defeats his opponent. Recovering from a bankruptcy is a lot like Rocky’s journey (minus the cool soundtrack).

When you file for bankruptcy, it’s usually your last resort. You’ve been backed into a corner and the punches keep coming, but bankruptcy lets you get out of that corner and continue the fight. It’s time to put on the gloves and face that seemingly unbeatable foe and get started repairing your credit score.

4 Steps to Repairing Your Credit After Bankrupty

Examine Your Credit Report: The first step is to get a copy of your credit report and go over it with a fine-toothed comb. You need to check to make sure all the accounts were placed on the bankruptcy and that all the information is correct. There may be negative accounts on your credit report that were paid off prior to the bankruptcy which have inaccurate information or shouldn’t even be on it anymore. The bankruptcy will have a big impact on your credit score, so anything you can do to raise it by making sure everything on your report is correct only helps.

Create a Budget: If you declared bankruptcy, then you were in a negative debt situation to begin with. You need to create a realistic budget based on your income. This budget needs to include all bills and necessities as well as an amount dedicated to repairing your credit. You can use this to start a nest egg savings before applying for a new credit or use it to make payments on new credit.

Build Your Credit Score: Declaring bankruptcy doesn’t mean you will not be eligible for any credit at all. There are companies that specialize in providing credit, such as credit cards, to people with bad credit scores and bankruptcy. The company is taking a risk giving you credit, so the interest rates on these cards are high. You can also apply for a secured credit card, where you pay the credit amount first and they keep it on hand in case you default on the card. You have credit and the card will charge interest and report to the credit bureaus.

Note: Do not apply to several credit cards or other credit lines. Bankruptcy is a red flag for most creditors and will be difficult for you to be approved. Each time a creditor looks at your report, it can have an impact on your score. These are called hard inquiries.

Pay On Time: It takes 10 years for a bankruptcy to be taken off your credit score, so it’s important to build your credit the right way. Make sure you pay all of your bills on time because late payments create a negative impact. Do not get too much credit debt and keep your balances to about 10 percent of the total limit.

If you follow these steps, then the bankruptcy can be the inspiration needed to beat that unstoppable foe of debt and get your life back on track. You can give debt a K.O. if you are willing to be disciplined and fight to the finish.

Your Credit Blemishes Are Easier to Overcome Than an Impulsive Tattoo

By | Bankruptcy, Collections, Credit Repair, Credit Scores, Personal Finance

We all make mistakes. We order a regular soda instead of diet, we get a regrettable tattoo, and we miss a car payment. So, choke down some high fructose corn syrup, find the humor in the bright, new Mighty Mouse tattoo, and know that someday that blemish on your credit report will go away.

While credit reporting practices and scoring methods differ depending on the creditor, potential lender, and credit bureau, payment history is always one of the primary factors in a credit score. In FICO (Fair Isaac Corporation) scoring, payment history is weighted at a hefty 35% of a credit score, which is more significant than any other factor. In the VantageScore calculation used by the top three credit bureaus (TransUnion, Equifax, and Experian), the exact formula is a black box, but we know payment history is weighted in the 30% range and is again more important than other factors. Specific industries – like the mortgage industry and the automobile industry – have their own algorithms for credit scoring, but most use either the FICO or VantageScore as a starting point.

There are components of payment history that range from amount past due on an account to frequency and severity of payment tardiness to liens and court judgments. The weight of these factors on the payment history varies, since some creditors report immediately, some report based on a 2-3 rolling period, and some don’t report at all. To further complicate matters, some calculations look at the full seven years of credit history (FICO) and others at shorter periods like two years (VantageScore).

At Ovation, we advise our clients to assume all financial information will affect credit scores for seven years. Thus, all of us would do well to treat our credit score like our reputation or identity and take very good care of it. Tools like automatic bank payments can help to ensure our financial commitments are met on time. If a payment is missed, don’t wait to bring the account into good standing.

Credit scoring is confusing and complicated and sometimes frustrating for consumers. While the weight of a financial blemish is beyond our control, the blemish itself is well within our control – The easiest way to take control of our financial reputation and keep a solid credit score is to live within our means and make our payments on time. If a payment is missed, at least the ramifications are shorter term than impulsive ink!

How Long Can Information Be Reported On Your Credit Reports?

