Advice if Settled Debt Not Updating on Credit Report
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We had a balance on a repossession that was not paid and we recently settled but it still shows a balance on our report...
Via a divorce, the co-signed loan of my new wife went into default by her husband, who retained the vehicle and was ordered by the court to sell and pay the diff. He didn't it was repossessed and the diff was never paid. Now, we settled with the credit union for 50% of the amount. The loan was "legally closed" it is still showing balance due by two of the three credit bureaus. The point was to close and raise credit score. We have not yet contacted the two bureaus we want changed. We want to understand what to ask for and how we can support our request. We don't know our way around but do know "they" will offer NO help. They just report what is given them. How do we close this out to our best advantage? Bob
Thanks for your question, Bob. Depending on how long ago your wife settled this debt, it is possible that the creditor has not yet updated its information on her credit reports to show that the account has been settled and should reflect a $0 balance. Most creditors report updated information to the bureaus once a month, so your wife should pull her credit reports around 45 to 60 days after the account was paid to verify that the account is reporting accurately. You and your wife can request free copies of your credit reports by visiting AnnualCreditReport.com.
If the information for the settled account is not updated on her credit report within 45 to 60 days of the date it was settled, you should consider contacting the creditor about the inaccurate reporting. The creditor should be willing to update the information voluntarily if you point out the error; if that fails, the credit bureaus should remove the inaccurate listing if you provide proof that the account was paid. See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information.
As for your wife’s credit score, there is no guarantee that paying off a single account will improve her credit rating. There are simply too many factors that go into calculating a credit score to make a broad statement as to the effect of paying off any single account. If your wife is concerned about increasing her credit rating, I suggest that she take more direct action to try to rebuild her credit. For example, she should try to pay off any derogatory items that legitimately belong to her which are appearing on her credit reports. While paying off these accounts will not make them fall of her report, it should improve her credit by reducing the amount of delinquent debt reporting to the bureaus and preventing the accounts from continuing to be reported as delinquent. Once she has dealt with any derogatory accounts, she should begin paying down any other accounts, to reduce her debt to available credit ratio. You can safely carry some debt, but carrying too much debt month to month demonstrates that you are financially strapped, and should not be extended more credit. Ideally, a consumer’s ratio of debt to available credit should not exceed 33%.
If you and your wife do not already have a long, positive credit history, you should begin to build one. You can start by opening a few small credit card accounts, making charges on them, and paying off most, if not all, of the balances each month. By doing this, you will show yourself to be a responsible user of credit, and your credit score should improve with each month you continue to show a positive payment history. If you find that you cannot obtain a traditional credit card because of past credit problems, a secured credit card, in which you deposit cash in an account as collateral for the credit line, can help build a positive credit history. Again, I cannot tell you how much or how quickly opening a new credit account will improve your credit rating, but building new positive trade lines is the key to improving your credit score over the long term.
To learn more about credit and strategies to improve your credit score, I encourage you to visit the Bills.com Credit Solutions and Resources page at http://www.bills.com/credit/.
I hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/
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Debt statistics
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Housing debt totaled $12.82 trillion and non-housing debt was $4.88 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
The amount of debt and debt in collections vary by state. For example, in Connecticut, 22% have any kind of debt in collections and the median debt in collections is $1427. Medical debt is common and 10% have that in collections. The median medical debt in collections is $490.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.
