What is debt validation? – Lexington Law

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Information in this article is not intended to provide legal advice for your individual circumstances and does not create an attorney client relationship with Lexington Law. If you need specific legal advice, contact an attorney in your jurisdiction.

A debt validation (or verification) letter may help you resolve some issues related to collection accounts and potentially minimize the damage done to your credit score.

For example, collection agencies may “reactivate” debt that you might have forgotten about, reporting very old debt again on your credit report. Or they may even try to collect debt that you already paid or that is past your state’s statute of limitations. In these cases, you may want to use a debt validation letter.

What Is Debt Validation?

Debt validation is simply the act of demanding that a credit agency prove that you owe a specific debt. The right to debt validation is protected under the Fair Debt Collection Practices Act.

Debt validation is simply the act of demanding that credit agency prove that you owe a specific debt.

How to Request Debt Validation

To protect your FDCPA rights, should follow a certain process. These steps help you document that you sent a proper validation letter and whether or not the collection agency responded in a timely manner.

1. Obtain a Copy of Your Credit Report

Obtain a copy of your credit report and highlight the
negative items you want to challenge. Make sure you have a basis for
challenging them. Examples for reasons include that you already paid the debt,
that you never owed the debt to begin with or that the debt is beyond your
state’s statute of limitations on collections.

2. Write and Mail a Letter

Write a letter including the reasons you feel the debt
is invalid. Address the letter to the collection agency that reported the debt
to the credit bureau. State that you’re requesting validation of the debt or
removal of the debt from your credit report. Then mail the letter and request a
return receipt so you have proof that you sent it and that the collection
agency received it.

3. Follow Up With a Challenge Letter

If you don’t receive a validation of your debt and it’s
still on your credit report, follow up with a credit challenge letter. Send
this letter to the credit bureau and include copies of any documentation you
have that disputes that you legally owe the debt. Make sure to note that you
contacted the creditor and did not receive a response to your validation
request, and include copies of the letter and the return receipt as proof.

4. Wait 30 Days for a Response

The credit bureau must investigate dispute letters. It will contact the reporting collection agency and request documentation of the debt. If the collection agency doesn’t provide sufficient documentation within 30 days, the credit bureau must remove the item from your credit report. Continue to check your credit report, even if you don’t hear from the bureau or creditor, to see if the item is removed.

How to Write a Debt Validation Letter

Dealing with collection accounts and agencies can be
stressful, and if you don’t think you owe the debt, you might also be angry. Remember,
it’s important to be as professional, clear and concise in a debt validation
letter as possible. You might need to use this letter later for proof that you
asked for validation of the debt, so you don’t want to complicate the issue or
use unprofessional wording.

Instead, keep it as brief as you can, including only what
you need to for the validation request. That includes:

  • What debt you are writing about
  • That you are requesting validation under the
    FDCPA
  • What information you are requesting
  • That you dispute the debt and request it be
    removed from your credit report
  • Your request that the creditor stop trying to
    collect the debt

Is a Creditor Required to Respond to Debt Validation?

Creditors do not have to respond to every debt verification letter sent to them. Under the FDCPA, if a collector contacts you about a debt, you have 30 days to request validation. If you send a verification request within that time, the creditor is legally obligated to respond to you. However, if you send a letter outside of that time or based on something you see on your credit report, the creditor is not legally obligated to respond.

Some people might tell you that it’s better to simply pay the debt and ask the creditor to delete the item from your report in return. That can in some cases, be an expensive proposition that doesn’t provide any results—especially if you don’t actually think you owe the money. Payment for deletion isn’t an option most creditors can back up because many collection agencies have contracts with the credit bureaus that prohibit it.

If a collector contacts you about a debt, you have 30 days to request validation.

How a Debt Validation Letter Can Help

Even if you’re outside of the debt validation window
under the FDCPA, a debt verification letter can still offer some benefits.
First, if the collector realizes that there is an issue with their information,
they might remove the negative item from your credit report. Even if that doesn’t
happen, you at least have documented proof you took these steps, and that can
help you when you try to dispute the information with the credit bureaus.

For more help with staying on top of your credit report and disputing incorrect items, get in touch with the credit consultants at Lexington Law.


Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

10 Best Health Care ETFs of 2021

Technological innovation is everywhere you look, especially in health care. New technologies are making simple work of some of the most pressing medical conditions known to man.

Even the COVID-19 pandemic has been proof that the health care sector is evolving, with vaccines being created and marketed within a year of the outbreak of the novel coronavirus.

Of course, the health care industry is massive. Well-researched investments in a variety of health care stocks and bonds have proven to be lucrative moves. But what if you don’t have the time or expertise to do the research it takes to make individual health care investments?

That’s where health care exchange-traded funds (ETFs) come in.

Best Health Care ETFs

Health care ETFs are funds that pool money from a large group of investors and then invest in health care stocks and other health care-focused investments.

As with any investment vehicle, not all health care ETFs are created equal. Some will come with higher costs than others, and returns on your investment will vary wildly from one fund to another.

With so many options available, it can be difficult to pin down which ETFs you should invest in. Here are some of the best options on the market today:

1. Vanguard Health Care Index Fund ETF (VHT)

  • Expense Ratio: 0.10%
  • One-Year Return: 29.89%
  • Five-Year Annualized Return: 15.10%
  • Dividend Yield: 1.42%
  • Morningstar Rating: 4 out of 5 stars
  • Top Holdings Include: Johnson & Johnson (JNJ), UnitedHealth Group (UHC), Abbott Laboratories (ABT), Thermo Fisher Scientific (TOM), Pfizer (PFE)
  • Years Up Since Inception: 14
  • Years Down Since Inception: 2

Vanguard is one of the best-known wealth managers on Wall Street. So, you can rest assured that when you invest in a health care ETF or any other Vanguard fund, your money is in good hands.

The Vanguard Health Care Index Fund ETF is focused on investing in companies that sell medical products, services, equipment, and technologies using a highly diversified portfolio.

As a Vanguard fund, the VHT comes with an incredibly low expense ratio and a strong history of providing compelling returns for investors.

Pro tip: Have you considered hiring a financial advisor but don’t want to pay the high fees? Enter Vanguard Personal Advisor Services. When you sign up, you’ll work closely with an advisor to create a custom investment plan that can help you meet your financial goals.


