Category Archives: Speaking of Credit

Not giving in to unfair doctor bill? It’s going to cost you!

This post originally appeared March 9, 2017 on as “‘Refusing to pay bills on principle has consequences

By Barry Paperno

Dear Speaking of Credit,
I have four medical bills I tried disputing with the family practice they originated from. The doctor coded my visit in such a way that I disagreed with. I had moved to a new city and was simply establishing a relationship with a local practice in case I needed a doctor. He took my medical history and then billed the visit as if he diagnosed my illnesses. I was floored when I received the bills.

However, I didn’t get anywhere with the practice when I responded to their charges. They eventually went to collections because I refused to pay them. They are still showing active in collections, and my credit score took a serious hit because of them. What do you suggest I do to remedy this situation? I’m so frustrated! – Mary

Dear Mary,
I’d be frustrated, too! And while you haven’t shared the amount of these bills, this major misunderstanding is clearly going to cost you plenty – both in money and in your credit score.

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Debt buyer/collection agency doing right by consumers

This post originally appeared February 9, 2017 on as “‘Pay-for-delete’ debt settlement comes out of the shadows

By Barry Paperno

Heard of Encore Capital Group? Or maybe, like millions of consumers, you’ve seen the names of its subsidiaries, Midland Credit Management or Asset Management? They’re big players in the world of debt-buying, where some very big credit reporting and scoring changes affecting millions of consumers are in the works.Encore Capital Group, the huge (more than $1 billion in revenue annually) debt-buyer known to millions of debtors by its subsidiaries – Midland Credit Management, Midland Funding, Asset Management and Atlantic Credit & Finance – announced in January 2017 it has imposed a new credit reporting policy that has already affected more than 1 million of their debt-holders:

  • If more than two years have passed since the debt became delinquent, a collection account will be removed entirely from a consumer’s credit report once paid in full or settled for less than the total due.
  • For newer debts not yet appearing on credit reports, the debt will be kept off the credit report if payments begin within three months of the initial collection notice mailing, or as long as payments are made each calendar month until the account is paid in full or settled.

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Make your credit score excellent again!

This post originally appeared February 2, 2017 on as “Canceling new card won’t restore credit score

By Barry Paperno

Dear Speaking of Credit,
I have three credit cards with average age of 15 months. My credit score was excellent. I applied for a new credit card from at a store four days ago. I got the approval, but it has impacted my credit score negatively. Regardless of the hard inquiry, I want to cancel it to regain the age of my credit history and higher credit score. If I close it, will I regain my previous score? What’s your suggestion? – Hanna

Dear Hanna,
One of the great things about having an excellent credit score is that for the most part you can just continue to manage your credit as you’ve always done, often without even giving it much thought. Another great thing about an excellent score is that as long as payments continue being made on time and credit utilization (card balances/credit limits ratio) is kept as low as possible, the score can recover relatively quickly – typically within six months – from some of the lesser “offenses,” such as opening new accounts.

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Let excessive inquiries fade into the distance

This post originally appeared January 19, 2017 on as “Credit pulls hurt score, but only once

By Barry Paperno

Dear Speaking of Credit,
I recently went to a dealer, with a finance certificate in hand, to purchase a vehicle. I was advised that they needed my information for their records, but they would not pull my credit. They not only pulled my credit, but they did so seven times. I know my credit score and know that I am not eligible for standard financing at this time as I filed bankruptcy three years ago. This is why I went to the dealership with financing. I had been shopping around for the right car for about 16 days. They pulled my credit. What can I do? I have a 10-point decrease on my score as a result. – Natasha

Dear Natasha,
You were clearly right to prepare yourself with a finance certificate, knowing you wouldn’t be eligible for the better rates with a low post-bankruptcy credit score. The car dealership was clearly wrong to check your credit score after promising it wouldn’t.

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Left country for 6 months & forgot about card payments

This post originally appeared January 12, 2017 on as “Your 6-months-with-no-payment credit score comeback plan

By Barry Paperno

Dear Speaking of Credit,
I went to travel to India for six months. Forgot a credit card payment for that long and the communications sent to my home were not accessible. In spite of 30 years of an excellent score, it went down from 830 to 640. How can I revert to my good score? The credit card company responsible for lowering my score refused to correct it. What should I do now? – Rajagoapalan

Dear Rajagoapalan,
If it hasn’t happened yet, you’re about to learn from the school of hard knocks just how hard it can be for a credit score to recover following six months of late payments on a single account. As the strongest predictors of future credit risk, missed payments are the hardest mistakes for your score to overcome, particularly when compared to the damage from high card balances, new accounts, inquiries and other red flags to future trouble.

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7 quick ways to a better credit score

This post originally appeared January 5, 2017 on as “7 steps: Clean up your credit by spring

By Barry Paperno

New home or other major purchase coming up this spring? If so, the time to start shaping up your credit score is now. Unlike slimming down at the gym, a buffed score doesn’t have to cost anything or even require getting up from the sofa.

