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Consumer Guide to Credit Reports Part 7

In this series, we’ve covered: what a credit report is used for, why it should be periodically reviewed, how to review it, how to deal with fraudulent transactions or accounts, how to calculate debt-to-credit ratios, the two types of credit inquires. Last up is how to handle credit delinquencies/collections and rebuilding credit after bankruptcy.

Delinquencies & Collections

Now that you’ve reviewed your credit report with a fine-toothed comb, let’s address any delinquencies or collections you may have. If they’ve been reported in error, take the necessary steps to have them removed if you have the necessary documentation. However the debt may exceed the applicable statute of limitations (called a time-barred debt).  In both cases, you should contest that debt even though it’s not actionable by the creditor or collector. It’s also wise to consult an attorney to help guide you through the process and settle the matter.

Credit reports also contain notations of past due accounts – 30, 60, 90, 120+ days when payments are late. A history of late payments have a dramatic and negative impact to your credit score; it can make up as much as 35% of your FICO score.

If you’re feeling overwhelmed by your debt and are unable to manage it, you may need to consider other options. The first option may be bankruptcy which can release your debt obligations.  Be advised that it will put on a serious blemish on your credit report for 10 years. Another debt relief option is to negotiate and settle debts directly with your credits. We’ve helped many clients restructure their unsecured obligations where they can regain their financial footing.

Rebuilding Your Credit Report

The best way to combat any damage to your credit rating is to begin making consistent payments. Some creditors will take that into account, where you demonstrate a concerted effort to remain current with your debts and  follow-through with your financial obligations. Another healthy financial habit is to review your credit report at least annually to see your progress.

When you are approved for new credit, be sure to calculate your debt-to-credit score and keep it in the 10% range.  Be aware of your spending as well as your dependence upon the use of credit. Credit is a tool when used wisely. Remember, slow and steady wins the race to financial stability and security.

What tactics have worked for you in rebuilding credit?

About Sean Hanley

Practicing law since 2007, Sean specializes in the ever-changing laws related to real estate, business and estate planning. Embracing technology with a focus on personalized service, he understands the challenges of living and thriving in Silicon Valley. Tapping into his education in economics and business administration, Sean also serves on the non-profit Willow Glen Business Association.

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