By | Bankruptcy, Collections, Consumer Rights, Credit Cards, Credit Laws, Credit Repair, Credit Reports, Fair Credit Reporting Act, Your Credit

One of the first credit repair steps involves removing information that is outdated.  The problem is that many consumers cannot tell when information is outdated.   On the surface, it seems like a simple exercise – just compare some dates.  While that is correct, the more difficult part involves determining which dates to compare.  The answers are provided in The Fair Credit Reporting Act, section 605.  According to section 605, the following items may not be reported on your credit reports:

  1. Bankruptcy: Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
  2. Civil suits, civil judgments, and records of arrest:  Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period.
  3. Paid tax liens: Paid tax liens which, from date of payment, antedate the report by more than seven years.
  4. Collections and Chare Offs: Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years.
  5. Other Adverse Items: Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years.

So What Are The Exceptions?

There are exceptions to these general rules.  Most of the exceptions are based upon the use of the report.  The general rules are not applicable in the case of any consumer credit report to be used in connection with the following:

  1. Credit transactions involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more;
  2. Underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or
  3. Employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.

If you have ever wondered why there are so many different credit scoring models, this is one of the primary reasons.  The information that is permitted to be included on the credit report can vary depending on what the credit report is being used for.

So When Does The Time Period Start?

In regards to bankruptcy, the 10 year period starts at the date of entry of the order for relief or the date of adjudication.   In regards to the other items, the 7 year period begins, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.   Clear as mud, right?

So What Does This Mean?

In order to understand if items on your credit report are outdated, you need to understand how the dates are calculated.  Remember, you should review your credit reports frequently for errors and signs of identity theft.  It is not uncommon that dates are incorrect.  In fact, in the case of debt collection, errors in the proper dates are very common.  These errors may result in negative items being reported longer than necessary.  Check the dates on your reports and verify that the information is correct.  If you need help, give us a call – we would be happy to assist you.


Can Debt Collectors Contact Friends and Family Members?

By | Ask a Credit Expert, Collections, Consumer Rights, Credit Repair, Debt, End Debt Collector Abuse Act of 2010, Fair Debt Collection Practices Act

It is not uncommon for debt collectors to go to extreme measures in order to get information about a debtor.  In fact, many debt collectors call friends and family members of debtors they are trying to reach.  While this practice is permitted and regulated by the Fair Debt Collection Practices Act, it is frequently abused.

Are Debt Collectors Harassing You About Someone Else’s Debt?

Debt collectors are permitted to contact third parties for the purpose of acquiring location information about the debtor.  Section 804 provides the following:

Any debt collector communicating with any person other than the consumer for the purpose of acquiring location infor­mation about the consumer shall identify himself, state that he is confirming or correct­ing location information concerning the consumer, and, only if expressly requested, identify his employer.

Debt collectors are prohibited from stating that such consumer owes any debt.  They may not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information.  Debt collectors may not communicate by post card and they may not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communi­cation relates to the collection of a debt.

By the way, if the debt collector knows the consumer is repre­sented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, they may not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to the communication from the debt collector.  In this case, family and friends may not be contacted at all.

How Can You Stop Debt Collectors from Harassing You About Someone Else’s Debt?

The purpose here is to allow debt collectors to try to obtain location information.  That makes sense.    However, many debt collectors abuse this provision to harass family members and friends in an effort to get the debtors to respond.  This practice is unethical, and it is illegal.  If you are being contacted by a debt collector regarding someone else’s debts, and the debt collector is violating the provisions above, let us know.  We’ll help you locate an attorney in your area that can help protect you from this type of abuse.

By the way, if the debt collector knows the consumer is repre­sented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, they may not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to the communication from the debt collector.


Validation of Debt

By | Collections, Consumer Rights, Credit Laws, Debt

Under the Fair Debt Collection Practices Act, debt collectors have certain obligations when first communicating with a consumer about a debt.  The debt collector must provide certain information within five days of the initial contact with the consumer.  That information includes the amount of the debt and the name of the creditor to whom the debt is owed. 

The debt collector must also provide certain statements within five days of the initial communication.  The following statements are required:

  1. A statement that the debt will be assumed to be valid by the debt collector unless the consumer, disputes the validity of the debt, or any portion thereof, the debt within thirty days after receipt of the notice;
  2. A statement that the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed; and
  3. A statement that the debt collector will provide the consumer with the name and address of the original creditor if different from the current creditor upon the consumer’s written request within the thirty-day period.

Keep in mind that a communication in the form of a formal pleading in a civil action is not considered an “initial communication.”

Validating the Debt:

If the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector must cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt.  The debt collector can satisfy this requirement by obtaining a copy of a judgment or other specific account information and mailing the information to the consumer.

Also, if the consumer has requested the name and address of the original creditor, the debt collector must cease collection of the debt, or any disputed portion thereof, until the debt collector obtains the name and address of the original creditor and that information is mailed to the consumer by the debt collector.

