If you are preparing to purchase a house or a vehicle, you should closely examine your credit report and determine what you can do to improve your credit score. It’s advisable to begin this process at least 6 months in advance.  If you have a spotty record from the past, it likely includes charge offs.  Scorecrafters customers often want to know if it makes sense to payoff these debts now that they are in the hands of a debt collection agency. The short answer is not always yes.

A charge off on your credit report means the original creditor has determined the debt is unrecoverable and they have since sold it to a collections agency. For the collections agency, recouping the initial investment and making a profit is solely dependent on getting you to pay that debt. They will aggressively pursue this goal through phone calls, letters and recent reports indicate they are even utilizing social networking sites such as Facebook to contact debtors.

If you receive a settlement, a raise or other large cash inflow, you first need to determine if the collection agency is going to pursue obtaining a judgment against you. Keep in mind that the charge off is going to remain on your credit report for seven years, even if you pay it off. So unless the collection agency feels your debt is sizable enough to warrant the expense of them going to court to obtain a judgment, which will also stay on your record for seven years, it is not worthwhile to pay off a charged off debt.

The two key exceptions are if the debt collection agency is willing to delete the item from your credit report or if the amount is owed to a bank for overdraft charges. If you attempt to open a bank account in the future, you will likely be denied if a bank closed your previous account and you never paid the overdraft fees charged.

When you are trying to improve your credit score, pay charged off debt only if the creditor provides an agreement in writing that the item will be deleted from your credit report. Otherwise it will show you paid it off – but the impact on your credit score will be minimal at best. Also keep in mind that if the debt is slated to roll off your credit report within eighteen months, it is generally not worth spending your cash to pay it off. Your resources would be better used toward “newer” blemishes slated to stay on the credit report for several more years.

If you have concerns about items showing up on your credit report, contact Scorecrafters today. We can provide you a detailed analysis about your credit report and make recommendations about how you can improve your credit score.

Several years ago, the New York Times discussed a potential upcoming phenomenon: that as more and more families found themselves upside down on home mortgages, they would simply walk away from the debt.  At the time, many believed that very few people would actually follow through on such a strategy.  Experts felt that most borrowers felt bound to deal with the debt and that they would not want to risk the significant and long-term damage such an action would have on their credit score.

To address the situation, the federal government actively developed programs and encouraged home lenders to begin working with homeowners owing substantially more than the house was worth. Unfortunately for all concerned, this program has not been quick – and in fact, many home lenders are dragging the process out, even for those who started out with good credit scores. The number of homeowners underwater on their home loans has dropped from 30 percent to 23 percent according to a Fannie Mae recent report.  As more and more families deal with long term unemployment and are frustrated by the lengthy process to renegotiate, however, some are beginning to consider walking away as the best option available.

A recent National Housing Survey shows that in the first quarter of 2011, there was a slight improvement in the sentiment that the economy was moving in the right direction.  This has inspired some to feel as though this is a good time to buy a house.  About thirty percent of the people polled believe that home prices will get better in the coming year. Unfortunately, however, homeowners’ confidence in improved value of their homes continues to decline. In January 2010, it was at 51 percent.  By June 2010, it fell to 46 percent – and now sits at 44 percent.

Presently, nine out of ten homeowners do not expect to walk away from situations where they owe more on their mortgage than the house is actually worth. But the idea that it is OK to walk away has nearly doubled from 14 percent in January 2010 to 27 percent.

The red flag to lenders is the fact that among homeowners who are delinquent, 33 percent have considered defaulting, and 20 percent considered it “strongly.”  Even more startling is that fact that if a homeowner knows someone who has defaulted, they are now far more likely to do it themselves.  Unemployment and the lack of cooperation by home lenders, many of which home buyers now feel dealt with them unfairly, are factors in this growing idea of deliberately defaulting on their mortgages.

Despite the satisfaction of punishing home lenders this option may provide, it is not one to be considered lightly because the long-term impact on your credit scores is significant – and will last for a very long time. Contact Score Crafters to learn more about how this will affect your credit score and what you can do to further prevent damage.

Your prince (or princess) charming has finally arrived and you are joyfully looking forward to walking down that aisle during this wedding season. However, have you considered the impact of a horrible credit report on the relatively blemish free record you have worked to maintain? There are a few important things you should keep in mind before you join your credit reports together to ensure a real “happily ever after.”

Financial stress and issues are one of the leading reasons marriages end in divorce. Beat the odds by proactively discussing your individual financial philosophies and financial health when the relationship begins to become serious. This allows ample time to work through your different point of views and help each other grow in this important area of your lives.

Sometimes couples try to hide the dirty details of the true condition of their finances. However, dealing with it openly and honestly is the key to a healthy relationship – and can prevent speed bumps down the road.

With couples spending over $10,000 for the ring and wedding ceremony, quite often, if you do not have a conversation about your approach to finances, you will quickly run into problems. Not to mention, the condition of your credit score will certainly impact your ability to pay for your dream day. For example, do you plan to use credit cards and other revolving debt to pay for the wedding? Do you really want to spend 3 – 5 years paying off your wedding?

To get your intended’s credit in order, even if your fiancé would prefer to ignore it all together, it’s important that you convince your better half to check everything out and deal with any issues on the report itself. Perhaps there is incorrect information or even evidence suggesting identity theft.  Scorecrafters can determine what actions are needed to clear up as many of these items as possible.

Until the credit report is cleaned up, it is important that you do not open a joint checking account or take out any loans together. This will prevent a negative credit report from affecting yours. Once you begin using credit together, your credit scores become entwined, meaning that your fiance’s negative scores can impact yours.

It is important to deal with this quickly because it will severely limit the type of home or vehicle you can purchase. In fact, to get a mortgage, your spouse would have to sign an agreement that they have no financial stake in the property – even if you have spotless credit and can afford the house based on your income alone.

Before you walk down the aisle, call the team at Scorecrafters.  We can provide the analysis and education needed to make smart decisions regarding how to clean up your significant others credit report.

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