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With late payments, what you’ve done lately matters most

This post originally appeared December 29, 2016 on as “Late payments’ recency, frequency, severity dictate score damage

By Barry Paperno

Dear Speaking of Credit,
We have huge amounts of credit card debt, but yet to date we have never been late on a single one. It is getting harder and harder to make those payments. What if I quit paying one but continued to pay all the others on time? How does that affect credit scores? – Jim

Dear Jim,
I hope you’re not seeing this scenario – letting one card go unpaid while paying the others – as a true solution to your debt problem. Unless you can soon find a way to begin paying at least the minimum amount required on each card, I’m afraid you’re going to lose this battle.

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Credit score is more crystal ball than report card

This post originally appeared December 15, 2016 on as “How credit scores attempt to predict the future

By Barry Paperno

Dear Speaking of Credit,
Barry, not a question. A comment. I read your explanation as to why “hard pulls” lower your credit score. What I think I boiled it down to is this: it is based on statistical trending, not on me. Now, my score is 825, so I am not particularly worried, except that I do NOT dip in my likelihood of paying on time because of, say, a new loan for a (used) car. So I take exception to the assumption that I will perform like the statistical masses and start paying with lower consistency.

This feeling is further exacerbated because they know enough intimate detail about my history to be 99.9 percent certain that there will be no fluctuation, since there never is. So, in the end I take exception to the practice as unnecessary on such a broad scale and with so much INDIVIDUAL historical information available. – Christopher

Dear Christopher,
Considering the abundance of historical credit information on file at the credit bureaus, I agree that your 825 credit score – out of a maximum of 850 – should leave no doubt that over the years you have managed your credit exceptionally.

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Need a quick 10 points to close on new house

This post originally appeared June 2, 2016 on as “Just 10 credit score points shy of a mortgage

By Barry Paperno

Dear Speaking of Credit,
Hi. I’m 10 points away from closing on my new house. I have an old unpaid card that I can pay in full, but they refuse to remove it from my credit reports. If I still pay it off will it help or hurt me? – Melissa

Dear Melissa,
It looks like you’ve made a nice attempt at a “pay for delete,” whereby you offered to pay that old unpaid debt in exchange for the creditor or collection agency removing it from your credit reports. Yet, despite your likely frustration at their refusal, the card company or collection agency may have actually done you a favor by rejecting your request.

You’re probably thinking common sense would dictate that paying off an old unpaid debt couldn’t help but raise your score by at least a little, maybe enough for you to get those last 10 points and qualify for a mortgage. But credit scoring doesn’t rely on common sense. Sometimes paying off an old debt can help your score, however, there are no guarantees that doing so, or even getting the account removed entirely from your credit report, will provide you with those 10 points needed to close.

I’ll explain why this is so and suggest a couple of alternate ways to increase your chances of getting those 10 points as quickly as possible.

Account balances, credit limits, payments and any other dollar amounts on a credit report are only considered by the score when reported to the credit bureau within a recent timeframe. Otherwise, once the creditor or collection agency has stopped the monthly reporting of an account after a number of years – the most likely scenario with your old unpaid debt – that information is then ignored by the score for any credit utilization (balance/limit ratio) or other calculations that consider how much you owe.

For this reason, the amount of that unpaid debt may no longer be causing any damage to your score, only the fact that it has not been paid as agreed. And if that’s the case, then paying it off won’t earn you any additional points, though retiring that balance could prevent a future collection if the debt hasn’t already been assigned to a collection agency. It couls also prevent a court judgment if a lawsuit is brought against you for payment.

Where older derogatory accounts like this one affect your score most is by way of the Payment History scoring category that makes up 35 percent of your score. Here, the score looks at past due accounts in three major ways (in order of importance):

  • Recency: How long has it been since the most recent delinquency?
  • Severity: How many months past due did the account fall behind?
  • Frequency: How many accounts on the credit report show late payments?

Recency, the length of time since your most recent delinquency on any account, is the best indicator of how well your score is recovering. And despite knowing nothing else about your credit, the fact that it’s an old debt tells us that it is not likely to be having nearly as much of an adverse effect on your score these days as it used to.

Further, if your credit report includes any additional, more recent problems in your accounts, that old unpaid debt takes on even less importance to the point that a payoff or deletion isn’t likely to provide much, if any, help at all.

Now that we know what won’t help your score, what will?

If you carry substantial balances on any of your credit cards, you could gain those 10 points relatively quickly by taking the funds you might have otherwise applied to that old unpaid debt and instead paying your credit card – not loan – balances down. Reducing credit utilization on your credit cards will have a big, positive impact on your score.

If available, have your mortgage broker or lender submit documentation of those reduced card balances via the the “rapid rescore” process, a service available to mortgage applicants in which account information is updated on your credit report and included in your score within a few days rather than the usual 30 days or more.

But what if the balances have already been paid down?

Regardless of how good or bad your credit score may be, some points can be earned simply thanks to the passage of time. This is where the length of credit history scoring category that makes up 15 percent of your score comes into play. An important scoring calculation within this category is the average age of accounts (total number of months since the open date for each account divided by the number of accounts), where the longer the average age, the more points for your score.