2. Health Care Select Sector SPDR Fund (XLV)

  • Expense Ratio: 0.12%
  • One-Year Return: 23.75%
  • Five-Year Annualized Return: 13.15%
  • Dividend Yield: 1.49%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Abbott Laboratories (ABT), AbbVie (ABBV), Pfizer (PFE)
  • Years Up Since Inception: 17
  • Years Down Since Inception: 5

The Health Care Select Sector SPDR Fund is offered by State Street Global Advisors, one of the largest asset management companies on Wall Street. The firm behind this health care ETF is one with pedigree.

As a passively-managed fund, the XLV was designed to track the returns of the Health Care Select Sector Index, which provides a representation of the health care sector of the S&P 500.

As a result, the XLV ETF provides diversified exposure to some of the largest U.S. health care companies. The fund provides compelling returns and relatively strong dividends for the health care industry.

As is the case with most funds provided by State Street Global Advisors, this ETF comes with incredibly low fees, far below the industry average.


3. ARK Genomic Revolution ETF (ARKG)

  • Expense Ratio: 0.75%
  • One-Year Return: 174.19%
  • Five-Year Annualized Return: 43.78%
  • Dividend Yield: 0.93%
  • Morningstar Rating: 5 out of 5 stars
  • Top Holdings Include: Teladoc Health (TDOC), Twist Bioscience (TWST), Pacific Biosciences of California (PACB), Exact Sciences (EXAS), Regeneron Pharmaceuticals (REGN)
  • Years Up Since Inception: 4
  • Years Down Since Inception: 2

The ARK Genomic Revolution ETF is offered by ARK Invest, yet another highly trusted fund manager on Wall Street.

The ETF is designed to provide diversified exposure to companies that are working to extend the length and improve the quality of life for consumers with debilitating conditions through technological and scientific innovations in genomics.

Essentially, this fund invests in companies focused on the editing of genomes, or base units within DNA, to solve some of the most pressing problems in medical science.

With genomics being a relatively new concept that’s showing incredible promise in the field of medicine, companies in the space are experiencing compelling growth, making the ARKG ETF one of the best performers on this list.

However, it’s also worth mentioning that this is one of the higher-volatility ETFs on the list, which adds to the risk of investing.


4. Fidelity MSCI Health Care Index ETF (FHLC)

  • Expense Ratio: 0.08%
  • One-Year Return: 29.76%
  • Five-Year Annualized Return: 15.11%
  • Dividend Yield: 1.46%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Abbott Laboratories (ABT), AbbVie (ABBV), Pfizer (PFE)
  • Years Up Since Inception: 6
  • Years Down Since Inception: 1

Fidelity is a massive company that has grown to become a household name thanks to its insurance division. It’s also one of the biggest and most well-trusted fund managers on Wall Street.

The company’s MSCI Health Care Index ETF has become a prime option for retail investors who want to gain diversified exposure to the U.S. health care industry.

The ETF was designed to track the MSCI USA IMI Health Care Index, which represents the universe of investable large-cap, mid-cap, and small-cap U.S. equities in the health care sector.

As can be expected from the vast majority of Fidelity funds, the FHLC is a top performer on the market with a relatively low expense ratio.


5. iShares Nasdaq Biotechnology ETF (IBB)

  • Expense Ratio: 0.46%
  • One-Year Return: 38.14%
  • Five-Year Annualized Return: 13.38%
  • Dividend Yield: 0.19%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: Amgen (AMGN), Gilead Sciences (GILD), Illumina (ILMN), Moderna (MRNA), Vertex Pharmaceuticals (VRTX)
  • Years Up Since Inception: 15
  • Years Down Since Inception: 4

iShares has become yet another leading fund manager on Wall Street, and the firm’s Nasdaq Biotechnology ETF is yet another strong option to consider if you’re looking for diversified exposure to the U.S. health care sector.

The fund was specifically designed to provide exposure to the biotechnology and pharmaceuticals subsectors of the health care industry. It does so by investing in biotechnology and pharmaceutical companies listed on the Nasdaq.

As an iShares fund, investors will enjoy market-leading returns through a diversified portfolio of investments selected by some of the most trusted professionals on Wall Street.

The IBB expense ratio is around the industry-average ETF expense ratio of 0.44%, according to The Wall Street Journal, but the fund’s expenses are justified by its outsize returns.


6. iShares U.S. Healthcare Providers ETF (IHF)

  • Expense Ratio: 0.42%
  • One-Year Return: 31.67%
  • Five-Year Annualized Return: 16.5%
  • Dividend Yield: 0.54%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: UnitedHealth Group (UNH), CVS Health (CVS), Anthem (ANTM), HCA Healthcare (HCA), Teladoc Health (TDOC)
  • Years Up Since Inception: 13
  • Years Down Since Inception: 1

The iShares U.S. Healthcare Providers ETF is designed to provide exposure to a different area of the health care industry.

Instead of investing in companies that create treatments and therapeutic options, the IHF fund invests in companies that provide health insurance, specialized care, and diagnostics services.

To do so, the ETF invests in an index designed to track large U.S. health care providers.

The fund comes with an expense ratio that’s slightly lower than the average for ETFs while providing performance that’s hard to ignore. While IHF isn’t the best dividend payer, the iShares U.S. Healthcare Providers ETF does provide compelling returns, making it a strong pick for any health care investor’s portfolio.


7. iShares U.S. Medical Devices ETF (IHI)

  • Expense Ratio: 0.42%
  • One-Year Return: 36.77%
  • Five-Year Annualized Return: 23.60%
  • Dividend Yield: 0.50%
  • Morningstar Rating: 5 out of 5 stars
  • Top Holdings Include: Abbott Laboratories (ABT), Thermo Fisher Scientific (TMO), Medtronic (MDT), Danaher (DHR), Stryker (SYK)
  • Years Up Since Inception: 12
  • Years Down Since Inception: 2

The iShares U.S. Medical Devices ETF gives investors access to a diversified portfolio of stocks in the medical device subsector.

Investments in the company center around products like glucose monitoring devices, robotics-assisted surgery technology, and devices that improve clinical outcomes for back surgery patients.

In order to provide this exposure, the iShares U.S. Medical Devices ETF tracks an index composed of domestic medical devices companies.

While the expense ratio on the fund is about average, its performance over the past 10 years has been anything but, with annualized returns throughout the period of more than 18%, earning it a perfect five-star rating from Morningstar.


8. iShares Global Healthcare ETF (IXJ)

  • Expense Ratio: 0.46%
  • One-Year Return: 19.93%
  • Five-Year Annualized Return: 11.51%
  • Dividend Yield: 1.27%
  • Morningstar Rating: 2 out of 5 stars
  • Top Holdings Include: Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Roche Holdings (ROG), Novartis (NOVN), Abbott Laboratories (ABT)
  • Years Up Since Inception: 12
  • Years Down Since Inception: 3

If you’re not interested in choosing subsectors of the health care industry to invest in and would rather have widespread exposure to all sectors of health care in all economies, whether developed or emerging, the iShares Global Healthcare ETF is a strong pick.

