Credit Repair Blues

Today Ann in California wanted TaxMama to fix her credit. Since all my income disappeared when I lost all my clients in the Y2K corporation crash, my credit tanked. A lot of my credit debt has even been written off by now. But now, I’m getting back on my feet again and want to clean it up. Help me!

[TaxMama Alert: We were shocked to learn that the best credit repair agency in the country now charges too much – and their staff gives out erroneous information. Please listen the TaxQuip]



TaxMama knows how hard and emotional this can be. So, I told Ann to contact the CCCS – the Consumer Credit Counseling Service – for help. In the past, this non-profit organization has been a huge help. And reliable They only charged a $10 donation per visit, since they got their funding from the credit card agencies and loan companies – and seemed to have contacts to be able to arrange for reasonable settlements.

It turns out not to be true any longer. CCCS has changed their name. And raised their fees. Now, they charge $350 AND 15% of the amount they reduce your debt. When Ann and I ran the numbers on the total costs, it was obviously much cheaper for her to handle the negotiations herself.

You may not know it, but IRS has a task force actively investigating the credit repair bureaus – and they expect to eliminate at least half of them by 2007. So, for now, I would avoid any bureau.

So Ann did her research. Here’s a bit about what she learned, scouring FindLaw and the search engines.

1)Credit card companies have a 4 year statute of limitations to collect debt. That 4 years start when you are 90 days delinquent and they post your arrears to the credit bureaus.
2)Collections agencies, if the debt is turned over to them before the statutes run out, have no limit on how long they may try to collect. They may chase you forever.
3)Tax liens and bad credit will remain on your credit for 7 years – even after the debt has been discharged. It will be 7 years after the discharge.
4)Paying off part of your old debt will not really raise your credit score all that much. Worse, that transaction will start the 7 years running again!
5)It may be cheaper NOT to pay off the old debt, and to use that money to pay higher interest rates – especially on mortgages or business vehicles. That way, the interest will be deductible.

If you don’t want to invest all the time to research credit repair the way Ann (not her real name) did, read Liz Pulliam Weston’s 2004 book Your Credit Score: How to Fix, Improve, and Protect the 3-Digit Number that Shapes Your Financial Future http://www.amazon.com/exec/obidos/tg/detail/-/0131486039/mywishlistA

Or hire Ann to help you…she’s become quite a tiger about credit rip-offs.

You’ll find answers to all your questions about winning – and all kinds of tax information, where? At TaxMama.com

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