Charge offs are some of the most damaging items on a credit report. They are applied when a creditor gives up on a debt; after 180 days of delinquency and will usually remain on a credit score sheet for up to seven years. Such an item can disqualify the borrower from getting funding. This can badly crimp the probable spending pattern of the affected person who will be literally forced to pay cash for a huge expenditure. Moreover, the charge offs will also negatively affect the rate of interest charged by the lending organizations that are willing to offer the debtor a second chance.
If you fail to repair your credit charge-offs, by law they will remain on your credit report for not less than seven years. Even if you pay a charge-off it shall still remain on your report. However, once you have paid a charge off it will be much simpler to have it deleted from your report than unpaid charge off. The simplest way to remove a paid charge off is by disputing it.
-Dispute Charge offs
Every consumer or borrower has a right to dispute any negative item indicated on his or her credit report. In fact, the Fair Credit Reporting Act clearly stipulates that one can dispute charge offs, collection accounts, repossessions, judgments, foreclosures, bankruptcies, etc. the point here is that borrowers can dispute any negative item on their credit reports. Therefore, dispute your charge off.
-How do you dispute negative items on your credit report?
The first step is to approach the credit bureaus. The most efficient and best way to do this is by writing to them. In your letter, you should clearly indicate/state your intentions. Ensure that all the credit reporting agencies get a copy of the letter. It is also advisable to attach a copy of the credit report with the particular negative item highlighted or circled.
What is good about this step is that all you have to do is wait. Once the charge off has been disputed, the credit reporting agencies have only 30 days to conduct an investigation on the charges. The agencies usually contact the creditors by sending them an electronic notice. In the notice they ask the creditor to agree or disagree with the dispute. If they fail to validate the dispute within the 30-day time frame it is automatically deleted from the credit score sheet.
-Follow up with credit reporting bureaus
It is very crucial to do a follow up with the bureau. Mostly, credit bureaus will not delete the negative item from your report. It is, therefore, recommendable to ensure you do a follow up via phone calls or any other available means. Once everything is in place you will start to realize improvement on your credit score.
If you are in debt and you find yourself in the middle of an ocean, then there is no need to panic. There are many debt relief options available for you and debt management plan is one of them. Unlike other debt relief options, the debt management program can improve your financial picture drastically.
However, debt management program is not appropriate for everyone. You should talk to a financial counselor and see if you are eligible for a debt management program and if it’s going to be beneficial for you or not. If you are thinking of getting into a debt management plan, these are some things you should know about.
You will have to meet eligibility criteria
Not everyone can join a debt management program. There are some criteria that you must meet. First of all, all your debt must be unsecured debts which include personal loan and credit cards. Mortgages, student loan, car loan, and other secured debts cannot be included in this program. Secondly, you should be able to pay the debt off for years; there is no way you can give up in the middle.
You will have lower monthly debt payments
Debt management program reduces your monthly debt payments by 30% to 50%. So, if you become eligible for a debt management program, all your unsecured debts which you are paying at 14%-15% interest per month will be consolidated into a lower interest rate of between 6% and 10%. This way your debt will be more manageable.
You can get rid of penalties
If you had been penalized for late payments or missed payments, a credit counselor can talk to the creditors to cancel the penalties on behalf of you if you are in a debt management program. So, the debt amount will be reduced. Also, the debt management program ensures that your missed payments become current within a very short time so that you can be regular from now on.
It will reduce your hassle
With one payment to make every month instead of multiple payments, your work will become much less complicated. You won’t have to deal with different interest rates and different due dates. You will just need to pay one payment at one particular date every month. You can also sign up for auto payment system every month so that you don’t miss any of your payments.
You can get out of debt quickly
Even though you pay less per month when you are in a debt management program, you will end up clearing your debt much quicker. The reason is that you pay a considerably lower interest rate compared to before. So, you pay off debts sooner than before. On average, people who are in the debt management program can become debt-free within 5 to 7 years. This will take only 36 to 60 payments to pay back all the money.
You can rebuild your credit history
By applying for a debt management plan gives you the opportunity to rebuild your credit history. When you are in a debt management program, you start to become regular with your payments; that is, you no longer miss your payments. Your debt amount slowly goes down and you become debt-free within a short time. So, this has a positive impact on your credit report. Your credit rating will no longer decline.
You won’t be able to use credit cards
Once you are on a debt management plan, you won’t be able to use your credit card any more until you pay off the entire amount. You won’t be able to apply for new cards as well. This can be tough for those people who depend on credit cards on a daily basis. So, you need to make sure that you have enough money to meet your daily expenses before you get enrolled in a debt management program. However, you may be able to just keep one card in case of emergency purposes.
Your credit report is affected
Though a debt management plan is not similar to bankruptcy, it may still have a negative effect on your credit report. When you are in a debt management program, you are paying less amount than you used to pay before every month. This has a negative effect on your credit score. As you are paying through a third party, some creditors perceive this as something negative. Many creditors won’t lend you any money unless you pay off the full amount.
Debt management program is a better alternative to bankruptcy. With this program, you will be able to get financial control over the debts. You should choose a credit counseling agency carefully. Not all agencies are capable of managing this program effectively. You should find out an agency that belongs to the National Foundation for Credit Counseling (NFCC).
The certified agencies will be organized and they will make sure that your payments are given on time. A debt management plan provides a simple way of getting rid of your debt. You will make a constant payment every month. You should learn about the debt management program before signing up for it. There may be issues that only an expert can explain to you. If you think you are having difficulty in paying the high amount of debt, then contact a good credit counselor today and get assessed to be enrolled in a debt management program.…