The ETF comes with an expense ratio that’s nearly in line with the industry average, but its holdings are some of the most diverse in the health care ETF space.

Moreover, the IXJ ETF is known to produce relatively reliable gains year after year, closing in the green in 12 of the past 15 years.


9. Invesco S&P 500 Equal Weight Health Care ETF (RYH)

  • Expense Ratio: 0.40%
  • One-Year Return: 27.93%
  • Five-Year Annualized Return: 13.81%
  • Dividend Yield: 0.51%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: Illumina (ILMN), Eli Lilly (LLY), Alexion Pharmaceuticals (ALXN), Abiomed (ABMD), Catalent (CTLT)
  • Years Up Since Inception: 11
  • Years Down Since Inception: 3

Founded in 1935, Invesco is a fund manager that’s been around the block more than a few times. It’s all but expected that the firm would make an appearance in just about any “top ETF” list.

Based on the S&P 500 Equal Weight Health Care Index, the ETF provides diversified exposure to all health care stocks listed on the S&P 500. That means when you purchase shares of RYH, you’ll be tapping into a wide range of health care stocks.

In fact, the S&P 500 represents more than 70% of the market cap of the entire U.S. stock market, which is why it’s often used as a benchmark. So, by tapping into every health care stock listed on the index, you’ll be tapping into some of the highest quality U.S. companies in the space.


10. SPDR S&P Biotech ETF (XBI)

  • Expense Ratio: 0.35%
  • One-Year Return: 66.31%
  • Five-Year Annualized Return: 22.56%
  • Dividend Yield: 0.2%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: Vir Biotechnology (VIR), Novavax (NVAX), Ligand Pharmaceuticals (LGND), Agios Pharmaceuticals (AGIO), BioCryst Pharmaceuticals (BCRX)
  • Years Up Since Inception: 11
  • Years Down Since Inception: 3

Another fund offered up by State Street Advisors, the SPDR S&P 500 Biotech ETF is an impressive option. While it’s the last on this list, it’s also been the top performer on this list over the past year and the third-best performer in terms of annualized returns.

The XBI ETF was designed to track the S&P Biotechnology Select Industry Index, an index designed to track the biotechnology subsector of the health care industry. As a result, an investment in this fund means you’ll be investing in all biotechnology companies listed on the S&P 500.

Not to mention, while returns on the XBIO have been impressive, to say the least, the expense ratio on the fund is below the industry average.

While the SPDR S&P Biotech ETF isn’t the biggest income earner on this list, it is a strong play with a relatively consistent history of producing gains far beyond those seen across the wider market.


Final Word

Health care ETFs are a great option for investors who are interested in using their investments to create some good in the world.

Not only are the top ETFs in this space known for producing incredible returns, it feels good knowing that your investment dollars are helping companies produce medications, devices, and services designed to improve quality of life and extend the length of the lives of your fellow man.

Although investing in health care ETFs is a promising way to go about building your wealth in the stock market, it’s important to remember not all ETFs are created equal. So, it’s best to do your research, looking into key stats surrounding historic performance and expenses before diving into any fund.

Nonetheless, the ETFs listed above are some of the strongest performers in the health care industry and make a great first watchlist for the newcomer to health care ETF investing.

Source: moneycrashers.com

The Dangers of Title Loans & Why You Should Avoid Them

A title loan is a form of short-term lending in which you give the title of your car as collateral in return for a loan. The lender gets authority to take your car as payment should you fail to pay the loan within the stipulated time.

The loan is payable as a lump sum, usually 30 days later or spread out in installments over a period of 3-6 months. A balloon payment is usually paid at the end of the loan term.

Title loans do not require a credit check or proof of income plus they can be processed super fast, you can literally walk in with your car title and walk out with cash. Sounds appealing right? Except they are not! If you are thinking of getting one, here are several reasons why you should steer clear of title loans.

You may Lose Your Car

Say No to Title LoansSay No to Title LoansThis is as plain as it sounds. When you put up your car as collateral for a loan, failure to repay gives the lender rights over your car. According to Consumer Financial Protection Bureau (CFPB), 1 out of 5 cars used for title loans end up being repossessed.

This means that you have a 20% risk of losing your car with a title loan. How many aspects of your life will be affected by this?

You Risk Increasing the Cost of Borrowing for up to 3 Times your Initial Loan

The (APR), Annual Percentage Rate of title loans averages at 300%. APR translates to the amount of money in percentage that your loan will cost you if it was outstanding for a year.

If you are unable to pay your loan by the end of the loan term, you can have your car repossessed or request to have a roll-over. A roll-over translates to extended payment period at an extra fee.

With more amounts to pay now, you may have to keep on rolling over your loan. If you do it for up to a year, the accumulated cost of your loan in interest and rates can add up to 300% which translates to 3 times what you borrowed.

It Puts you into a Cycle of Debts

A Car Title Lending report by CFPB states that only 12% of title loan debtors are able to pay without renewing their loans. If you end up in the 88%, this means that you will have to either keep renewing your loan or opt to re-borrow in order to keep your car and pay either part or all of the accumulating debt.

CFPB also did an analysis on 3.5 Million single payment title loans given to more than 400,000 borrowers between 2010 and 2013. The report showed that 1 out of 3 borrowers defaulted. Of the remaining ones, 1 out of 3 renewed their loans up to 7 or more times.

The same analysis showed that loans that were re-borrowed on the same day that previous ones were repaid accounted for 83%. If you find yourself in such situations, you will be in caught up in a cycle of debts that goes on and on.

You might still be in Debt if your Repossessed Car fetches Less!

If you thought losing your car is the worst that can happen; you’ve got another thing coming! Before you are given the loan, your car is valued. Failure to pay leads to repossession after which it is put up for sale. There are instances when the car is sold for less than its value.

This can happen if the market value of the car goes down or if the lender fails to find a buyer who can buy it at the original price. They sell it to the highest bidder and in some states; you are required to assume the balance. On the other hand, if the car fetches more, you may not get the surplus depending on the state that you come from.

The Take Away

While taking a title loan is a decision you get to make on your own or as a family, it is important to weigh the risks against the benefits of such a decision. There must be a very good reason why 25 states have banned title loans. Be informed and make the right decision.

