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Credit Score Ranges: What do they Mean?

If you’ve recently been contacted by a debt collector for the first time, or you’re worried that a collector will contact you soon because you’ve fallen behind on your bills, you probably have many questions and are understandably nervous about the process.

This article will give you an introduction to the debt-collection business so you can understand the collection agency’s perspective. This should give you a better idea of what motivates debt collectors and what their incentives are, which can help smooth your interactions with them and make the process less stressful.

The Business of Debt Collection

Debt collectors often work for debt-collection agencies, though some operate independently and some are also attorneys. Sometimes these agencies act as middlemen, collecting customers’ delinquent debts – debts that are at least 60 days past due –  and remitting them to the original creditor. The creditor pays the collector a substantial percentage, typically 25% to 45%, of the amount collected. Debt collection agencies collect delinquent debts of all types: credit card debt, medical debt, automobile loan debt, personal loan debt, business debt, student loan debt and even unpaid utility and cell phone bills.

Collection agencies tend to specialize in types of debt. For example, an agency might only collect delinquent debts of at least $200 that are less than two years old. A reputable agency will also limit its work to collecting debts that are within the statute of limitations, which varies by state.

For difficult-to-collect debts, some collection agencies also negotiate settlements with consumers for less than the consumer owes. Debt collectors may also refer cases to lawyers who file lawsuits against customers who have refused to pay the collection agency. 

Agencies That Buy Debt

When the original creditor has determined that it isn’t likely to collect, it will cut its losses by selling that debt to a debt buyer. Creditors package together numerous accounts with similar features and sell them as group. Debt buyers can choose from packages of accounts that are not that old and that no other collector has worked on yet, accounts that are quite old and that other collectors have failed to collect on, and accounts that fall somewhere in between. 

Debt buyers often purchase these packages through a bidding process, paying on average 4 cents for every $1 of debt face value. In other words, a debt buyer might pay $40 to purchase a delinquent account where the balance owed is $1,000. The older the debt, the less it costs, since it is less likely to be collectable.

The type of debt also influences the price; mortgage debt is worth more, while utility debt is worth less. Debt buyers keep everything they collect; because they have purchased the debt from the original creditor, they don’t send any of the amount collected to that creditor. 

Debt collectors get paid when they recover a delinquent debt; the more they recover, the more they earn. Old debt that is past the statute of limitations or is otherwise deemed uncollectable is bought for pennies on the dollar, making collectors big profits.

What Debt Collectors Do

Debt collectors use letters and phone calls to contact delinquent borrowers and try to convince them to repay what they owe. When debt collectors can’t reach the debtor with the contact information provided by the original creditor, they look further, using computer software and private investigators. They can also conduct searches for a debtor’s assets, such as bank and brokerage accounts, to determine a debtor’s ability to repay. Collectors may report delinquent debts to credit bureaus to encourage consumers to pay, since delinquent debts can do serious damage to a consumer’s credit score

A debt collector has to rely on the debtor to pay and cannot take a paycheck or reach into a bank account, even if the routing and account numbers are known, unless a judgment is obtained, meaning that the court orders them to repay a certain amount to a particular creditor. To do this, a collection agency must take the debtor to court before the statute of limitations runs out and win a judgment against him or her. This judgment allows a collector to begin garnishing wages and bank accounts, but the collector must still contact the debtor's employer and bank to request the money.

Debt collectors also contact delinquent borrowers who have already had a judgment against them,  Even when a creditor wins a judgment, it can be difficult to collect the money. Along with placing levies on bank accounts or motor vehicles, debt collectors can try placing a lien on property or forcing the sale of an asset.

How Reputable Collectors Operate

Debt collectors have a bad reputation for harassing consumers. More consumers complain to the Federal Trade Commission about debt collectors than about any other industry. The Fair Debt Collection Practices Act limits how collection agencies can collect a debt in order to keep them from being abusive, unfair and deceptive, and there are debt collectors who are careful not to violate consumer protection laws. Here’s what you can expect from a reputable collector.

In contacts with debtors, a collector who behaves properly will be fair, respectful, honest and law-abiding. After you make a written request for verification of a debt you've been contacted about, the collector will suspend collection activities and send you a written notice of the amount owed, the company you owe it to and how to pay it. If the collector can’t verify the debt, the company will stop trying to collect from you. It will also tell the credit bureaus that the item is disputed or request that it be removed from your credit report. If the collector is working as a middleman for a creditor and doesn’t own your debt, it will notify the creditor that it has stopped trying to collect because it couldn’t verify the debt. 

Collectors must also follow certain time limits, such as not reporting a debt that is more than seven years old and sending a debt validation letter within five days of first contact with the debtor.

