Don't Worry About Your Credit Score

One of the first things you’ll hear from a debt collector is how your debt will affect your credit rating.  Which is kinda stupid, because, if you’re in collections it’s already tanked your credit score.

As I’m sure you already know, your credit score is used by various financial institutions to evaluate your credit worthiness.  Lenders, banks and insurance companies are the primary users, but other agencies including potential employers may want to take a look at your credit history, too. 

Anywhere you try to purchase anything with credit is going to run a credit check and discover your score is probably going to be below their acceptable levels.

So, your credit score does have value, though I believe the financial institutions like to use your credit score as leverage against consumers.  You know, “If you cross us, we’ll mess with your credit score!”  That can have far reaching consequences.

But, where there’s a will, there’s a way...

If for some reason you feel compelled to get your credit score restored, after you have resolved your delinquency issues - whether by paying a settlement, filing bankruptcy or whatever, you can begin restoring your credit score almost immediately.

There are plenty of businesses that will extend credit to you, if they want to sell their product.  You may have to pay a higher down payment and a higher interest rate, but if you stay current and pay off that bill, that’ll be your first step towards getting back on track.

If you need to have your credit score restored quicker - that’s possible too, if you’re willing to pay.  You see there are credit restoration businesses out there who will “rent” you bank accounts and lines of credit.  You can’t use the money in those accounts, but the account will come up under your name and become part of the credit scoring mechanism.

The amount of time and the size of the accounts you “rent” will determine the price you pay to "rent" those accounts.  The credit repair agency will help you determine what you need based on your description of your goals, and from there you can decide if it’s worth the expense.

Then again, you may wish to avoid using credit in your name.  You can set up an LLC or other corporate entity and partner with somebody, to help establish credit with that LLC.  Or, you can use one of the credit repair services, for this.  The LLC then, would have the credit, and you control how that credit is used within the LLC.

Personally, I think this might be the best way to go, especially if you’re an entrepreneur.  That way if you get in trouble again, you can avoid dragging your name and family through the mud.  

Check with the appropriate professional - lawyer or accountant, because setting up a basic LLC that  simply passes through to you may not be sufficient  So, you’d have to set up a legit company and “run it” as such.  You know, have corporate meetings once per year, etc.

Oh, and if you do pay your debtor collectors anything because they have offered to place a positive note in your credit record, make sure you have their assurance in writing - signed, dated and on their corporate letter head.  They have very selective memories when it comes to them promising you anything, especially after they have collected some money from you.

If it was me, I’d record the telephone message where the agreement was made, and I’d make sure I had it in writing before any payment was made.  Even if I have to draft the letter - something like, “Per our discussion with Mr. Debt Collector, on August 12, 2008, it has been agreed...”  “The agreed upon payment will be made upon written verification of our agreement.”  Then send that letter certified mail, return receipt - and wait for your response.

Avoiding buying anything on credit may be what's best for you now anyway.  If credit is what got you in trouble, perhaps learning to live with as little credit as possible might be the best path for you to take.  Especially, if you have been paying attention to the fees and interest lender's are attaching to credit use.  Geez - it's ridiculous!

Getting back to your credit score, the point is, don’t let these lenders and creditors threaten you by holding your credit score over your head in an effort to try to compel you to pay.  It’s not the end of the world and you can repair your credit quicker than they’d like you to believe.

Debt Collections and the FDCPA

If you’re upside down and sideways financially, like so many people in our country, then undoubtedly you have received calls from debt collectors.

I’ll admit there are numerous debt collectors who are very professional and reasonably compassionate, but most are not.

They have one job and that job is to squeeze money out of you.  Most get paid on commission, which is tied to what they get you to pay, and they are given quotas to meet.  So, they are incentivized to do whatever they can to intimidate, coerce, and threaten you into giving up some cash.

Of course, they assume you have money to pay and are purposely withholding cash.  That’s what burns me.  The debt collectors I have spoken to always get around to, “What are you prepared to pay now?” 

I’m like, “If I had money to pay, I wouldn’t be behind in the first place!”

If you do have some ability to pay, and are willing to work something out, DO NOT pay anything on the spot over the phone. DO NOT pay anything at all, until you have received in writing, on their company letter head, verification of the terms you and the debt collector agreed to.

If you make a payment or even a series of payments without first getting an agreement in writing, as to how those payments will be applied, and how those payments will affect the your debt, you may as well have simply thrown that cash out your front door.

These debt collectors are notorious for losing payments or forgetting what they agreed to.  It is your responsibility to be able to provide proof of payment and proof of the agreement under which you paid.