Source: creditabsolute.com

Someone Took Out a Loan in Your Name. Now What?

Wise Bread Picks

Identity theft wears many different faces. From credit cards to student loans, thieves can open different forms of credit in your name and just like that, destroy your credit history and financial standing.

If this happens to you, getting the situation fixed can be difficult and time-consuming. But you can set things right.

If someone took out a loan in your name, it’s important to take action right away to prevent further damage to your credit. Follow these steps to protect yourself and get rid of the fraudulent accounts.

1. File a police report

The first thing you should do is file a police report with your local police department. You might be able to do this online. In many cases, you will be required to submit a police report documenting the theft in order for lenders to remove the fraudulent loans from your account. (See also: 9 Signs Your Identity Was Stolen)

2. Contact the lender

If someone took out a loan or opened a credit card in your name, contact the lender or credit card company directly to notify them of the fraudulent account and to have it removed from your credit report. For credit cards and even personal loans, the problem can usually be resolved quickly.

When it comes to student loans, identity theft can have huge consequences for the victim. Failure to pay a student loan can result in wage garnishment, a suspended license, or the government seizing your tax refund — so it’s critical that you cut any fraudulent activity off at the pass and get the loans discharged quickly.

In general, you’ll need to contact the lender who issued the student loan and provide them with a police report. The lender will also ask you to complete an identity theft report. While your application for discharge is under review, you aren’t held responsible for payments.

If you have private student loans, the process is similar. Each lender has their own process for handling student loan identity theft. However, you typically will be asked to submit a police report as proof, and the lender will do an investigation.

3. Notify the school, if necessary

If someone took out student loans in your name, contact the school the thief used to take out the loans. Call their financial aid or registrar’s office and explain that a student there took out loans under your name. They can flag the account in their system and prevent someone from taking out any more loans with your information. (See also: How to Protect Your Child From Identity Theft)

4. Dispute the errors with the credit bureaus

When you find evidence of fraudulent activity, you need to dispute the errors with each of the three credit reporting agencies: Experian, Equifax, and TransUnion. You should contact each one and submit evidence, such as your police report or a letter from the lender acknowledging the occurrence of identity theft. Once the credit reporting bureau has that information, they can remove the accounts from your credit history.

If your credit score took a hit due to thieves defaulting on your loans, getting them removed can help improve your score. It can take weeks or even months for your score to fully recover, but it will eventually be restored to its previous level. (See also: Don’t Panic: Do This If Your Identity Gets Stolen)

5. Place a fraud alert or freeze on your credit report

As soon as you find out you’re the victim of a fraudulent loan, place a fraud alert on your credit report with one of the three credit reporting agencies. You can do so online:

When you place a fraud alert on your account, potential creditors or lenders will receive a notification when they run your credit. The alert prompts them to take additional steps to verify your identity before issuing a loan or form of credit in your name. (See also: How to Get a Free Fraud Alert on Your Credit Report)

In some cases, it might be a good idea to freeze your credit. With a credit freeze, creditors cannot view your credit report or issue you new credit unless you remove the freeze.

6. Check your credit report regularly

Finally, check your credit report regularly to ensure no new accounts are opened in your name. You can request a free report from each of the three credit reporting agencies once a year at AnnualCreditReport.com. You can stagger the reports so you take out one every four months, helping you keep a close eye on account activity throughout the year. (See also: How to Read a Credit Report)

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Someone Took Out a Loan in Your Name. Now What?

Source: wisebread.com

How to Maintain a Good Credit Score in College

College life brings a host of new and exciting experiences in the various aspects of your life. Financial independence and responsibility also come to play. While your achievements are important in putting you in your right career path, a good credit score is paramount in bettering the deals you will get when renting or buying a home, purchasing a car, getting a cellphone plan, applying for a student loan or in some instances, getting employment.

This calls on your effort to not only build but also maintain a good credit. It may sound complicated and intimidating especially when you don’t know how to go about it. Below, is all you need to know on how to maintain a good credit score in college.

Good Credit in CollegeGood Credit in College

Taking Advantage of your Parent’s Good Credit

This is commonly referred to as ‘piggybacking’. It allows people with bad or no credit to enjoy a spillover of other people’s good credit. It is a great way of establishing and maintaining your credit especially if you need a little help in managing your budget. For you to qualify for this, you have to become an authorized user of your parents’ accounts.

This comes in handy especially if you can’t get your own credit card; according to Oct 1st 2013 Credit Act report, students and other persons below 21 years of age cannot get their own credit cards without proof of income or at least a co-signer. Apart from the credit boost you get from your parent’s account, your credit card use is forwarded to credit bureaus in your name.

Get the Most Suitable Credit Card

Your ability to qualify for a credit card opens you to the opportunity to choose from a variety of cards. You should research and shop around to find out what these cards have to offer before making your choice. Some of the benefits to look out for include low interest rate, no annual fees, convenient credit limits and other competitive incentives.

Better still, you can opt for student credit cards. These come with incentives such as cashback rewards, limited credit history requirement, no annual fees and 0% introductory APR among other benefits. Your own credit card comes with sole responsibility. This means that it’s up to you to stay on top of your billing statements so as to improve and maintain a good credit

Always Pay your Credit Balance

Your payment history accounts for 35% of your credit. Good credit of course depends on timely and full payment of your balance. Inability to pay or late payment may attract additional interest, accrue more debt and negatively affect your credit.

This can take a long time to repair. Besides this, it is also a sign that you are living beyond your means. Ideally, your credit balance should be about 30% of your credit limit or below.

Tip: The higher your credit balance in relation to your limit is, the worse your credit becomes.

Pay your Bills on Time

Late or failed payment of rent, utility bills, parking tickets, library or school fees and other payments can harm your credit; especially is if they are sent to collection agencies and reported to credit bureaus. Ways of beating this include setting up payment reminders and electronic billing. You can also organize for auto payments with your bank to ensure that timely payments are done.

If you live in an apartment, you might get credit for full and timely payments. You can take advantage of eRentPayment which transfers your payment reports to the three major credit bureaus; Experian, Equifax and TransUnion. This consequently improves your credit. However, your landlord needs to be registered and the lease needs to be in your name.

Limit Applications and Inquiries for New accounts

Numerous credit inquiries negatively impact your credit score. In the event that you need to make new credit applications that warrant hard inquiries, concentrate them into period of 14 days in which they will factor as one inquiry.

Once you decide to get a credit account, get all the facts right to avoid the urge to close and open others every now and then. Short credit histories with several new accounts are seen as riskier compared to a few accounts with long credit histories. When you close a credit card, you not only lower your available credit but also shorten your credit history both of which can reduce your score.