Reputable debt collectors will try to obtain accurate and complete records so they don’t pursue people who don’t really owe money. If you tell them the debt was caused by identity theft, they will make a reasonable effort to verify your claim. They also won’t try to sue you for debts that are beyond the statute of limitations. They will not harass or threaten you or treat you differently because of your race, sex, age or other characteristics. They will not publicize any debt you owe or try to deceive you in order to collect a debt, nor will they pretend to be law enforcement agents or threaten you with arrest. They also won’t contact you before 8:00 a.m. or after 9:00 p.m. without your permission to do so.

To learn more about what debt collectors are not allowed to try on you, read 5 Things Debt Collectors Are Forbidden To Do.

The Bottom Line

Debt collection is a legitimate business, and if a debt collector contacts you, it’s not necessarily the beginning of an abusive relationship. Many  collectors are honest people who are just trying to do their jobs and will work with you to create a plan to help you repay your debt, whether that means a payment in full, a series of monthly payments or even a reduced settlement.

You should of course put up your guard  when a collector contacts you, and you should know your rights and understand what debt collectors are and aren't allowed to do. But if you know a bit about how the business works, you might be able to resolve your delinquent debt amicably.

One cautionary note: Debts fall under a statute of limitations. If you think this could be an issue in your situation, do not admit to the debt or discuss any settlement without legal advice; taking even the smallest step could void the statute of limitations and restart the clock. See Do I still owe debt collectors for a debt that's past the statute of limitations for my state?



Read more: How the Debt Collection Agency Business Works | Investopedia https://www.investopedia.com/articles/personal-finance/121514/how-debt-collection-agency-business-works.asp#ixzz54MajV23U
Follow us: Investopedia on Facebook

Posted by Anne James on January 16th, 2018 7:54 AM
Credit Score Ranges: What do they Mean?

If you’ve recently been contacted by a debt collector for the first time, or you’re worried that a collector will contact you soon because you’ve fallen behind on your bills, you probably have many questions and are understandably nervous about the process.

This article will give you an introduction to the debt-collection business so you can understand the collection agency’s perspective. This should give you a better idea of what motivates debt collectors and what their incentives are, which can help smooth your interactions with them and make the process less stressful.

The Business of Debt Collection

Debt collectors often work for debt-collection agencies, though some operate independently and some are also attorneys. Sometimes these agencies act as middlemen, collecting customers’ delinquent debts – debts that are at least 60 days past due –  and remitting them to the original creditor. The creditor pays the collector a substantial percentage, typically 25% to 45%, of the amount collected. Debt collection agencies collect delinquent debts of all types: credit card debt, medical debt, automobile loan debt, personal loan debt, business debt, student loan debt and even unpaid utility and cell phone bills.

Collection agencies tend to specialize in types of debt. For example, an agency might only collect delinquent debts of at least $200 that are less than two years old. A reputable agency will also limit its work to collecting debts that are within the statute of limitations, which varies by state.

For difficult-to-collect debts, some collection agencies also negotiate settlements with consumers for less than the consumer owes. Debt collectors may also refer cases to lawyers who file lawsuits against customers who have refused to pay the collection agency. 

Agencies That Buy Debt

When the original creditor has determined that it isn’t likely to collect, it will cut its losses by selling that debt to a debt buyer. Creditors package together numerous accounts with similar features and sell them as group. Debt buyers can choose from packages of accounts that are not that old and that no other collector has worked on yet, accounts that are quite old and that other collectors have failed to collect on, and accounts that fall somewhere in between. 

Debt buyers often purchase these packages through a bidding process, paying on average 4 cents for every $1 of debt face value. In other words, a debt buyer might pay $40 to purchase a delinquent account where the balance owed is $1,000. The older the debt, the less it costs, since it is less likely to be collectable.

The type of debt also influences the price; mortgage debt is worth more, while utility debt is worth less. Debt buyers keep everything they collect; because they have purchased the debt from the original creditor, they don’t send any of the amount collected to that creditor. 

Debt collectors get paid when they recover a delinquent debt; the more they recover, the more they earn. Old debt that is past the statute of limitations or is otherwise deemed uncollectable is bought for pennies on the dollar, making collectors big profits.

