How To Remove Negative Items From A Credit Report
A version of this blog post on How to Get Items Removed From Your Credit Report was originally published by our content partner Money. They are a digital magazine and a resource for personal finance news and information.
Having a good credit score is an important part of most peoples lives. It lets lenders know how trustworthy you are with borrowing money. This can include everything from asmall business loan to a big financial commitment like a home mortgage.
Yet, in 2020, most people still have no idea how their credit score works and the importance of having the correct information on their credit report.
Here are some things to keep in mind next time you think about your credit score.
Paying Your Spouse Their Share
If you want to keep the home and are not interested in refinancing, then you can pay your spouses share. If either one of the spouses incomes is high, then you can better pay your spouses share.
If you want to get cash, you can refinance for a certain amount in their name and use it to clear your spouse with their share. Make sure that you are qualified for refinancing.
What’s Worse Delinquent Or Derogatory
“Derogatory” is the term used to describe negative information that is more than 180 days late. Accounts that are less than 180 days late are referred to as “delinquent.” … Settling a debt and not paying it in full as originally agreed is a serious negative issue and would therefore be described as derogatory as well.
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Waiting Period After Timeshare Foreclosure
Is A Timeshare Foreclosure Considered Mortgage Foreclosure? A timeshare, foreclosure on the credit report is treated like regular residential home foreclosure. As reported on a credit report, it can significantly drop credit scores. A timeshare, the foreclosure will stay on the credit report for 7 years like any other foreclosures. Timeshare Foreclosure Considered Mortgage Foreclosure? On the credit report yes, but not with mortgage lenders. Timeshare foreclosures have been skyrocketing after the 2008 real estate and banking collapse. Most lenders will treat Timeshare Foreclosure Considered Mortgage Foreclosure. If a lender treats timeshare, foreclosure considered mortgage foreclosure, then they will require a three-year waiting period. FHA Borrowers with a foreclosure on their record need to wait 3 years from the recorded date of the foreclosure for them to qualify for FHA Loans. Many lenders can treat a timeshare, foreclosure as a regular foreclosure. But per HUD mortgage lending guidelines, a timeshare is not treated as a regular foreclosure and is treated as consumer debt. Gustan Cho Associatesdoes not treat Timeshare Foreclosure as a real estate foreclosure so we do not have any waiting period after foreclosures on timeshares.
The Solution: Release Or Refinance
When an ex-spouse is removed from the title to the property, he or she will usually also want to be removed from the loan. This protects the ex-spouse from responsibility if the former spouse does not make payments on time or if the mortgage is foreclosed. There are two ways to remove an ex-spouse from a loan: Release and refinance.
- A lender may release the ex-spouse from the loan. If presented with a divorce decree and a quitclaim deed, many lenders will remove the ex-spouse and leave the loan in the name of one spouse only. This is true even for loans underwritten by the Veterans Administration or other governmental organizations.
- Refinancing creates a fresh loan in the name of only one spouse. The prior loan is paid off as part of the refinancing. After the refinancing, the ex-spouse that is no longer listed on the property and is not responsible for past due mortgage payments, liens, or other property-related debt.
Issues sometimes arise when the release or refinancing is not done during the divorce. An uncooperative ex-spouse may try to require additional payment before cooperating in the transfer and/or release of the loan. Often, these unreasonable demands violate the divorce decree could create legal liability for the uncooperative spouse. In this scenario, the spouse seeking cooperation may seek to have the uncooperative spouse declared to be in contempt of court for ignoring the court order.
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Can A Collection Agency Report An Old Debt As New
Collection agencies cannot report old debt as new. If a debt is sold or put into collections, that is legally considered a continuation of the original date. It may show up multiple times on your credit report with different open dates, but they must all retain the same delinquency date. They should also all be discharged on the same date seven years after the original open date.
Removing A Name From The Deed
Regardless of which method you use to take your exs name off the mortgage, youll also need to get their name off the deed.
You usually dothis by filing a quitclaim deed, in which your ex-spouse gives up allrights to the property.
Your ex should sign thequitclaim deed in front of a notary. One this document is notarized, you fileit with the county. This publicly removes the former partners name from theproperty deed and the mortgage.
If you refinance to removethe borrower, the title company will remove the spouses name from the deed foryou.
