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LEARN HOW TO START, RUN, OR GROW YOUR CREDIT REPAIR BUSINESS

All About Charge Offs

By: Daniel Rosen May 25, 2021

They report to the bureaus the debt has been charged off, then they either sell the debt to a 3rd party debt collection, or in some cases, they actually lease the debt to a debt collection firm who takes over the right to collect the debt.

So, your client still owes the debt - but they owe it to someone else.  

This is extremely damaging to a credit report. 

The way it normally works is, the original account will appear 30 days, 60 days, 90 days or more past due, then the status is adjusted to reflect a charge off. 

Then usually, the new debt collector (the one that purchased it) will report the same account as a new collection. 

What ends up happening, is your client’s credit report has a really bad payment history with the original creditor, PLUS a collection account. 

It’s a double hit!

 


Now that you know what charge-offs are, how they happen, and the devastating effects they have on your client’s credit report, you’ll probably want to know what YOU, Credit Hero, can do about it. 

I often hear these questions in our credit repair community ...

  • How do you remove charge offs? 
  • And how do you deal with the collector? 

So here’s the process I recommend that often works. 

First, start with the standard process of requesting verification with the bureaus, and of course, if you can pinpoint a factual error, go after it. 

You can also request validation with the debt collector. 

A great way to be persistent with both the bureaus and the debt collector is to demand the method of verification and reinvestigations and filing complaints if necessary. 

If the debt is truly valid - you're still left with two options.

One, try to secure a deletion by offering a settlement or full payment in return for a deletion. This is common practice and most debt collection agencies will do it. 

To make it easier, if you’re a Credit Repair Cloud user, there are a couple of great pay-per deletion letters in your library. You can find them with the Letter Finder Feature. If you’re not a member yet, get a 30-day free trial at CreditRepairCloud.com. 

Next, if you send some letters to get a deletion and you don’t get results, at that point you may need to settle the account in full. 

Remember, I wouldn’t suggest settling on accounts that have been on the credit report for years and years. Sometimes, settling old accounts can hurt credit because the status date gets renewed. 

Also, don’t forget to consider how long until the account is scheduled to naturally fall off the report. 

What if you get to the point where your client needs to settle the account or pay it in full?

The good news is that once a debt is paid, the creditor and collection agency are less motivated to verify it! That means, after it’s paid, you’re free to go through the process of disputing it again ... to get it off their report.

Pretty interesting, isn’t it?

And If you want to learn more strategies like the one I just went over, I want to invite you to join our Credit Hero Challenge!

It’s an amazing program that has helped tons of credit heroes get their first paying clients, get certified in disputing, and to gain confidence in knowing they are launching their credit repair business on a solid foundation that allows them to grow and scale FAST!

We’ve got a new challenge starting soon, so join now before doors close. Go to creditherochallenge.com!


 

 

Be sure to subscribe on your favorite platform below!

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Topics: Podcast

Transcript

0:00  

Let me ask you, does this sound familiar? Your client has a credit card, and for whatever reason, they stopped making their payments. Then they got charged with a late fee plus interest, which then pushes their balance over the limit, and then they get slapped with yet another charge, an over limit fee. And then another month passes by, and they're still unable to bring the account current. So they're charged another late fee, another overlimit fee, and more interest. And this continues for months as a horrible snowball effect takes place. Wishful thinking won't make it go away. Ignoring their bills and accumulating fees, this only makes the problem get bigger and bigger. And now after several months of this, the creditor wants their money. They desperately try to reach your client, they call, they send letters, and they relentlessly try to make contact. They know that if they don't get the account current, the chances of ever getting their money are slim to none. And then after the 90 to 120 day mark, they usually pull a legal maneuver to reduce their losses. And this is called a charge off. But why do they do this? How does it affect your client's credit score? And for how long? And most importantly, what can you do as a Credit Hero to help your clients who have charge offs on their credit report? Well, in this episode, I am going to reveal the secrets that you need to know about charge offs. So stick around! 

