Now we’re going to discuss another secret that will help you with improving your credit.  A recent customer named Linda was stuck in a cycle of debt That was killing her credit report. She fell behind for five months on her credit card payments, and even though she started paying again. She was still consistently showing as 150 days past due. Every payment Linda made dragged out the past due to balance, and she couldn’t afford to get ahead. Now it ‘s urgent for Linda to Eliminate old debt.

Linda was a victim of a perpetual cycle of debt, and extreme measures were needed to clear up her credit report. So she could live a normal life again. And no, I’m not talking about bankruptcy, which is the last resort.

How long negative information impacts your credit report

Information that negatively impacts your credit report only stays on your credit report for seven years and 180 days after the incident. This doesn’t include bankruptcy, which remains for 10 years.

The “incident” is considered as a late payment or charge off. It is required by the Federal Deposit Insurance Corporation that after 120 days of delinquency, installment loans like a mortgage or car loan should charged off . Credit cards and other revolving debt must charged off after 180 days of delinquency.

How to negotiate a debt settlement

Once your account is charged off, it’s sold to a debt collector for less than 20 percent of the total balance. This gives you leverage to negotiate a settlement as low as 30 percent of the total debt. This is a trick many credit counseling companies use to consolidate and lower your bill payments.

In Linda’s case, it was necessary to stop making payments that dragged the debt out longer. Instead, we negotiated a settlement. Keep in mind, settled accounts don’t help your credit score as much as paid-in-full accounts. But they don’t negatively impact it as much as unpaid debts.

If the creditor doesn’t accept a settlement then try to eliminate old debt with the debt collector. Even though they purchase the debt for pennies on the dollar, debt collectors still attempt to collect the full balance.

Debt collectors also continue charging interest and late fees on your unpaid debt. This increases the amount of the debt they can eventually sue you for. In most states, third-party collectors can continue adding interest for three to seven years, although sometimes it’s indefinite. This is why it’s important to settle all your debts as fast as possible.

Check your state laws to determine the statute of limitations in your specific circumstances. For example, in California, collectors have four years to legally collect.

Things to remember when negotiate a debt settlement or cancellation

When you negotiate a debt settlement or cancellation, you should be prepared to receive a 1099-C tax form for cancellation of debt. The IRS considers cancelled debt to be taxable income. You must report when you file your taxes.

If you’re being targeted by collectors, don’t worry. There are laws in place that dictate how collectors can pursue you for this debt.

Next, we’ll discuss one simple phrase that can give you peace of mind by ending all the harassing phone calls and letters from debt collectors. I also provide lot of information on ‘Optimize Your Debt Ratio in a unique way‘ that will help you to improve your credit score.


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