Debt collectors are allowed to proceed with lawful collection activity during the thirty day period prior to receipt of a dispute.  Any collection activities and communication during the thirty day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.

What happens if the consumer does not demand validation of the debt within the thirty day period?

If the consumer does not dispute the validity of the debt during the thirty day period, the debt collector may assume that the debt is valid for collection purposes.  However, the failure of a consumer to dispute the validity of a debt may not be construed by any court as an admission of liability by the consumer.

What does this mean?

When you are contacted by a debt collector in regard to a debt that you allegedly owe, it does not mean that the debt collector has access to the information necessary to validate the debt.  While some debt collectors have this information in advance of an initial contact, many debt collectors only attempt to validate a debt if the consumer requests during the thirty day period.  If the debt cannot be validated, the debt collector must cease additional collection activity.  Also, if a debt cannot be validated, the debt cannot be reported on your credit profile.

If I file Bankruptcy, I will not have to pay back my debt and my credit report will be wiped clean, correct?

By | Ask a Credit Expert, Bankruptcy, Collections, Credit Repair, Credit Reports, Credit Scores, Debt, Personal Finance, Your Credit

This is one of the biggest myths and misunderstandings with credit.  When you file bankruptcy you are telling the court that you do not have enough money to pay your bills.  Since you do not have enough money to pay your bills, you will have to include EVERYTHING in the bankruptcy and in return you can wipe away your debt and stop the collection calls.  If you file a Chapter 7, then you debt is wiped away.  If you file a Chapter 13, then you set up a payment program to pay a percentage of the money back to your creditors over the next 3-5 years.  The debt may be gone or may be lowered dramatically and put in a payment plan and the creditor calls will stop, but remember the Bankruptcy as well as all of the creditors included in the bankruptcy will report on your credit report.  All of your creditors (even positive accounts) will now report as Included in Bankruptcy, which reports in the same category as Charge off or Collection accounts.  So, your debt may have been wiped away but you usually end up with an even lower credit score in its place.

Bankruptcy is not the end of the world.  A bankruptcy does report for 10 years but sometimes it is the only way out.  As a consumer you need to focus on rebuilding your credit after you file bankruptcy.  In the last several years a lot of credit companies have changed their approval process and will approve consumers for credit after a bankruptcy.  That is great news, so you can start rebuilding your credit, but start small.

After filing bankruptcy you want to check your credit reports as well and make sure that all of your creditors are reporting accurately.  It is very common for creditors that are included in the bankruptcy to report the account as charge-off that is inaccurate information that can damage your credit score, so you need to get all information reporting inaccurately fixed. That is what Ovation Credit Services is here!

If you have any of these errors or have any questions about a bankruptcy you filed and how it is reporting, give Ovation Credit Services a call.  Our Case Analysts would be happy to review your credit reports with you and make sure everything is reporting accurately.   Call us at 1-866-639-3426 option 2 for your FREE Credit Consultation. During your free credit consultation we will also help you order your credit reports so we know exactly what is going on with your case.

If you have any questions for our Credit Expert Kristi Thornton, please email me at [email protected].

When I pay off a collection or charge off account, will it start reporting as paid in full and as a positive account?

By | Ask a Credit Expert, Collections, Consumer Rights, Credit Cards, Credit Laws, Credit Repair, Debt, Payment, Personal Finance, Your Credit

When you pay off a collection or charge off account on your credit report that is great. It is always in a consumer’s best interest to pay off their debt. However, a lot of consumers think that once the account is paid that it is no longer negative and has actually become positive. That would be great, unfortunately that is not the case, and it is still a negative account. The creditor should update your account on your credit report to show that it is paid in full or paid collection/charge off.  By updating that information it will have a positive impact on your credit report and more importantly on your credit score. The amounts owed on your accounts is 30% of your credit score, so as you pay accounts off it will help to raise your credit score. By paying accounts off they no longer have such a bad impact on the credit score.

Your credit scores will improve when you pay off accounts because your reports will show you owe less money to creditors, it will stop the account from updating every month that it is not paid and it’s late, and it will keep the date of last activity as when it was paid.  When the account is paid off it stops the activity on the account so that it will fall off of your credit reports 7 years (for most items) from the date of last activity.  All collection, charge off, and late payments should come off your reports 7 years from the date of last activity. If you have accounts that have not updated as paid or have not come off your reports when they were supposed to, then give us a call.

If you have any other questions about items on your credit reports, how items are reporting, and when items will come off your credit reports, please call one of our Experts at Ovation Credit Services.  Call 1-866-639-3426 and schedule a FREE credit consultation! Check out to see other ways we can help! We are here to guide you to a BETTER Financial Future!

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