In a Nut Shell

Maintaining a good credit score in college is important if you are going to get any good deals in personal credit in the future. This requires vigilance on your part to ensure that you do not do anything that can have negative impact on it. When all is said and done, it all comes down to personal financial responsibility.

Source: creditabsolute.com

Is it Wise to Use Personal Credit for Business Finances?

Whether you want to start a business or to finance one that is already functioning, you may find your financing options reduced to taking a loan. In such a case, you have the option of taking either a personal or a business loan.

Given the unpredictable nature of businesses, it may not be wise to mix your personal and business finances. This advice notwithstanding, there are some circumstances in which using personal credit for business finances makes sense.

When to use personal credit for business finance

Starting a BusinessStarting a BusinessWhen your personal credit is more attractive

Credit score is among the main factors that determine the amount and rate of a loan. If your venture hasn’t established a good credit, a business loan may not be advisable.

Such a loan will probably be denied or approved under restrictive terms and high rates. On the other hand, you can still access finances by going for a personal loan if your credit score is more attractive.

When you are setting up

Lenders will require proof of the revenue generated by the business to determine its capability in repaying the loan. This requirement puts you at a disadvantage when you’re setting up. Without any experience or books to show, a personal loan maybe the only way to go.

When you have no collateral

Business loans are mostly offered as secured loans. This means that collateral is required before approval. When starting a business you probably have no asset that can be tied to the loan or may not want to risk other existing assets due to the risk associated with businesses.  In such a scenario, a personal loan will do since it requires no collateral.

When the loan is within personal credit limit

Business loans attract higher interest rates than personal credit. However, personal credit comes with a lower limit compared to that of a business. The question you should ask yourself is; how much do you need and what will it cost you?

When the amount you need can be covered by personal credit, then go for it. You will avoid paying heftier interest that could run into thousands of dollar if you were to take a business loan.

When you don’t have a business plan

Another requirement for a business loan is an elaborate business plan. That’s easier said than done. The passion and hard work that you are ready to put into your venture cannot be captured on paper. What lenders want to see is an actionable plan that shows how capital will be utilized and the expected returns; to the last dollar!

In addition to this, lenders set stringent measures on how a business loan is to be utilized. Instead of allowing these requirements and terms to curtail your venture, you can tap into your personal credit as you get a feel of the business environment.

That said,

Personal credit might be cheaper and a good alternative to a business loan, but there are a few things to consider;

The major drive of setting up of a business is to generate profit. You inject part of the returns back into the business, and with time it grows into greater heights. If successful; what started out as a small business will one day grow into a huge venture.

To achieve that major boost, you may find yourself in need of a sizable amount. When self-funding can’t cover this, you may have to turn to lenders for a business loan.

Lenders will be more willing to finance your business if they have taken part in its growth. The point here is that, your bank needs to recognize your business as separate entity.

This kind of recognition is only possible if you take and manage business loans with them. Not only will this push your loan applications to the top of the pile, but you will get financial advice from the bank.

Final Take

Using personal credit for business finances is wise if it makes business sense to your specific venture. If it comes down to letting your business go under or abandoning your dream business for lack of financing, you have a winner. However, you should also be aware that personal credit does not elevate your business credit, something which may come in handy for future financial needs.

Source: creditabsolute.com

What are derogatory marks and how can you fix them?

Derogatory Marks Header Image

Having a few items on your credit report dragging down your score can be incredibly frustrating, especially if you have a good financial record.

A derogatory mark is a negative item on your credit report that can be fixed by removing it or building positive credit activity. Because derogatory marks can stay on your credit report typically for seven to ten years, it’s important to know how to fix them.

Derogatory marks can affect your credit score, your ability to be approved for credit and the interest rates a lender offers you. Some derogatory marks are due to poor credit activity, such as a late payment. Or it could be an error that shouldn’t be on your report at all.

Types of negative items include late payments (30, 60, and 90 days), charge-offs, collections, foreclosures, repossessions, judgments, liens, and bankruptcies. We’ll cover what each one of these means, and how they can impact your credit reports.

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How do derogatory marks impact my credit score?

The amount that derogatory marks lower your credit score depends on the mark’s severity and how high your credit score was before the mark. For instance, bankruptcy has a greater impact on your credit score than a missed payment or debt settlement. And, unfortunately, having a derogatory mark impacts a high credit score more than it does a low credit score.

According to CreditCards.com and CNNMoney, even a single negative on your credit could cost you over 100 points. Negative items on your credit could cost you thousands of dollars in higher interest rates, or you could be denied altogether.

negative item score decrease stats

How long a derogatory mark stays on your credit report depends on the type of mark.

How long do derogatory marks stay on my credit report?

Derogatory marks usually stay on your credit report for around seven to ten years, depending on the type. After that period passes, the mark will roll off your report and you should start seeing a change in your credit score.

Here’s how long each derogatory mark stays on your credit report:

Type of derogatory mark What is it? How long does this stay on a credit report?
Late payment Late payments are payments made 30 days or more after the payment due date. Typically, this can remain on your report for seven years from the date you made a late payment.
An account in collections or a charge-off Creditors send your account to collections or charge them off if there’s been no payment for 180 days. Typically, this can remain on your report for seven years from the date you made a late payment.
Tax lien A tax lien is when the government claims you’ve neglected or failed to pay taxes on your property or financial assets. Unpaid tax lien: Can remain on your report indefinitely.

Paid tax lien: Can remain on your report seven years from the date the lien was filed.

Civil judgment Civil judgments are a debt you owe through the court, such as if your landlord sued you over missed rent payments. Unpaid civil judgment: Can remain on your report for seven years from when the judgment was filed, but can be renewed if left unpaid.

Paid civil judgment: Can remain on your report for seven years from when the judgment was filed.

Debt settlement Debt settlement is when you and your creditor agree that you will pay less than the full amount owed. A typical time period is seven years, starting from when the debt was settled or the date of the first delinquent payment if there were missed payments.
Foreclosure Foreclosure is when you fail to pay your mortgage and you forfeit the right to the property. Typically, seven years from the foreclosure filing date.
Bankruptcy Bankruptcy is a court proceeding to discharge your debt and sell your assets. Can remain on your report for seven years for Chapter 13 bankruptcy. Chapter 7 bankruptcy can remain on your report for 10 years.
Repossession A repossession is when your assets are seized, such as a vehicle that was used as collateral. Can remain on your report for seven years from the first date of the missed payment.