I can't tell you how many people I have spoken to who made a payment over the phone or sent a check in, only to discover that money was never applied to their debt.  And when they have tried to check on it, gee, nobody knows anything about any payment.  You talked to who...? 

If you can't prove it, the payment or payments never happened.  And what are you going to do?  Hire an attorney?  They know you can't afford that.

This may sound harsh, but don't ever believe that a debt collector has any compassion for you or your situation.  Regardless if it was a medical situation, a job loss or whatever, they simply do not care.  You are, by default, simply a liar.  

Even if they sound as though they want to be your friend and work with you, don't fall for it!  What they are doing is "building trust," so that you'll drop your guard and they can manipulate you easier.

Don't forget, they have your credit report and any other public information that’s readily available sitting on the screen in front of them.  They can see whether that outstanding debt originated with a medical bill.  

One guy said, “Look you have a card with nothing on it, that has a credit limit sufficient to pay off this debt.”

My response was, “That doesn’t make sense - to pay off one debt by creating another!”

He persisted by saying that I would be getting rid of bad debt and creating good debt.  Which, technically he was right.  But, the problem was, I had no income and no ability to pay good debt or bad debt, so it was a mute point.  


I could have paid off the bad debt and created good debt.  But, in no time at all, that good debt would have become bad debt, and then I would have had two negatives on my credit report instead of one.

In their determination to get some type of payment out of you, they’ll often forget there are rules they must adhere to which are spelled out in the Fair Debt Collection Practices Act (FDCPA).  

If you are having financial difficulties, you must read the Fair Debt Collection Practices Act.  You should also visit the Federal Trade Commission site, where they have a nice "Frequently Asked Questions page.  Read these and take notes.  I can't stress this enough.  Read it!!!


You should also visit your State's website regarding debt collections.  You can Google that by typing in "debt collections state of ???" and then input whatever state you live in.

Keep in mind, they’re only allowed to call you once per day - so if you answer their call the first time, they should not call you again.

If you want to stop them in their tracks, when you answer, just let them know you’re recording the call and they will end the call.  That in itself should give you a heads up to their practices.  They will be recording the conversation, but they don’t want you to - hm...?  What do they want to hide?

Here's an interesting side note...  Debt collectors very often use aliases, because they don't want you to have anyway of tracking them down.  They'll often use actor's names.  But again I ask, why do they have to hide their identity if they're behaving in an honorable manner?

I record them anyway, without notifying them.  I checked with my State, and discovered I legally am permitted to record the call provided at least one party to the conversation agrees to the recording.  Since I am a "party to the conversation," and agree to the recording, I fall within what is legally allowed in my State.  

But, even if I legally could not, I would record them anyway.  The recording may not be able to be used in a court of law, but you can certainly use it to accurately remember and recreate the conversation on paper, which can be used in a court of law. 

Trust me, you’re going to want to have excellent records regarding your conversations - time, date, and content.  It could put money in your pocket.  I collected nearly $8,000, because debt collector's illegal actions!

If you know your rights, they cannot threaten you.  If they start getting belligerent and threatening, disengage.  Even if you do not know the law, you certainly do not have to listen to somebody being argumentative or putting you down.

The downturn in our economy caught a lot of people off guard, and caused a tremendous number of folks to lose their jobs.  Let these debt collectors walk in your shoes, before they start name calling - which, by the way, is against the law.

If they’re calling you on your cell, that can get really old, really fast.  So, here’s a little trick.  When they call, whether you answer or not, their number will be saved by your cell.  Add that number to your Contacts List and assign a “no ring” tone to the number.

Now when they call, on my cell all I receive is a beep letting me know I missed a call.  

Oh, and one other thing...  When assigning a name to the caller in my contact list, I always put two “z’s” in front of their name.  That way the number falls to the end of my contact list, and I never see it when looking up my real contacts.

But wait, there's more...

Laws regarding debt collection spell out fines that must be paid if a debt collector violates these laws. Remember I mentioned earlier, I collected nearly $8,000 from Debt Collectors.  Here's how...

By keeping good records, you can actually sue the debt collectors for violating the FDCPA.  There are attorney's who will sue these lenders on your behalf, at no cost to you.  You have to split the settlement fee the collector pays with the attorney, but it's pretty cool when the debt collector pays you!

All you have to do is keep good records - preferably recordings, and make these recordings available to the law office. They'll do all the rest.  Assuming the debt collector violated the law, you'll get a check from your attorney for a few hundred to a couple of grand in a few weeks.

It pays to know Know Your Rights!  Literally!

Lender's Created the Real Estate Bubble!

