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Question About Disputing a Debt in Another State


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I originally posted this as one small question, but I figured I would post one post with all of my questions instead of cluttering up the board.

I have the opportunity to buy a nice home from a family member who was in a severe accident. She has been in the hospital for almost three months and she has several more months of physical therapy/rehab to go before she can even come home, so the good thing is that time is on my side. I do not have to worry about another buyer stealing the place away from me or anything. That means I have some time to work on improving my credit.

I talked with a mortgage broker and know what I need to do as far as saving for a down payment and getting all of my documentation together. The only issue is my credit score. They require a minimum middle score of 580. My best score is 630 and my middle score is 567. So, I am only 13 points away from the minimum, but obviously I would like to be higher to get a better rate. Most of the debts on my report are medical -- I was hospitalized several times when I had no insurance and then had a bunch of surgery. I got the hospitals to do payment plans, but the ancillary services (radiology, emergency services, etc.) went to collections.

I did a round of disputes about a year ago and successfully got rid of a few accounts on my TransUnion report. My Experian and Equifax reports stayed pretty much the same. However, I did not know about all the tactics on this site -- I was simply sending out disputes. I have a student loan in good standing and two open retail credit card accounts (I can't get a major credit card due to my credit), so those are positives in my favor.

I've spent about three hours reading the info on this site and have a plan in mind to improve my score. I'd love any feedback you might be able to provide.

1) Pay down the balances on my two cards (I'm using 17 percent of the limit on one card and 44 percent of the limit on the other -- I assume I should pay off the one with the higher utilization first?).

2) Send dispute letters to the three major bureaus. This is where I am confused. Are they supposed to list the date the debt was incurred or the date the debt went to collections? For some, I incurred the debt in 2006, but it was not reported until 2008. If they are supposed to list the date incurred, then should I dispute the dates?

Also, a few of the medical debts were incurred in another state with a different statute of limitations. I assume I have to follow that state's SOL -- is that correct? In my state, the debts are zombie debts. In the state where the debts were incurred, the SOL will be up at the end of this month.

One more question about disputes - I actually disagree that I owe one of the debts. It was an early termination fee from Verizon Wireless. I had a cell plan with them when I lived in NJ. When I got sick and no one at the NJ hospital could diagnose me properly, I had to move back home to PA to live with my parents while I recovered. I had no cell service there or in the two miles surrounding the house, so the phone was completely useless to me. I spoke with the Verizon tech team and the customer service team and I was told I could cancel without an ETF since I was unable to use the service I was paying for. I canceled and Verizon charged me the ETF anyway. Because I had just moved, I didn't get the paperwork, and it ended up going on my report. Should I explain this in a dispute letter, or would it do no good?

3) Work out pay to delete agreements. I am confused on one point here -- if I offer to pay to delete, do I have to pay the whole amount of the debt, or can I offer to settle AND ask them to delete the item from my report? Some of the debts are small ($100 to $200), but there is one for emergency services for $2,500 and there is one for ambulance service for $983. I could pay the smell debts, but the larger ones are impossible (or I would have paid them to begin with).

4) Settle small accounts. Does settling hurt your score? My average account age is 7.8 years and my total credit history is 13 years, if that makes a difference.

5) Repeat dispute letters as needed.

If I can get my score to a 640, the mortgage broker says things will be immensely easier at that point. I would love to accomplish that and am willing to do the work to do so.

Thanks for all of your input in advance.

Edited by lilacbouquet
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A couple things to keep in mind. First these sound like they could be FAKO scores. These are scores that attempt to mimic the FICO model to give you an idea of where you stand. They cannot be trusted.

Furthermore, if you do go to the FICO website and pay to see your FICO score you will have a better understanding of where you truly are. However, the generic FICO model is not the same as the Mortgage FICO model. The mortgage algorithm is your truest standing and is not available to a consumer that I know of. This is just some additional information to keep in mind.

It sounds like you have a borderline score (or so you think) you have a few collections on your accounts (which are unpaid and within seven years), and no major credit cards.

Banks want to be assured that when they fork over the money that no one is going to immediately slap a lien on their investment. I'd be surprised if they don't say something regarding those collection balances. They are obviously your biggest problem.

You do have a couple of store cards with a 17% and 44% utilization. The best bet is to pay off whichever gives you the most breathing room. 17% of $5,000 is more then 44% of $1000. You want to free up as much card space as possible, as it figures into your credit score. Percentages are not relevant.

CRAs usually report both dates. The date the account was opened (meaningless), the date the account was sent to collections (meaningless), and the date of first delinquency (important). The date of first delinquency is the date your account fell out of favor and was never brought back into a good standing. It is not concretely defined, but is recognized as anywhere from 30-90 days after your last payment on an account, or your date of invoice (if you never paid on it).

It is from this date that the 7.5 years of reporting is determined. This becomes more complicated because CRAs don't all have a line clearly defining "DoFD". Each one calls it something different. In your case you had a debt in 2006. If you never paid a dime on it then the clock would start 30-90 days after they invoiced you. The fact that they didn't report it until 2008 is not your concern. If they report it in 2008 and hold it on your report until 2015, that extends longer then the law allows. If you have a dunning letter (a letter indicating you owe them money) from 2006 you can use this to prove the debt existed previously to 2008, and should be reported accurately and removed in a timely manner. If you don't have the dunning letter this becomes more difficult to prove and a judge will likely need more then your "scouts honor" to satisfy his doubt.

SOL is a tricky game and there are a few exceptions, but for the most part the SOL must abide by the current residence of the debt holder (i.e., wherever you live now). Some states allow for the SOL to be changed to wherever the contracted agreement was signed, but only if the contract can be produced. Credit card companies often fail miserably at producing the signed contract agreement and just live with the "wherever the debtor is now" concept. No one is going to come for you in the 11th hour, so I would say by the end of the month the point is moot.

This Verizon thing...life is about what you can prove. If you don't have a written agreement from Verizon indicating what you have stated, you likely have nothing. I would try for a good will letter explaining it nicely. If you had a clean record previous to this event they may honor it. If not, they likely won't. If they deny your goodwill letter it never hurts to dispute anything.

I personally have had strong success with PFDs. You must absolutely make sure the debt is past the SOL, or the answer to your letter could be a lawsuit. You need to ensure you are targeting zombie debt. They can't sue you, they can't garnish you, in effect they can collect nothing. You are offering them profit where none currently exists. Other then the TL on your report, you hold every card. Remember that. For the little debts I would offer (in writing) full payment in return for a PFD agreement. Be sure to receive their response in writing, using any of the recommended letters on this website.

For debts between 1,000 and 5,000 I would start at 25% (some people start even lower, but I want the agreement to appear attractive to the other party). I would negotiate from there but would never exceed 50% of the debt (previous to any ridiculous fees, charges, or goofy overhead they add on as your account ages).

Settling old accounts can hurt your score. Debt collectors will tell you that by paying your debt your tradeline changes from "collection" to "paid" which in fact does increase your score (minimally). What is missed is that you have just reset your DoFD. By paying on an old debt you can cause it to stay on your account another 7 years. I would never, ever, ever pay a zombie debt in this manner without a signed PFD agreement. I noticed you reference your average age of accounts. Settling an account does not stop it from being reported. So your age wouldn't change. If by settling you mean closing a line of credit, never do that. Feel free not to use it, but never close it. This negatively affects your available credit and thus your FICO.

Good luck.

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