How do paid collections affect my credit score?

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How do paid collections affect my credit score?

  • 00:00                                   Hey, what’s up guys? This is Nik Tsoukales with Key Credit Repair. So we’re gonna try something new today. We’re gonna use a white board. So I’ve been told that my handwriting is pretty God awful, so I apologize in advance. There will be text below in the comments with everything we’re talking about. I’m gonna have this transcribed as well, as well as every single credit tip we’re giving you, from now on will be transcribed so you can read it as well.
  • 00:22                                   So credit question of the day coming out of San Jose, California. Okay. We have, “How do paid collections affect my credit score?” It’s a really great question. Okay, so let’s think. Um, let’s think of really what makes up the credit score. Okay? The two biggest factors right now. Okay. We have 35% of the credit score, okay, we’re gonna put PH, we have pay history, okay?
  • 00:51                                   And then we have 30% of your credit score being balances, okay? So when you have a defaulted debt, really, you’re gonna have, this part of your credit score is gonna really take a, a, a beating. Okay? Um, and that’s 30% of what makes up your overall credit score. Okay? Keep in mind as well, is when you incur that collection, it’s a collection record. It’s part of your reporting for possibly seven years plus 180 days from the date of last activity. So that’s gonna affect the 35% of your credit score that’s based on payment history.
  • 01:27                                   Now, here’s the good thing with the paid off collection. If it just happened, and this part of your credit score just took a bath. Let’s say you were at 700 and quickly, you dropped to 600, you can remedy, um, probably half of this drop very quickly by simply paying off that debt. Okay? By paying off that collection. So if the collection just happened, it’s legitimate, pay It off. You’re getting back almost half of that drop. Okay?
  • 01:55                                   But obviously 35% of the score is uh, payment history. So you’re probably wondering what happens to that part of my credit score. So let’s say you went from a 700 to a 600 very quickly, okay? Typically within 60 days, that’s 600 is probably gonna lie somewhere in the 660 range. Okay? So you haven’t yet gotten back those other 40 points. Now here’s the good thing. You will get back those 40 points. How long will it take? That’s a different story. Okay? Typically we’re seeing people get back 80% of these points over the course of a year from the point they’ve paid off that debt. That’s the numbers that we’re seeing. Okay?
  • 02:33                                   Um, so that’s probably a big reason for credit repair as well. Um, probably 80% of our phone calls, or 80% of the phone calls that we’re getting right now, are people that have paid off collections, they’ve realized that this part of the game, the 30% of what makes up their FICO score, but they haven’t really reached this 35%. They haven’t had a chance to get back all those points. Um, and sometimes it’s been a year, two years, three years, five years, and the record is just sort of sitting around um, plaguing somebody.
  • 03:03                                   Now keep in mind the statutes of limitations for this stuff to drop off automatically is gonna be, seven years plus a 180 days from the date of last activity. Or if it’s unpaid, from the date it went into a charge off or collections status. Okay? Um, you don’t always have to wait for the statutes of limitations. You have the Fair Credit Reporting act and a whole boatload of laws, that are in place that protect the consumer for things like inaccurate credit reporting, unverifiable data, stuff that just shouldn’t appear there.
  • 03:32                                   So my suggestion is, whenever you pay off a collection, reach out to a licensed credit repair organization. Let them know you did the right thing, you paid off the debt quickly, but you’re not getting back that 35% of your credit score. A credit expert’s gonna be able to analyze the credit report, see how it’s reporting. If there’s any, there are any errors in the reporting, okay? And see if we can come up with a dispute process to get that record lifted off the credit report, expunged, and therefore grabbing the other 35% of what makes up your credit score. At least the majority of it. Okay?
  • 04:05                                   So again, how do paid collections affect the credit score? Initially, pretty dramatically. It’s pretty easy to see a 100 point drop. Once you’ve paid off that debt very quickly, you should see about 60% of those points come back, you know, 60, 90 days. The, uh, uh, the other points, the other 40 in this, in this scenario, could take a year, two years, three years. It really depends on how severe it was, how recent it was. So keep that in mind. And that’s really where you want to reach out to uh, a licensed credit repair uh, expert.
  • 04:38                                   Guys, this is Nik Tsoukales with key credit repair. Thanks for checking out our Credit Minute. If you have any questions regarding your credit, um, it doesn’t matter how hard the question could be, whether it’s about a foreclosure or bankruptcy, debt, how do deal with any credit scenario? Feel free to email to me at N-T-S-O-U-K-A-L-I-S-@ keycreditrepair.com. Or you could just email to support@keycreditrepair.com. I’ll get the question. I’d love to answer it, and send you a video uh, letting you know, um, you know, how you can tackle it.
  • 05:11                                   Thanks guys. Have a great day.

The post How do paid collections affect my credit score? appeared first on Credit Repair Services.



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