Here’s the second installment of answers to your questions from Consumer Credit Counseling Service of Greater Atlanta.
Because of the Martin Luther King Jr. holiday Monday, Part 3 will run on Tuesday.
Q: I have very good credit, but found an old medical bill written off in 2006 on my credit reports. Otherwise, there are no negatives or late payments on my reports. This one must have fallen through the cracks as it’s only for $52 and I have always had insurance. Honestly, don’t know how it wasn’t paid either by insurance or me, but it wasn’t. How long does this have to remain on my report? I can pay it but they still will not remove it, or so they told me. How do I handle this?
A: This is a tricky one, because the notation on your credit report is so old. If you contact the company that sent the bill, you will create a new Date of Last Activity, which means the old bill will suddenly show up as a current obligation on your credit report. If you leave things as they are, this debt will fall off your report in two years. Reawakening this account might also cost you interest on top of the $52.
Most lenders will only look at your payment history over the past two years to qualify you for credit. If you wish to clear this up anyway, ask the company that reported the $52 debt to show proof that you were obligated to pay the bill. If it can furnish proof, pay the bill and ask the company to remove the negative notation on your credit report. If it declines, write the three credit reporting agencies (Equifax, Experian and TransUnion) with the explanation of how this bill fell through the cracks.
The most important lesson from all this is you should pull your credit report at least once a year at www.annualcreditreport.com.
Q: I filed bankruptcy eight years ago and have been diligently working to rebuild my credit. I have six major credit cards, but all have very low credit limits. In total, my available credit is only $6,500.00. My credit score is 725. I purchased a home in 2008 and have had two car loans since my bankruptcy. All of my payments have been made on time and I always make large payments on credit cards, never utilizing more than 35% of my open credit line on each. I seem to have hit a dead end and can’t build credit any further. At this point I seem to only be able to wait out the next 22 months until my bankruptcy falls off my credit report. If there are other options, please let me know.
A: It’s true that the biggest improvement in your score will likely come after the next 22 months pass and your bankruptcy is no longer showing up on your credit report. In the meantime you might make more incremental improvements by reducing your overall use of credit cards to less than 30 percent. You also might see some improvement if you lower the overall use of credit cards to 15 percent, or if you pay some of the balances down to zero. If you pay down the balance on your car loan, that should also help. But if you are planning a big purchase like a home or a car, it would be best to hold on until October 2011, when the bankruptcy is off your record. The improvement in the interest rates available to you by then should be dramatic.
Q: Is there a difference in credit counseling services? With my work hours dwindling and my credit card debt high – but not in default – I’m thinking it is a good time to get some advice.
A: It’s good that you’ve recognized you could use some advice. Please call a nonprofit, certified credit counseling agency soon. To verify that a credit counselor is accredited, you can go to the Web site of the National Foundation for Credit Counseling at www.nfcc.org. As far as what makes counseling agencies different, CCCS of Greater Atlanta is one of the larger counseling agencies in the country and, as a result, has more counseling and educational resources to help consumers than most. CCCS can be reached at 1-800-251-2227 or go to the Web site at www.cccsinc.org to get started.
Q: The market and appraised value of our property in Michigan has declined by 50 percent since we left two years ago with a job transfer. We have been unable to sell or lease the house, and our mortgage company has declined two short sale offers in the last 90 days. We purchased the property with an 80/10/10 mortgage in 2004. The foreclosure process started last week because we simply cannot carry the monthly costs ($2,000+) to maintain such a depressed asset. Are we personally liable for the home equity line ($28,000) that was used for the down payment?
A: That is a shame you couldn’t get a short sale worked out. You don’t say whether or not you’ve been in touch with the holders of the subordinate mortgages. If you haven’t contacted them, you should and tell them what is happening. They may appeal to the holder of the primary mortgage to avoid starting foreclosure. But rather than go through this on your own, please consider contacting a HUD-certified nonprofit counseling agency to act as an intermediary. Go to the HUD Web site at http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm. Of course, CCCS is HUD-certified and you can schedule an appointment to speak with a housing counselor by calling 1-800-251-2227.
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