Types of derogatory marks

Late payments

Late payments occur when you’ve been 30, 60, or 90 days late paying an account. Although you don’t want late payments on your credit reports, an occasional 30 or 60-day late payment isn’t too severe. But you don’t want frequent late payments and you don’t want late payments on every single account. One recent late payment on a single account can lower a score by 15 to 40 points, and missing one payment cycle for all accounts in the same month can cause a score to tank by 150 points or more.

Payments 90 days late or more start to factor more heavily into your credit score, and consecutive late payments are even more harmful to your score, as each subsequent late payment is weighted more heavily. Sometimes, creditors will report payments as late as 120 days, which can be almost as severe as charge-offs and collections. Late payments can be reported to the credit bureaus once you have been more than 30 days late on an account and these late payments can stay on your credit reports for up to seven years.

Charge offs

A charge off is when a creditor writes off your unpaid debt. Typically, this occurs when you have been 180 days late on an account. Charge offs have a severely negative impact on your credit, and like most other negative items can stay on your credit reports for seven years. When an account is charged off, your creditor can sell it to collection agencies, which is even worse news for your credit.

Creditors see a charge off as a glaring indication that you have not been responsible with your finances in the past and cannot be counted on to fulfill your financial obligations in the future. When creditors see a charge off on your credit reports, they are more likely to deny any new applications for loans or lines of credit because they see you as a financial risk. If you do qualify, this can mean higher interest rates. Current creditors can respond by raising your interest rates on your existing balances.

Tax liens

In most cases, liens are the result of unpaid taxes – whether it’s at the state or the federal level. For a federal tax lien, the IRS can place a lien against your property to cover the cost of unpaid taxes. Tax liens can make it difficult to get approved for new lines of credit or loans because the government has claimed to your property. What this means is that if you default on any other accounts, your creditors have to stand in line behind the IRS to collect.

Unpaid liens can stay indefinitely on your credit reports. Once they have been paid, however, they can stay on your reports for up to seven years. Like judgments though, the credit bureaus are strictly regulated on how they can report liens because they are also public records.

Civil judgments

Judgments are public records that are also referred to as civil claims. A judgment can be taken out against a debtor for an unpaid balance. A creditor or collection agency can file a suit in court. If the court rules in favor of the creditor, a judgment is taken out against the debtor and put on their credit reports. This, like many other negative items, has a severely negative impact, and like most other negative items can be reported for seven years.

Judgments are also another indication that a person won’t pay their debts. Lawsuits are time-consuming and costly, so they are something that creditors potentially want to avoid. When a judgment is filed though, it can impact more than credit. The judge may allow the creditor to garnish a debtor’s wages, which can heavily impact finances.

Collections

Collections are the most common types of accounts on credit reports. About one-third of Americans with credit reports have at least one collection account. Over half of these accounts are due to medical bills, but other accounts like unpaid credit cards and loans, utilities, and parking tickets can be sold to collections.

Collections arise from debts that are sold to third parties by the original creditor if a bill goes unpaid for too long. They have a severe negative impact on your credit and can stay on your reports for up to seven years. When potential creditors see collections on your credit reports, it can raise flags and cause them to think that you won’t pay your debts.

Foreclosures

A foreclosure is a legal proceeding that is initiated by a mortgage lender when a homeowner has been unable to make payments. Usually, a lender will file a foreclosure when a homeowner has been three months late or more on mortgage payments.

When a lender decides to foreclose, they begin by filing a Notice of Default with the County Recorder’s Office, which begins the legal proceedings. If a foreclosure goes through and a homeowner can’t catch up on payments, then they are evicted from their home, and the foreclosure is reported to the credit bureaus.

Bankruptcies

Bankruptcy is extremely damaging to credit. Individuals who file for bankruptcy are those who have too much debt, and not enough money to pay it. They likely have had overdue accounts for a long period of time and in some cases loss of income that prevents them from being able to pay any of their bills. Bankruptcies can also arise from huge medical debt.

Whether or not file for bankruptcy is a difficult decision, and doing so can impact your credit from seven to ten years, depending on the type of bankruptcy you file. When a bankruptcy is filed, debts are discharged and the individuals filing are released from most of their previously incurred debts (there are some exceptions). This option can give people a “clean slate” from debt, but creditors don’t like to see it on credit reports because it can imply that an individual won’t pay their debts.

Repossessions

A repossession is a loss of property on a secured loan. Secured loans are where you have collateral, like a car or a house, and the loss occurs when the lender takes back the property because of the inability to pay. Usually, when this occurs, the lender will auction off the collateral to make up for the remaining balance, although it doesn’t usually cover the remaining balance.

When there is a remaining balance, the creditor may choose to sell it off to collections. A repossession has a severe negative impact on credit because it shows a debtor’s inability to pay back a loan. Usually, a repossession follows a long line of late payments and can knock a lot of points off a credit score.

How can I improve my credit score with derogatory marks on my credit report?

If you have derogatory marks, you can improve your credit score by working to rebuild your credit. By boosting your credit score, you’re more likely to get approved for loans and credit cards.

Here’s how to improve your credit score based on the type of derogatory mark:

Derogatory mark What to do to improve your credit score
Late payments Pay off the full debt as soon as possible. If there are late fees, ask the creditor to drop the fee (they often do if it’s your first time being late).
Stay on top of your payments with other lenders to show that you’re responsible, reducing the impact of a late payment.
An account in collections or a charge-off Pay off the debt or negotiate a settlement where you pay less than the full amount owed. Making a payment doesn’t remove the negative mark from your report, but prevents you from being sued over the debt.
Tax lien Pay the taxes you owe in full as soon as possible. Continue to make timely payments with any creditors and lenders.
Civil judgment Pay off the judgment amount, ideally before it gets to court. Make other payments on time to limit the impact of the civil judgment on your credit score.
Debt settlement Pay the full settled amount to prevent your account from going to collections or being charged off.
Foreclosure Keep other credit and loans open and make timely payments to build up positive credit activity.
Bankruptcy Rebuild your credit after bankruptcy with credit cards that cater to lower credit and credit builder loans. Make timely payments to reestablish that you’re a responsible borrower.
Repossessions Continue to pay other bills on time and pay off any further debt to the creditor.

You can also remove derogatory marks if they’re inaccurate or unfairly reported. By requesting your free credit report, you can look for mistakes and inaccuracies.

For example, check to see if a missed payment was inaccurately reported or if someone else’s account got mixed up with yours. You can remove these mistakes, giving your credit score a boost. 

How do I remove derogatory marks from my credit report?