Since longer-held accounts tend to raise the average age, and newly opened ones can lower it, you’ll want to avoid opening any new cards or loans for the time being. By maximizing your average age and other length of credit history measurements along with paying down any card debt, you’ll stand the best chance of gaining those 10 points (or more) in time to close on that new house.

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Good news for New Yorkers with paid collections

This post originally appeared May 12, 2016 on as “Some states offer exceptions to credit reporting rules

By Barry Paperno

Dear Speaking of Credit,
Is New York the only state that keeps negative items on your credit file for seven years? Is there any current legislation pending to change this? Second question: I filed for Chapter 7 bankruptcy about eight years ago, but before it went through I changed my mind and didn’t actually go through with it.

I received papers from the court stating “bankruptcy dismissed.” This shows up on my credit reports as “bankruptcy dismissed,” which frankly is just as bad as going through the bankruptcy in the first place. I’ve been trying for the past eight years to have this item removed, and finally only one bureau took it off my profile. If I didn’t actually go through with it and continued to pay my creditors, why is it so difficult to have this item removed. It’s like false advertisement on my credit! I’m innocent! – Marie

Dear Marie,
No, New York isn’t the only state that keeps (most) negative items on your credit file for seven years. The overriding set of rules that establish how long negative credit bureau information can remain on your credit file comes from a federal law applying to all states, which regulates credit reporting across the U.S.: The Fair Credit Reporting Act (FCRA), enacted in 1970, and later amended by the Fair and Accurate Credit and Transactions Act (FACTA) in 2003.

While the FCRA limits on credit reporting cannot be exceeded, some states have passed laws putting tighter restrictions on the length of time credit bureaus can continue to report certain types of information. For example:

  • New York law requires that paid (satisfied) civil judgments be removed from credit reports within five years of the filing date – the FCRA allows them to be reported for up to seven years.
  • New York law also requires that paid collections be removed within five years of the date paid – again, the FCRA specifies a maximum of seven years.
  • California law puts a limit on the reporting of paid (released) tax liens at seven years from the date paid and 10 years from the filing date, paid or unpaid. The FCRA does not restrict the length of time unpaid tax liens can be reported and, for paid liens, allows seven years from the date paid.

To your question about any pending credit reporting-related legislation, there could be good news for New Yorkers with credit reports showing medical debt that’s either been paid or is being paid through insurance. A March 2015 settlement between the New York Attorney General and the big three US credit bureaus – Equifax, Experian and TransUnion – provides for some major credit reporting changes, such as:

  • 180-day waiting period before reporting medical debt. To allow time for insurance and other means of payment to run their course, a medical debt must be past-due for a full 180 days before it can appear on a credit report.
  • Removal of medical debt from credit reports. Credit reports can no longer show medical debt that’s been paid in full or is being paid by insurance.
  • Credit reports can only include debt resulting from a contract or agreement to pay. No longer will collection agencies and debt buyers be able to report debts resulting from traffic tickets, library fees, government fines or any other debt not previously agreed to.

Addressing your dismissed bankruptcy, you might rightfully think that when a bankruptcy is dismissed and the debts are not eliminated it’s a case of no harm, no foul. Yet regardless of any changes in the status or outcome following a public record filing, it is extremely difficult to have that public record item – bankruptcy, tax lien, judgment – removed from your credit report, as long as it belongs to you and the filing date falls within its legal expiration date. A couple of reasons for this stubbornness by the credit bureaus include:

  • Creditors who rely on the use of credit reports in their credit decision-making processes consider this kind of information valuable.
  • Research conducted by credit scoring companies, such as FICO, has found this kind of data to be highly predictive of how a consumer is likely to pay future debts.

And speaking of credit scores, your comment that having dismissed the bankruptcy is “just as bad as going through the bankruptcy in the first place” is not only accurate, but for your score, it’s often worse. Here’s why:

Discharged bankruptcy. For credit accounts with balances discharged, essentially eliminated, through bankruptcy, the consumer’s credit report shows a balance of $0 for those accounts. As a result, those debts are no longer included in the credit utilization (balance/limit ratio) and other debt-measuring scoring calculations that had been hurting the score before the discharge – a plus for the score.

Dismissed bankruptcy. Following dismissal of the bankruptcy, where the debt continues to be owed, these amounts continue to be considered by the score to its detriment. Additionally, any of these debts not already assigned to a collection agency or the subject of legal action can be fair game for such consequences that can increase the debt and lower the score even further.

There could be a light at the end of this tunnel, however, and you may be closer to seeing it than you might think. Since most negative information is removed after seven years and it’s been eight years since the bankruptcy filing, much of the negative credit history leading up to it is likely to have already fallen off your credit reports by now. The bankruptcy-dismissed notice will appear for only a few more years, and because of its age has already lost some of its sting. If you’ve established some positive credit in recent years, your credit score could already be on the upswing.