 

So the big question is this. How can we take our passion for helping people with their credit, and turn it into a successful business without taking loans without spending a fortune by bootstrapping it from nothing, so we can help the most people and still become highly profitable? That is the question, and this podcast will give you the answer. My name is Daniel Rosen, and welcome to Credit Repair Business Secrets.

 

Okay, let's get into this. Now, when a credit card account is 90 to 120 days overdue, and over the limit, chances are the creditors have little hope of collecting it, but they still have to pay taxes on the debt that the account holders have. Yep, they pay taxes, because the debt is an asset to their company. Even though they lost money, they are losing even more money by hanging on to that debt. So what exactly is charging off? And how does that help them? Well, typically, when a creditor charges a debt off, they are essentially reporting it as uncollectible so that they no longer have to pay taxes on the debt. And by doing so, they give up the right to actively collect on it. They report to the bureaus that the debt has been charged off, and then they either sell the debt to a third party debt collection, or in some cases, they actually leased the debt to a debt collection firm who takes over the right to collect the debt. So essentially, your client still owes the debt, but now they owe it to someone else. And this is extremely damaging to a credit report. Typically the original account will appear 30 days, 60 days, 90 days or more past due. And then the status gets adjusted to reflect a charge off. And then usually the new debt collector, the one who purchased it, they will report the very same account as a new collection, it ends up that the credit report has a really bad payment history with the original creditor plus the collection account. So it's a double hit! Okay, so that's what charge offs are, how they happen and the devastating effects that they have on your clients credit report. So how do you remove them? And how do you deal with the collector? Here is the process that I recommend that often works. First, you start with the standard process of requesting verification with the credit bureaus. And of course, if you can pinpoint a factual error, then go for it. You can also request validation with the debt collector. Now be very, very persistent with both the bureaus and the debt collector by demanding the method of verification, and reinvestigations and filing complaints if necessary. If the debt is truly valid, you're still left with two options. First, you try to secure a deletion by offering a settlement or a full payment, in return for a deletion. This is a common practice and most debt collection agencies, they will do it. If you are a Credit Repair Cloud user, there are a couple of great pay per delete letters that are already in your library, you can find them very fast with the letter finder feature. And if you're not a Credit Repair Cloud member yet, you can get a 30 day free trial at creditrepaircloud.com. Now, if you send some letters to get a deletion, and you don't get results, then you may need to bite the bullet and at the very least settle the account in full. Now, this isn't recommended on accounts that have been on the credit report for years and years. Because sometimes settling old accounts can actually hurt your credit because the status date gets renewed. Also, you need to consider how long until the account is scheduled to naturally fall off the report. Now, if you get to the point where your client needs to settle the account, or to pay it in full, the good news is that once a debt is paid, the creditor and the collection agency, they have less motivation to verify it. So after it's paid, you can go through the process of disputing it again to get it off the report. And if you want to learn more about strategies like the one I just went over, I want to invite you to join our Credit Hero Challenge. It's an amazing program that has helped tons of Credit Heroes to get their first paying clients to get certified in disputing and to gain confidence in knowing that they are launching their credit repair business on a solid foundation that allows them to grow and scale fast. We have a brand new challenge starting very soon, so join now before the doors close and to join it, go to creditherochallenge.com. And if you're finding value in the things that I'm sharing on this podcast, click below to subscribe. And if you're feeling kind, rate me and give me a review, give me a thumbs up because that stuff really helps me and I will see you on the next episode. And until then be a Credit Hero and keep changing lives! 

 

Want more credit repair business secrets? Then get a copy of my book, The Ultimate Guide to Starting a Credit Repair Business. Get it free at creditrepaircloud.com/freebook. Inside this book, you'll find my top 35 secrets to removing items from credit reports and turning that into an amazing business that helps people, changes lives, and makes you a great living in the process. Get it free at creditrepaircloud.com/freebook.

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