Give me a Break!  Lender’s Created this Mess, not the Consumer!

Lender’s created the real estate bubble by making loans available to just about anybody who wanted one. 

What’s this I hear?  Homeowners who are losing their homes are responsible for the depreciation for their neighbor’s homes!

Say what?!

Let’s step back a bit and take a look at how those home values got there in the first place.

We all know the basics of supply and demand - the higher the demand, the higher the value based on the amount of supply.  If supply and demand are reasonably equal, then values remain reasonable.  

But what happens if there’s low demand or an over supply?  Values drop, right?

And the opposite occurs when demand is high and supply is low.  The more people who want something, the higher the value because the product will go to the person who is willing to pay the most.

Ten years ago property values were being driven up, simply due to multiple offers coming in.  There for awhile, if you wanted to buy a home, often you had to submit an offer that was higher than the asking price.

To follow your father’s advice, and write an offer that was 10% below the asking price was simply a waste of a Realtor’s time - and she was willing to tell you that, point blank.  “In this market, 10% below - really...?”

Now take a look at real estate from a lender’s point of view.  First of all, a lender’s job is to make money selling “money.”  Right?

They make money by collecting fees, collecting interest on loans they make and by selling those loans to investors.

The more often they can do this, the more money they make.  But they have to have borrowers to “sell” their money to.  So, they marketed aggressively for borrowers.

Anybody remember those no down payment, low interest ads or how about no doc loans?  Or those loans offering up to 110-120% of the market value of the home?!  Do you think these loans were based on sound, financial principals?

If I loan you $50 bucks with a simple interest of 10%, and you pay me $55 bucks in a month, then I’ve done OK.  But, if I loan you $50 bucks with the same simple interest, and you pay me back in a week, I have done much better.  

Because now I can loan that same $50 at 10% simple interest, to your buddy the next week, and again the following week and one more time the week after that, within that same month long period, collecting $5 per week for a total of 4 weeks, and $20!

Instead of making $5.00 or 10% over the course of the month, I have made a whopping $20.00 or 40%.  The same amount of money loaned, the same interest rate and the same time frame, but a 40% return because I was able to loan that money 4 times instead of once. That’s a much better return on investment.

This is why the banks bundle loans a form of securitization and sell them to investors.  Of course, they’re making money when they loan the money to borrowers, but they’re also able to take their money back and re-loan it, collecting another round of “fees.”

Obviously, it’s more complicated than that; the point is the more often they were able to loan their money or “turned” their money, the more they made.  To facilitate this process they needed a constant source of investors, to buy these loans and replenish their investment funds.

If you have guaranteed investors lined up to buy the loans, then it becomes a no brainer.  Simply fill the funnel.  Who cares if the borrowers are qualified, if you’re just going to sell the loans at a profit to investors anyway?

To insure a constant source of borrowers, they simply created new and easier loans, dropped their requirements and stopped doing their due diligence.  By doing that they enticed more borrowers into the market, which in turn created demand and drove home values up - along with other consumables.

Driving prices up, helped the banks too, as well as the entire economy and it became a self-perpetuating, cash generating machine.  As home values went up, so did the amounts of the loans.  The increased home values also fueled home equity loans, refinances, etc - all designed to "pull" money out of the home's appreciating value.

As home values increased, so did the size of the loans and the fees collected.

And, of course, the larger mortgages, caused the banks to collect more interest.  This in turn made the loans more valuable to the investors buying the bundled loans.  As long as the economy was cooking along, the momentum of this cash producing machine continued to build. 

There’s just no way lenders, with all their resources and sophisticated economic models didn’t see how they could essentially, manipulate the market by making money or loans available to every potential buyer out there, regardless of their ability to repay.

As for the consumers - they took advantage of the opportunity that was made available to them by the lenders.  I mean, let’s get real here.  If the lender’s would have done their due diligence, they would have discovered that a lot of the borrowers requesting loans, didn’t have the ability to repay those loans.

The point I’m trying to make is these lenders were not innocent bystanders who got taken advantage of by greedy consumers.  These lenders actively pursued, marketed to and approved loans to consumers who truly did not qualify.  

Not only that, but through their marketing they convinced consumers that leveraging their credit capability was away to move themselves and their family up the economic food chain.  And that not leveraging ones credit was foolish.

Through their business practices, lenders themselves, knowingly facilitated the artificial appreciation of real estate.

The consumer on the other hand, may have known it was too good to be true, but I doubt really understood the potential fallout of the situation.

The lenders were the parents and the borrowers were their kids.  The kids may have gotten into trouble, but who failed to educate their children properly?  The parents!