How To Manage Late Payments, Tax liens, Collections, Charge Offs, Bad Debt Paid & Unpaid:

Late Payments:

Remain current on paying all your monthly bills

ANY new late payments, collections PAID or UNPAID, charge offs or bad debt of any type will lower your score as much as 107 points. Even 1 new 30 day late payment of $5 can cost you the loan you want and the credit score you deserve. The lower the minimum payment that is due, the further your score will drop. As it assumes if you cannot make a smaller payment, you’re in serious jeopardy and the score will then dramatically drop.

Tip:  Do not exceed more than 29 days midnight from the payment due date. Or it will become a 30 days late.

Collections & Bad Debt:

Special Note: Paying off your collections & bad debt typically LOWERS your scores. It does NOT does not raise them.

Creditors DO NOT remove or DELETE collections, bad debt accounts or entire trade lines when you pay them. They can lose their ability to report to the bureaus if they get caught doing this.

They only delete the balance, and update your file to show a paid or settled bad debt. This in turn drops the scores. FICO algorithms assume you just depleted your reserves or savings in order to pay it. And now you may have little to no cash reserves. FICO cannot calculate what your income or savings are. Which means if your sick and cannot work, missing a few paychecks. You are now HIGHER RISK to have new late payments or defaulting on your accounts. Thus dropping the score.

When & How To Settle Bad Debt:

Generally the older the collection from date of last payment made, the easier it is to settle for less. Most states statutes are 4-6 years to sue you from when last payment is made, and enter a judgement against you for wage garnishments and liens. They can still harass you for a lifetime on the debt asking for money.  If you already have an unpaid judgement, they can renew the judgement 3 times every 10 years or for 30 years In total.

Unless your minimum 4-6 months of no payments made, they will typically not settle for less.

As a client. We can teach you for FREE how to settle. Or we can have one of our attorneys settle for you for a fee, after settlement is completed.

Judgments & Liens: Unpaid

Tax Liens:
IRS liens are uncollectible of non payment after 10 years, unless they already placed a lien against property.

State Liens are various in each state.

Speak with your Credit Coach if you have open bad debt on your report, unpaid judgements or tax liens before taking any actions. If you don’t have an attorney we can provide you one.

As a client. We can teach you for FREE how to settle. Or we can have one of our attorneys settle for you for a fee, after settlement is completed.

Credit Cards: How To Manage

The longer your revolving accounts (credit cards) have been active and open, helps you achieve a higher score.

Do Not Close Credit Cards:

This will cause you to lose ALL the good history you have built over time, and drop your score up to 100 points. The older the card history the lower the score will drop.

Inactive Credit Cards:

Any open credit cards with a zero balance that has not been used for more than 6 months, is considered an “Inactive” account and will lower your score. Charging a small amount on the card every 5 months such as $5 or less, then paying it off when you receive the statement. Will help your score increase within 30-90 days stimulating activity. And insure the creditor does not close them from non activity.

Open Credit Cards WITH Balances:

30% Rule on Credit Card Balances:

Look at your credit card limit; subtract 70% from the credit limit amount. This will equal 30% of available credit. Never charge greater than this amount.

Example: $1,000 limit – 70% = $300   (30%) A ZERO Balance gains the most points

Creditors report data to the credit bureaus every 30-90 days. Randomly throughout the month, 1st or 15th or 30th when most people carry a balance. They do not report what you have paid that month on the statement. But rather, what your current balance was as a snapshot in time as they upload the data. Thus driving down your score.

Tip:  Ideally, Pay off all cards to a zero balance 90 days prior to applying for anything. This will insure enough time to upload a zero balance to maximize the score

Choose Which Cards to Pay Down First

Pay them all below 30% of the credit limit first. Then to ZERO. Start with the higher balances with higher % rates.

Example: Phase 1

A. $10,000 limit – 70% = $3000.   21% rate (Pay down 1st to 30%)
B. $8,000 limit   – 70% = $2400.  14% rate (Pay down 2nd to 30%)

Example: Phase 2

A. $10,000 limit Bal = $3000. 21% rate (Pay down 1st to Zero)
B. $8,000 limit Bal = $2400. 14% rate (Pay down 2nd to Zero)

Tip:  Take all your cards out of your wallet today except debit cards. Rap them together in a rubber band. Place them in a safe or freezer, and do not use them other than $5, 1 time every 5 months to keep accounts active. That’s it. (Place a recurring reminder alarm on your calendar for the rest of your life. To alarm you every 5 months to use them)

Don’t use them every month. Especially until after ALL critical financing is done such as Home, Car, Solar,  Insurance rates are in place with BEST RATES.

Open Credit Cards With NO Balances: You haven’t used within 5 months.