You can remove derogatory marks from your credit report by disputing inaccuracies with the credit bureaus. Here’s how:

1. Request and review your credit report

TransUnion, Equifax and Experian provide one free credit report each year. Request your credit report and review it closely for errors.

Look through both “closed” and “open” derogatory marks. Check to see if your personal information is correct and if the creditor reported payments and dates appropriately. Take note of any discrepancies.

2. Dispute derogatory marks

If you notice incorrect items, payments or dates you need to file a dispute with that credit bureau (and any bureau that lists the item on your report).

You can file a dispute through the credit bureau or have a professional assist you. It’s best to make disputes as soon as you notice them, ideally within 30 days of the incident. The credit bureaus must respond to you within 30-45 days. 

3. Follow up on the dispute

You may have to provide more information or proof to refute something on your credit report. Be sure to respond to any inquiries by the specified time. Check your credit report afterward to make sure that the error is removed.

Removing a derogatory mark from your credit report helps to repair your credit. You’ll also want to improve your credit by doing things like lowering your credit utilization rate, upping the average age of your credit and making timely payments.

If you’re unable to remove a derogatory mark from your credit report, you’ll need to wait until it rolls off of your report, usually within seven to 10 years. In the meantime, work to rebuild your credit and improve your creditworthiness.

steps to remove derogatory marks from credit report

How can I get help with derogatory marks?

You can remove derogatory marks from your credit report by yourself. However, getting help from a credit repair company can make the process easier and improve your chances of getting the negative mark removed.

Many consumers appreciate professional help as it saves time, energy and resources. Contact us for a free credit report consultation. We’ll talk about your unique situation and the ways that we can help you.

Source: lexingtonlaw.com

What are derogatory marks and how can you fix them? – Lexington Law

Derogatory Marks Header Image

Having a few items on your credit report dragging down your score can be incredibly frustrating, especially if you have a good financial record.

A derogatory mark is a negative item on your credit report that can be fixed by removing it or building positive credit activity. Because derogatory marks can stay on your credit report typically for seven to ten years, it’s important to know how to fix them.

Derogatory marks can affect your credit score, your ability to be approved for credit and the interest rates a lender offers you. Some derogatory marks are due to poor credit activity, such as a late payment. Or it could be an error that shouldn’t be on your report at all.

Types of negative items include late payments (30, 60, and 90 days), charge-offs, collections, foreclosures, repossessions, judgments, liens, and bankruptcies. We’ll cover what each one of these means, and how they can impact your credit reports.

[embedded content]

How do derogatory marks impact my credit score?

The amount that derogatory marks lower your credit score depends on the mark’s severity and how high your credit score was before the mark. For instance, bankruptcy has a greater impact on your credit score than a missed payment or debt settlement. And, unfortunately, having a derogatory mark impacts a high credit score more than it does a low credit score.

According to CreditCards.com and CNNMoney, even a single negative on your credit could cost you over 100 points. Negative items on your credit could cost you thousands of dollars in higher interest rates, or you could be denied altogether.

negative item score decrease stats

How long a derogatory mark stays on your credit report depends on the type of mark.

How long do derogatory marks stay on my credit report?

Derogatory marks usually stay on your credit report for around seven to ten years, depending on the type. After that period passes, the mark will roll off your report and you should start seeing a change in your credit score.

Here’s how long each derogatory mark stays on your credit report:

Type of derogatory mark What is it? How long does this stay on a credit report?
Late payment Late payments are payments made 30 days or more after the payment due date. Typically, this can remain on your report for seven years from the date you made a late payment.
An account in collections or a charge-off Creditors send your account to collections or charge them off if there’s been no payment for 180 days. Typically, this can remain on your report for seven years from the date you made a late payment.
Tax lien A tax lien is when the government claims you’ve neglected or failed to pay taxes on your property or financial assets. Unpaid tax lien: Can remain on your report indefinitely.

Paid tax lien: Can remain on your report seven years from the date the lien was filed.

Civil judgment Civil judgments are a debt you owe through the court, such as if your landlord sued you over missed rent payments. Unpaid civil judgment: Can remain on your report for seven years from when the judgment was filed, but can be renewed if left unpaid.

Paid civil judgment: Can remain on your report for seven years from when the judgment was filed.

Debt settlement Debt settlement is when you and your creditor agree that you will pay less than the full amount owed. A typical time period is seven years, starting from when the debt was settled or the date of the first delinquent payment if there were missed payments.
Foreclosure Foreclosure is when you fail to pay your mortgage and you forfeit the right to the property. Typically, seven years from the foreclosure filing date.
Bankruptcy Bankruptcy is a court proceeding to discharge your debt and sell your assets. Can remain on your report for seven years for Chapter 13 bankruptcy. Chapter 7 bankruptcy can remain on your report for 10 years.
Repossession A repossession is when your assets are seized, such as a vehicle that was used as collateral. Can remain on your report for seven years from the first date of the missed payment.

Types of derogatory marks

Late payments

Late payments occur when you’ve been 30, 60, or 90 days late paying an account. Although you don’t want late payments on your credit reports, an occasional 30 or 60-day late payment isn’t too severe. But you don’t want frequent late payments and you don’t want late payments on every single account. One recent late payment on a single account can lower a score by 15 to 40 points, and missing one payment cycle for all accounts in the same month can cause a score to tank by 150 points or more.

Payments 90 days late or more start to factor more heavily into your credit score, and consecutive late payments are even more harmful to your score, as each subsequent late payment is weighted more heavily. Sometimes, creditors will report payments as late as 120 days, which can be almost as severe as charge-offs and collections. Late payments can be reported to the credit bureaus once you have been more than 30 days late on an account and these late payments can stay on your credit reports for up to seven years.

Charge offs

A charge off is when a creditor writes off your unpaid debt. Typically, this occurs when you have been 180 days late on an account. Charge offs have a severely negative impact on your credit, and like most other negative items can stay on your credit reports for seven years. When an account is charged off, your creditor can sell it to collection agencies, which is even worse news for your credit.

Creditors see a charge off as a glaring indication that you have not been responsible with your finances in the past and cannot be counted on to fulfill your financial obligations in the future. When creditors see a charge off on your credit reports, they are more likely to deny any new applications for loans or lines of credit because they see you as a financial risk. If you do qualify, this can mean higher interest rates. Current creditors can respond by raising your interest rates on your existing balances.

Tax liens

In most cases, liens are the result of unpaid taxes – whether it’s at the state or the federal level. For a federal tax lien, the IRS can place a lien against your property to cover the cost of unpaid taxes. Tax liens can make it difficult to get approved for new lines of credit or loans because the government has claimed to your property. What this means is that if you default on any other accounts, your creditors have to stand in line behind the IRS to collect.