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Do All Late Payments Appear On My Credit Report
Generally speaking, creditors must wait until a payment is at least 30 days past due before reporting it to the credit bureau. If you have a good relationship with your lender and a good payment standing, its possible your lender may even extend that time to cut you some slack but could still charge you a late fee. If your payment is 90 180 days late, your lender could also take it a step further and send a notice of late payment to the credit bureau which could result in them actually closing your account.
How To Remove A Foreclosure From Your Credit Report
Once a homeowner has fallen behind on their monthly mortgage payments by at least 120 days, mortgage lenders generally begin foreclosure proceedings on the home. Having negative items on your credit report such as foreclosure can be damaging to your credit scores, even if youre already recovering financially from defaulting on a former home.
While it can be difficult to prematurely remove a foreclosure, its not impossible. If youre close to the date it should automatically drop off, you may also consider waiting. No matter what plan of attack you choose, well take you step-by-step to figure out the best course of action.
Contents
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File A Dispute With The Credit Reporting Agency
Once you have your report, make sure to look through each account and see if there are creditors you dont recognize. Its also important to check whether older derogatory items are still being reported.
If you do find errors in your reports, its time to initiate a dispute directly with the reporting bureau through its website or by mail. This will prompt an investigation on the bureau’s part.
Bear in mind that you have to dispute the entry with each agency to make sure the removal is complete across the board.
How to file a dispute online
Each bureau Equifax, Experian and TransUnion has a section dedicated to walking consumers through the online dispute process. Once you create an account, you can file as many disputes as you need and check their status, for free.
How to file a dispute letter
You can also send a dispute letter to the bureaus, detailing any inaccuracies you’ve found in your credit file. When writing your letter, provide documentation that supports your claim and be precise about the information you are challenging. The Consumer Financial Protection Bureau recommends enclosing a copy of your report with the error circled or highlighted.
Depending on the information being disputed, these are some of the documents you can provide to help aid the investigation:
- Copies of checks
Include this dispute form with your letter.
Can You Buy A House With A Foreclosure On Your Credit Report
In many cases, you dont need to wait the full seven years for a foreclosure to fall off your credit report to buy a new house. Depending on the type of mortgage loan you choose, you could qualify for a new home loan in as quickly as two to three years from your filing date.
Youll have a better chance of qualifying if your foreclosure was a result of a financial hardship, such as a medical illness, divorce, or unemployment. If your foreclosure was a result of poor financial management or a high adjustable rate mortgage, you may have to wait longer.
Youll have better luck with a government-backed loan such as an FHA compared to a conventional mortgage. If youre serious about putting your homeownership goals on the fast track, consider talking to a mortgage lender about your situation. That way, you can get an idea of what you need to do to qualify, what your options are, and how fast you can start applying.
Plus, you can get a clearer idea of what kind of rates and terms to expect, since a foreclosure history will almost certainly cause you to get higher interest rates. When you talk to a lender directly just for gathering information, you can get a lot more details than you would by applying online. You also dont have to worry about an application dragging your credit scores down even further.
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Send Letters To The Credit Bureaus
If the debt really is too old to be reported, its time to write to the credit bureau to request its removal. When you dispute an old debt, the bureau will open an investigation and ask the creditor reporting it to verify the debt. If it cant, the debt has to come off your report.
The Fair Credit Reporting Act requires credit bureaus to correct or delete any information that cant be verified or that is incorrect or incomplete, typically within 30 days. Otherwise, they are in violation and you are within your rights to file a lawsuit, as well as file a complaint with the Consumer Financial Protection Bureau.
Make sure to craft a case so strong that the creditor will have to acknowledge that its correct or present tangible evidence to the contrary. Include copies of anything that supports your claim, such as copies of court filings that show the correct date for a judgment or bankruptcy or a letter from your original creditor showing when the account became delinquent.
If a collection agency is reporting an account as a different debt, include any paperwork showing that the two accounts are really the same debt.
Send this letter certified with a return receipt requested so that you can prove when it was sent and that it was received.
Why this is important: If you can prove that the debt is older than legally allowed to show on your credit report, the bureau can remove it.
Do I Have To Refinance After A Divorce
Refinancing after a divorce isnt required. Many couples decide that neither of them can afford the home and choose to sell it. Their lender might also allow the partner keeping the house to assume the mortgage, relieving the other partner from obligation.
Divorcing couples sometimes reach other agreements. They both might continue to own the home jointly and not change the mortgage even though only one of them lives in it. Sometimes the home is quitclaimed to the spouse who will live there but the other partner remains on the mortgage a strategy that puts the departing spouse at risk.