What Debt Collectors Do

Debt collectors use letters and phone calls to contact delinquent borrowers and try to convince them to repay what they owe. When debt collectors can’t reach the debtor with the contact information provided by the original creditor, they look further, using computer software and private investigators. They can also conduct searches for a debtor’s assets, such as bank and brokerage accounts, to determine a debtor’s ability to repay. Collectors may report delinquent debts to credit bureaus to encourage consumers to pay, since delinquent debts can do serious damage to a consumer’s credit score

A debt collector has to rely on the debtor to pay and cannot take a paycheck or reach into a bank account, even if the routing and account numbers are known, unless a judgment is obtained, meaning that the court orders them to repay a certain amount to a particular creditor. To do this, a collection agency must take the debtor to court before the statute of limitations runs out and win a judgment against him or her. This judgment allows a collector to begin garnishing wages and bank accounts, but the collector must still contact the debtor's employer and bank to request the money.

Debt collectors also contact delinquent borrowers who have already had a judgment against them,  Even when a creditor wins a judgment, it can be difficult to collect the money. Along with placing levies on bank accounts or motor vehicles, debt collectors can try placing a lien on property or forcing the sale of an asset.

How Reputable Collectors Operate

Debt collectors have a bad reputation for harassing consumers. More consumers complain to the Federal Trade Commission about debt collectors than about any other industry. The Fair Debt Collection Practices Act limits how collection agencies can collect a debt in order to keep them from being abusive, unfair and deceptive, and there are debt collectors who are careful not to violate consumer protection laws. Here’s what you can expect from a reputable collector.

In contacts with debtors, a collector who behaves properly will be fair, respectful, honest and law-abiding. After you make a written request for verification of a debt you've been contacted about, the collector will suspend collection activities and send you a written notice of the amount owed, the company you owe it to and how to pay it. If the collector can’t verify the debt, the company will stop trying to collect from you. It will also tell the credit bureaus that the item is disputed or request that it be removed from your credit report. If the collector is working as a middleman for a creditor and doesn’t own your debt, it will notify the creditor that it has stopped trying to collect because it couldn’t verify the debt. 

Collectors must also follow certain time limits, such as not reporting a debt that is more than seven years old and sending a debt validation letter within five days of first contact with the debtor.

Reputable debt collectors will try to obtain accurate and complete records so they don’t pursue people who don’t really owe money. If you tell them the debt was caused by identity theft, they will make a reasonable effort to verify your claim. They also won’t try to sue you for debts that are beyond the statute of limitations. They will not harass or threaten you or treat you differently because of your race, sex, age or other characteristics. They will not publicize any debt you owe or try to deceive you in order to collect a debt, nor will they pretend to be law enforcement agents or threaten you with arrest. They also won’t contact you before 8:00 a.m. or after 9:00 p.m. without your permission to do so.

To learn more about what debt collectors are not allowed to try on you, read 5 Things Debt Collectors Are Forbidden To Do.

The Bottom Line

Debt collection is a legitimate business, and if a debt collector contacts you, it’s not necessarily the beginning of an abusive relationship. Many  collectors are honest people who are just trying to do their jobs and will work with you to create a plan to help you repay your debt, whether that means a payment in full, a series of monthly payments or even a reduced settlement.

You should of course put up your guard  when a collector contacts you, and you should know your rights and understand what debt collectors are and aren't allowed to do. But if you know a bit about how the business works, you might be able to resolve your delinquent debt amicably.

One cautionary note: Debts fall under a statute of limitations. If you think this could be an issue in your situation, do not admit to the debt or discuss any settlement without legal advice; taking even the smallest step could void the statute of limitations and restart the clock. See Do I still owe debt collectors for a debt that's past the statute of limitations for my state?



Read more: How the Debt Collection Agency Business Works | Investopedia https://www.investopedia.com/articles/personal-finance/121514/how-debt-collection-agency-business-works.asp#ixzz54MajV23U
Follow us: Investopedia on Facebook

Posted by Anne James on January 16th, 2018 7:53 AM



Has a bank turned you down for purchasing due to short sale or foreclosure?You may be eligible or closer than you think!

After a financial hardship like having to short sale your home, it’s important to know that your next home is within reach.

While a short sale will affect your credit score to varying degrees, time heals all credit wounds as long as you make an effort to build good credit, and keep all of your other payments current.
Rebuilding your credit, so that you are confident that you will not have similar challenges is the first step.

The second step to buying a home after a short sale is the “waiting period” required before you would be eligible for a new home mortgage.

Waiting Periods After Short Sale

The waiting period before you are eligible to buy a home after a short sale is determined by the type of financing you are applying for. In some cases, these waiting periods can be reduced with an extenuating circumstances exception.

FHA Insured Financing – If you are buying using a FHA insured loan, the Application Date for your new mortgage must be 3 years from the date that your name was removed from title to the home that was short sold. If the mortgage that was short sold was also a FHA insured mortgage, the waiting period begins from the day the mortgage insurance claim is paid.

