Many people, unfortunately, get in over their heads in debt. When that happens, the creditor often agrees to settle the debt for less. Lately, we have been seeing several lawsuits against creditors who continue to report debts that they have settled with consumers as still open and late. This hurts a credit score greatly.
When you settle a debt with a creditor, if it credit reports that debt, it is obligated to report that debt as either settled or settled for less than the full balance. There should be no current balance or currently monthly payment reporting. Sadly, this has not been the case with several creditors.
In Blazevich v Webbank et al, Ms. Blazevich filed a lawsuit against Webbank and others for failing to report debt that she settled with it as settled. Instead, Webbank allegedly continued to report the debt as “charged off.” This is illegal and quite damaging to Ms. Blazevich’s credit score, if true.
Similarly, in Maddalena v Navient Credit Finance Corp and Trans Union, Ms. Maddalena alleges that she settled a debt with Navient. Unfortunately, Navient took her money and continued to report her account as charged off along with a past due balance. Again, this account should have been reported as either settled or settled for less than the full balance.
If you settle an account with a creditor, here are the steps you need to take to protect your credit.
- Always get written confirmation of the settlement. It can be an email from the creditor or collector or one from you to them. Just be sure that you have some paper trail that documents the agreement.
- The agreement should address the credit reporting of the account. You should push for the tradeline or collection item to be removed from your credit report altogether. If the creditor refuses, then insist that it agree to update the tradeline to “Account settled.”
- When you send payment, always create another paper trail showing that the payment is pursuant to your prior agreement. Thus, when you send a check, be sure to put in the memo section “Per our agreement of ________ date.” If you pay by credit card, be sure to send an email or letter that also references the debt.
- Pull your credit report 30 days after the settlement to be sure that the tradeline is reporting accurately. The cases referenced above are just two such cases in which creditors took the consumer’s money and continued to damage their credit reports and scores. You are in charge of making sure that your credit report is accurate.
- If your credit report is still inaccurate, call us at(480) 771-6001. Let us review your credit reports and see if we can get it fixed at no out of pocket charge to you. Under the law, the defendants are responsible for paying a consumer’s fees and costs in any successful action. We tend to be very successful.
If your credit has been damaged by a debt collector or creditor, call us at Arizona Credit Lawyers at (480) 771-6001 for a free, no obligation consultation. You can also email us at [email protected] for more information. Again, in any successful action, the defendants are liable for paying our fees and costs.