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 ...
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!