Unpaid liens can stay indefinitely on your credit reports. Once they have been paid, however, they can stay on your reports for up to seven years. Like judgments though, the credit bureaus are strictly regulated on how they can report liens because they are also public records.

Civil judgments

Judgments are public records that are also referred to as civil claims. A judgment can be taken out against a debtor for an unpaid balance. A creditor or collection agency can file a suit in court. If the court rules in favor of the creditor, a judgment is taken out against the debtor and put on their credit reports. This, like many other negative items, has a severely negative impact, and like most other negative items can be reported for seven years.

Judgments are also another indication that a person won’t pay their debts. Lawsuits are time-consuming and costly, so they are something that creditors potentially want to avoid. When a judgment is filed though, it can impact more than credit. The judge may allow the creditor to garnish a debtor’s wages, which can heavily impact finances.

Collections

Collections are the most common types of accounts on credit reports. About one-third of Americans with credit reports have at least one collection account. Over half of these accounts are due to medical bills, but other accounts like unpaid credit cards and loans, utilities, and parking tickets can be sold to collections.

Collections arise from debts that are sold to third parties by the original creditor if a bill goes unpaid for too long. They have a severe negative impact on your credit and can stay on your reports for up to seven years. When potential creditors see collections on your credit reports, it can raise flags and cause them to think that you won’t pay your debts.

Foreclosures

A foreclosure is a legal proceeding that is initiated by a mortgage lender when a homeowner has been unable to make payments. Usually, a lender will file a foreclosure when a homeowner has been three months late or more on mortgage payments.

When a lender decides to foreclose, they begin by filing a Notice of Default with the County Recorder’s Office, which begins the legal proceedings. If a foreclosure goes through and a homeowner can’t catch up on payments, then they are evicted from their home, and the foreclosure is reported to the credit bureaus.

Bankruptcies

Bankruptcy is extremely damaging to credit. Individuals who file for bankruptcy are those who have too much debt, and not enough money to pay it. They likely have had overdue accounts for a long period of time and in some cases loss of income that prevents them from being able to pay any of their bills. Bankruptcies can also arise from huge medical debt.

Whether or not file for bankruptcy is a difficult decision, and doing so can impact your credit from seven to ten years, depending on the type of bankruptcy you file. When a bankruptcy is filed, debts are discharged and the individuals filing are released from most of their previously incurred debts (there are some exceptions). This option can give people a “clean slate” from debt, but creditors don’t like to see it on credit reports because it can imply that an individual won’t pay their debts.

Repossessions

A repossession is a loss of property on a secured loan. Secured loans are where you have collateral, like a car or a house, and the loss occurs when the lender takes back the property because of the inability to pay. Usually, when this occurs, the lender will auction off the collateral to make up for the remaining balance, although it doesn’t usually cover the remaining balance.

When there is a remaining balance, the creditor may choose to sell it off to collections. A repossession has a severe negative impact on credit because it shows a debtor’s inability to pay back a loan. Usually, a repossession follows a long line of late payments and can knock a lot of points off a credit score.

How can I improve my credit score with derogatory marks on my credit report?

If you have derogatory marks, you can improve your credit score by working to rebuild your credit. By boosting your credit score, you’re more likely to get approved for loans and credit cards.

Here’s how to improve your credit score based on the type of derogatory mark:

Derogatory mark What to do to improve your credit score
Late payments Pay off the full debt as soon as possible. If there are late fees, ask the creditor to drop the fee (they often do if it’s your first time being late).
Stay on top of your payments with other lenders to show that you’re responsible, reducing the impact of a late payment.
An account in collections or a charge-off Pay off the debt or negotiate a settlement where you pay less than the full amount owed. Making a payment doesn’t remove the negative mark from your report, but prevents you from being sued over the debt.
Tax lien Pay the taxes you owe in full as soon as possible. Continue to make timely payments with any creditors and lenders.
Civil judgment Pay off the judgment amount, ideally before it gets to court. Make other payments on time to limit the impact of the civil judgment on your credit score.
Debt settlement Pay the full settled amount to prevent your account from going to collections or being charged off.
Foreclosure Keep other credit and loans open and make timely payments to build up positive credit activity.
Bankruptcy Rebuild your credit after bankruptcy with credit cards that cater to lower credit and credit builder loans. Make timely payments to reestablish that you’re a responsible borrower.
Repossessions Continue to pay other bills on time and pay off any further debt to the creditor.

You can also remove derogatory marks if they’re inaccurate or unfairly reported. By requesting your free credit report, you can look for mistakes and inaccuracies.

For example, check to see if a missed payment was inaccurately reported or if someone else’s account got mixed up with yours. You can remove these mistakes, giving your credit score a boost. 

How do I remove derogatory marks from my credit report?

You can remove derogatory marks from your credit report by disputing inaccuracies with the credit bureaus. Here’s how:

1. Request and review your credit report

TransUnion, Equifax and Experian provide one free credit report each year. Request your credit report and review it closely for errors.

Look through both “closed” and “open” derogatory marks. Check to see if your personal information is correct and if the creditor reported payments and dates appropriately. Take note of any discrepancies.

2. Dispute derogatory marks

If you notice incorrect items, payments or dates you need to file a dispute with that credit bureau (and any bureau that lists the item on your report).

You can file a dispute through the credit bureau or have a professional assist you. It’s best to make disputes as soon as you notice them, ideally within 30 days of the incident. The credit bureaus must respond to you within 30-45 days. 

3. Follow up on the dispute

You may have to provide more information or proof to refute something on your credit report. Be sure to respond to any inquiries by the specified time. Check your credit report afterward to make sure that the error is removed.

Removing a derogatory mark from your credit report helps to repair your credit. You’ll also want to improve your credit by doing things like lowering your credit utilization rate, upping the average age of your credit and making timely payments.

If you’re unable to remove a derogatory mark from your credit report, you’ll need to wait until it rolls off of your report, usually within seven to 10 years. In the meantime, work to rebuild your credit and improve your creditworthiness.

steps to remove derogatory marks from credit report

How can I get help with derogatory marks?

You can remove derogatory marks from your credit report by yourself. However, getting help from a credit repair company can make the process easier and improve your chances of getting the negative mark removed.

Many consumers appreciate professional help as it saves time, energy and resources. Contact us for a free credit report consultation. We’ll talk about your unique situation and the ways that we can help you.

Source: lexingtonlaw.com