Refinancing is often the best solution, since taking a new mortgage can generate enough cash-out to cover the vacating spouses equity. But its not full proof. The spouse hoping to keep the home will have to qualify for a new mortgage on his or her own. That means reaching the financial benchmarks that the lender sets for a loan.
Criteria for refinancing includes:
- A credit score of at least 620 for a conventional mortgage and a slightly lower score for an FHA loan.
- A maximum loan-to-value ratio of 97% for a conventional loan and 97.75% for an FHA loan.
- In most cases, a maximum debt-to-income ratio of 43%.
Since what might have been a two-income household becomes a single-income household after the divorce, its possible that spouse who wants to stay in the home wont have enough income to meet the mortgage requirements.
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Negotiate With Debt Collectors
If a debt collector refuses to remove a collection entry in exchange for payment or you cant afford to pay off the amount owing in full, you might look into a debt settlement. A debt settlement means that youre able to settle your debts by paying a lesser amount than is owed. This wont always get rid of the collection entry from your credit report, but it will show that the debt is paid, improving your credit score.
Remember, if youre doing a debt settlement, make sure to get everything in writing. Youll want something in writing to prove the account is current with the debt collector.
Can I Get A Foreclosure Removed From My Credit Report
When you borrow money to finance a home purchase, the home you buy acts as collateral on the loan. If youre not able to make your monthly mortgage payments, your lender may take your home through a legal process called foreclosure.
Mortgage lenders and servicers generally report foreclosures to the three major , which will then add it to your credit reports. As long as the foreclosure is legitimate, it cannot be removed from your credit reports until it has run its full seven-year credit reporting lifecycle.
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Avoid The Following Strategies
While the following methods can be tempting options when trying to repair your credit, they can often cause more harm than good. Stay away from the following:
Closing a line of credit that is already behind on payments
Closing a card thats behind on payments doesn’t eliminate the debt. In fact, it can lower your credit score by increasing your debt-to-credit ratio, also known as credit utilization percentage. This ratio represents the amount of credit you’re currently using divided by the total amount of credit you have available.
For example, if you have two credit cards, each with a maximum credit limit of $5,000, your total available credit is $10,000. Owing $3,000 on one card and $2,000 on the other would mean you’re using 50% of your total available credit.
To improve your credit score, experts recommend keeping your credit utilization under 30%. Following the example mentioned above, that would mean using only $3,000 or less per cycle.
If you close one of your credit cards instead of paying it, you’ll have less available credit. Creditors evaluate your debt-to-credit ratio when you apply for new cards or loans. If your ratio is over that threshold, they might classify you as a high-risk borrower, offer you less attractive interest rates or even deny you credit altogether.
Filing for bankruptcy
There are two types of bankruptcies available for individuals: Chapter 7 and Chapter 13. A third type, Chapter 11, is meant for businesses.
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How To Remove Negative Items From Your Credit Report
First, it’s important to know your rights when it comes to the information in your credit history.
Under the Fair Credit Reporting Act , credit bureaus and lenders must ensure that the information they report is accurate and truthful.
This means that, if you find mistakes in your , you have the legal right to dispute them. And, if the information disputed is found to be incomplete or erroneous, the bureaus are obligated to remove it from your record.
Some common credit report errors include payments wrongly labeled as late or closed accounts still listed as open. It’s also possible for your report to include information from someone else, possibly someone with a similar name, Social Security number, or identifying information.
Bear in mind that correct information cannot be removed from your credit report. So, if your score is being dragged down by accurate negative information, youll need to repair your credit over time by ensuring you make payments on time and decrease your overall amount of debt.
Here are some tips to help you repair your credit history:
The Problem: Mismatch Between Ownership And Mortgage Liability
When couples purchase property, they usually finance it with a bank. The bank loan is secured by the property. In some states, the document that secures the property is called a mortgage. In others, it is called a deed of trust.
A mortgage or deed of trust may not match the title to the property. This can occur, for example, when both spouses are originally included in the loan documents, but only one spouse receives the property in the divorce. In this scenario, one spouse will own the property, but both spouses could remain responsible for the loan.
When an ex-spouse no longer owns the property but is still listed on the mortgage, he or she is responsible for debt on the property that he or she doesnt own. Failure to make payments could be reported to the credit bureaus and appear on that spouses credit report.
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