VA Guarantee Financing – If you are buying using a VA Guarantee, Veteran benefit home loan, the Application Date for your new mortgage must be 2 years from the date your name was removed from title to the home that was short sold. If the short sold home was also a VA Guarantee loan, the date will start when the Guarantee was paid, and your entitlement may be affected. Under 'exceptional circumstances' the wait period can be reduced to one year.

Conventional Financing – If you are buying using a Conventional loan, the Date of the Credit Report for your new loan must be 4 years from the date that your name was removed from title to the home that was short sold.

USDA Rural Development Loan – If you are buying using a USDA loan, the Date of the Credit Approval for your new loan must be 3 years from the date that your name was removed from title to the home that was short sold.

Extenuating Circumstance Exception

An extenuating circumstances exception is defined differently depending on what type of loan you are applying for.

In my personal experience, FHA financing has the most strict definition of what is a circumstance outside of your control. The only exceptions I have ever seen from FHA is the death of a primary wage earner, or the permanent disability of a primary wage earner, that resulted in a significant loss of income, and ultimately to financial hardship.

Conventional financing describes a seemingly more lenient definition (from Fannie Mae Guidelines):

Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower’s claim. Examples of documentation that can be used to support extenuating circumstances include

  • documents that confirm the event
    • such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.; and
  • documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.

The lender must obtain a written explanation from the borrower explaining the relevance of the documentation. The written explanation must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate that the borrower had no reasonable options other than to default on his or her financial obligations.

The written explanation may be in the form of a letter from the borrower, an email from the borrower, or some other form of written documentation provided by the borrower.

Mortgage Included in Bankruptcy

If the mortgage debt was discharged through bankruptcy, Conventional and USDA financing allows you to use the waiting period from the discharge date of the Bankruptcy. That would make your waiting period 4 years for Conventional, and 3 years for USDA. The date of the short sale is not considered.

Working with a Creative Lender

As a direct lender in California, we pride ourselves in being on the cutting edge of creative financing solutions. When I say “creative”, I mean that we know our guidelines, and we know how to fight through the hurdles of complicated situations that others may not have the experience or patience to figure out.

If you would like to explore buying after a bankruptcy, short sale, foreclosure, or deed in lieu of foreclosure, you can either ask questions or leave comments below, shoot me an email directly, or give us a call anytime.

Our phone number go to our cell phones, and we are available when you have a question. Don’t be afraid to leave a message, I promise we will get back to you in a timely manner.

Posted by Anne James on March 3rd, 2015 1:45 PM

Dale Delliquadri, an Account Executive for Mountain West Financial, and Reliance Mortgage Service investor source for our VA, FHA & Conventional loans, has provided the waiting periods for Fannie, Freddie, VA, USDA and FHA loans after a foreclosure or bankruptcy. For Fannie Mae products, if you have foreclosed on a loan, the waiting period is 7 years from the completion date and 3 years for extenuating circumstances (90% LTV). For a short sale or deed-in-lieu the waiting period is 4 years and for Chapter 7 bankruptcy the waiting requirement is 4 years from the discharge or dismissal date and 2 years for extenuating circumstances. For Chapter 13 bankruptcy, there is a 2-year waiting period from the discharge date, a 4-year waiting period from the dismissal date and a 2-year waiting period for extenuating circumstances. With Freddie Mac and LP Super Conforming loan products, the waiting period after a foreclosure is 7 years from the completion date, and for a short sale or deed-in-lieu the waiting period is 2-4 years. If you have filed for Chapter 7 bankruptcy, the waiting period is 4 years from the discharge or dismissal date and if you have filed for Chapter 13 bankruptcy the waiting period is 2 years from the discharge date and 4 years from the dismissal date. FHA loans are the most forgiving when it comes to derogatory credit events.

His information went on. The waiting period after a foreclosure is 3 years and for a short sale or deed-in-lieu the waiting period can be anywhere from 0-3 years from the completion date. If you have filed for Chapter 7 bankruptcy, the waiting period is 2 years and if you have filed for Chapter 13 bankruptcy, one year of the prepayment period has to lapse in order to qualify. For VA loan products, the waiting period after a foreclosure, short sale or deed-in-lieu and Chapter 7 bankruptcy is 2 years for a loan less than $417,000 and 7 years for a loan greater than $417,000. If you have filed for Chapter 13 bankruptcy, the waiting period is 7 years for a loan amount greater than $417,000, but it's mandatory to finish making all payments prior to qualifying. Finally for USDA loans, the waiting period after a foreclosure, short sale or deed-in-lieu and Chapter 7 bankruptcy is 3 years and one year of repayment has to occur for Chapter 13 bankruptcy.

Posted by Anne James on December 27th, 2014 7:56 AM

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