Credit Report?

Question

My gym membership defaulted due to various reasons. After some time, a lawyer's office contacted me and we worked out a payment schedule - I paid off the entire contract in three installments (approx ~ $550). This may sound silly...but is the lawyer's office deemed a "Collection Agency"?, or is this a different process? I know this will hurt my credit history...just wondering what the full impact might have been. (ie: points taken off my credit score?)

Also, if this did hurt my credit score...how long does something like this stay on my history? How much will it affect my getting approved for a car loan? Or a mortgage in the next few years?

Thank you!

Answer 1

As Faye said, lawyers can act as debt collectors.

By law, they should have included the mini miranda in their letters to you - This is a notice from a debt collector, you have the right to dispute the account, etc., etc., etc.

The time the account will remain on your reports is 7 years from the time you defaulted - the reporting SOL cannot be legally re-aged.

I also agree with Faye if it is not reporting correctly - dispute it. You might also send a goodwill letter to the data furnisher (lawyer/collection agency) requesting the removal of the tradeline since you had paid it.

One thing I disagree with Faye on is that a paid negative is just as bad as an unpaid negative. It is a negative no matter how you slice it.

I have seen far to many people that have paid without first requesting deletion upon payment, whether the account is SOL or not for collection. They thought it would improve their credit. Then they are surprised to find out how much that paid collection actually hurts them, in being denied credit, having higher interest rates etc.

Answer 2

Echo is right, a negative is a negative is a negative, but, when it comes to getting a mortgage it really depends on what type of mortgage you are looking at getting. Different programs have different requirements like FHA loans don't go off of your scores only off of your credit history. If that account shows paid that is a plus for you in their books. Most other places are completely score driven and you could end up with a much higher interest rate because of a paid collection.

However, you can still go over the trade line on your reports with a fine toothed comb and 9 times out of 10 there is some sort of inaccuracy in the account. A wrong date of deliquency perhaps, incorrect amount due, date of last activity even...you can dispute that trade line with the credit bureaus based on those inaccuracies and if the furnisher (lawyer/collection agency) verifies that the information is accurate when it is not, then they have violated the FCRA and possibly even the FDCPA. You really should read these laws and learn your rights, everyone should, understand them thoroughly because they are your salvation.

You can get this trade line removed and boost your scores anywhere from 5 points to 40 points depending on the age of the account, the amount owed, etc.

Answer 3

The process of credit repair is much more than simply eliminating the negative information. You should ensure any positive information that can improve your credit score is actually included.

1. Report Your Positive Accounts: Remember the credit bureaus generally avoid sharing information, but it can be annoying when your single good, paid-on-time account is not mentioned in all your credit reports. The worse scenario is when your credit account goes unreported. Some creditors just don’t utilize the services of credit bureau while others hide the histories of their best clients purposely to avoid their competitors from grabbing these customers. Although you cannot compel a creditor to inform about your account to a bureau or inform more often, you can try asking. In some instances, it is nearly impossible to ensure all your timely payments are recorded. Most creditors will only inform about you to the credit bureaus if you default.

2. Use Other Person’s History: Being included in other person’s credit card account as an authorized user can immediately better your credit report, provided that person has good credit history. As the opposite also holds true, it is essential you select the right person. A cooperative credit issuer introduces the card user's account history into your report, letting you gain from the other person's good financial habits. But all credit issuers do not give this benefit, so it is essential you find out about this important point. Also another advantage of being an authorized user instead of a joint, user, removes the liability for any debt incurred by the main account holder from your shoulders.

Answer 4

There are a bunch of Law Firms that are collection agencies. I guess they can't figure out another way to make a living or something and figure being a law firm will scare people. It usually works.

It will stay on your credit report for 7 years.

Make sure you check your credit report to see that they have reported that it is paid. A paid collection is a whole lot better for your score than one that is sitting there in default. If you check your report and find that it is showing a balance due, file a dispute with the credit reporting agencies.

You need to give the Lawyer a month or two to update your file before disputing it though.

It has hurt your score, I'm sure. But if you keep all other bills paid, ON TIME, and reduce the amount of your overall debt, within a year, that one default isn't going to be a huge problem.