Inactive Credit Cards:

Any open credit cards with a zero balance that has not been used for more than 6 months, is considered an “Inactive” account and will lower your score. Charging a small amount on the card every 5 months such as $5 or less, then paying it off when you receive the statement. Will help your score increase within 30-90 days stimulating activity. And insure the creditor does not close them from non activity.

Tip:  Take all your cards out of your wallet today except debit cards. Rap them together in a rubber band. Place them in a safe or freezer, and do not use them other than $5, 1 time every 5 months to keep accounts active. That’s it. (Place a recurring reminder alarm on your calendar for the rest of your life. To alarm you every 5 months to use them).

Credit Cards: How To Build Your Credit File (3 Active Cards Required For Each Person)

Obtaining Credit Cards to build up Credit: Links if you do not have a total of 3 open credit cards each.

You must always have a min of 3 active open good revolving Credit Cards for a minimum of 12 months. In order to achieve a great score 740 – 770+. Below is an outline of where and when to do it.

It’s always best to have your OWN cards NOT joint or authorized users. Authorized users do not count as part of the 3 cards that are needed per person.

Tip:  Open cards under your name ONLY not joint with another person. If the other person creates a late payment or defaults, then you also are stuck with the late payment and debt. Limit your liabilities.

Go to Section B first: Unsecured cards.

If you cannot obtain enough cards in this section to total each of person having 3 cards each.

Then go to Section C below which are:  Secured cards @ $200 each. These cards will eventually unsecure in good standing per their guidelines and raise your limits and return your deposit.

A. Good Credit Scores above 740: https://www.bankrate.com/credit-cards/

B. Fair Credit Scores no unpaid collections: $300 each unsecured:
Credit One Bank: https://www.creditonebank.com/pre-qualification/data-entry/index
Cap One Bank: https://www.capitalone.com/credit-cards/platinum/
First Premier Bank: https://www.premiercardoffer.net/Generic.aspx
Indigo: https://www.indigocard.com/

C. Bad Credit Scores with open unpaid collections: $200 each secured: ( You have to make a deposit )
Discover Card: https://www.discover.com/credit-cards/secured/?ICMPGN=PUB_HNAV_CARDS_SECURE
First Premier Bank: https://www.premiersecured.net/
Cap One Bank: https://www.capitalone.com/credit-cards/secured-mastercard/

NEW OPEN ACCOUNTS:

In most cases, opening a new account of any type will lower your score. Do not open any new accounts (even cell phone & utilities) unless absolutely necessary. Please consult with your Client Manager first. Choose your accounts wisely.

NEW INQUIRIES:

2 or more New Inquiries within 90 days can lower your score an avg. of 5 – 22 points 1 inquiry within 90 days can lower an avg. of 2 – 3 points. Your points will be returned within 90 days of each inquiry. The more inquiries within 90 days the higher the loss.  Again, please consult with your Client Manager before you do anything.

Tip:  Lenders can only see the last 120 days of Inquiries on their reports. Spread them out. Reports consumers view, inquiries can be seen for 2 years.

Hierarchy & Types of Credit Weighting

DIFFERENT CREDIT TYPES:

Mortgages – Have the greatest amount of weight with pos. & neg. remarks

Auto Loans: Do not pay off in less than 2 years: 30-60 point score drop

Revolving Lines of Credit: Bank & Store Credit Cards

Other Installment Loans, such as student loans – have the least amount of weight when it comes to the balances or debt load.

Tip:  A mortgage loan carries more positive points after being opened for greater than 12 months compared to any other types of credit. A good credit mix is, 1 mortgage, 1 auto loan, 3 credit cards for best weighting. Tradelines over 20 years old also carry the highest amount of weight. In increments of 1 yr, 2 yrs, 5 yrs, 10 yrs, 15 years, 20 yrs.

A Quick Way to Add Good Aged Credit History

Authorized User Cards:

It’s a good tool to use when your just starting out with NO credit as a teenager or new foreign national.

Special Note: If you have ANY negative information on your file, this will NOT help increase your scores. Or count as part of the 3 cards you need to build your file. FICO reformulated the scoring model in 2009 to off set gaming the system. As they know your attempting to game the system, IF you have any negative accounts or late payments. Authorized users ONLY work if you have no negative data on your file.

Contact a friend or relative and have them place you on 3 to 5 of their credit cards that they have had for a minimum of 2 or more years as an “Authorized User only” (NOT a Joint User). Make sure they have zero or balances or 30% of available credit.

The account holder will receive a new credit card in your name. The account holder must make a single charge of $5 on your new card to insure that their positive history appears on your credit. After charging they can cut the card up and they never have to use it again. Older cards are more valuable to your score. Such as 10-20 year old cards.

Speak with your Credit Coach first to make sure its a wise idea.

Tip:  Ask the creditor if they report auth user cards before adding. Not all credit card companies report data. A few are: Sears, JCPenney, AMEX, Home Depot, Nordstroms, Discover & Citibank