Credit Woes

We all know credit reports can be confusing at times to say the least. Some aspects of the data on credit reports just seem to make no sense, but some parts can be more confusing than others. To start off 2022, let us touch on some of the biggest issues asked about in 2021.

1. Charged off accounts that still show a balance.
Just because the balance on an account was charged off as no longer collectible does not mean the balance is not still owed. The creditor just does not believe they will ever collect the money, so for tax purposes, they write off the balance and issue a 1099 to the consumer. In reality though the balance is still owed, and they can continue to report that balance for seven years to the credit bureaus. This can be extremely frustrating as every time they report that balance it continues to hurt the consumer’s credit score. When it is reported, it updates the reporting date making it look like a brand new charged off account every month.

What is the best solution for this? Call the creditor and try to settle the account. Most credit cards will agree to settle for much less than what is actually owed. Once the account is settled it will report as a paid charge off or settled account and will normally then cease to re-report every month. The account will still be there for seven years, but the monthly reporting will stop and slowly the credit scores will start to rebound.

2. Accounts that were awarded to a spouse in a divorce decree.
There are a lot of credit reports that contain accounts that were awarded to a spouse. Many times, the spouse has made delinquent payments on some of the accounts or has stopped making payments altogether. That information is now reported on the credit reports of both parties even through the divorce decree awarded the account to only one of them. Unfortunately, there is not a way to make that account go away unless the creditor agrees to remove it which is highly unlikely. “A divorce decree does not supersede the original agreement between the creditor and the consumer.” When it comes to credit, a divorce decree is basically rendered useless.

So, what should you do if you are getting a divorce? It is best to close any joint accounts you have and open accounts on your own. In the case of any installment loans like auto loans it would be best for the party that it is awarded to in the divorce decree refinance it out of the other person’s name. This will eradicate any possibility of delinquent payments being made on the joint accounts.

3. Why isn’t my mortgage reporting?
This could be for a variety of reasons. If a person is on the title but not on the note, the mortgage company will not report the mortgage on the person who is only on the title.

Another reason could be because the borrower had a bankruptcy. When a consumer files bankruptcy, most creditors will stop reporting the mortgage even if it was not included in the bankruptcy. They do this to protect themselves from the possibility of violating the automatic stay or discharge injunction.

Finally, another issue is with the creditor themselves. They may not report to all three bureaus or to any bureau for that matter. Whether or not a creditor reports to the bureaus is their prerogative. There are several small banks and credit unions that may only report to one credit bureau, or they may not report at all.

Yes, credit reports can be confusing and frustrating. This is why it is so important to always be monitoring your credit report for inaccuracies or problems. The sooner they are caught the better. A credit report is a living, breathing body of information that can change daily. Staying on top of that information can save a lot of headaches in the long run.



Author: Mindy Leisure Manager of Rescoring Services
Mindy has been with the company since it’s inception in 1994. She wears several hats as Director of Product Development and Rescore Express Manager. As a public speaker she has delivered dozens of seminars for borrowers, real estate agents and mortgage brokers on the ins and outs of the world of credit. Prior to joining Advantage Credit she had 15 years experience in mortgage, real estate and property management. Her experience, knowledge and dedication have helped make Advantage Credit a leading credit reporting agency. Mindy has a BA from Fort Lewis College in Durango CO and an MFA from Humboldt State University in Arcata, CA. After living for 32 years in Colorado she has recently moved back to where she was born and raised in Bartlesville, Oklahoma in order to be closer to her family. In her free time she loves to cook, fish, garden, write and spend time with her family and her dogs Ben and Annie.