Note:  This article is by credit expert Mike Payne.  Read it carefully and be sure to check out Mike’s free resources over at http://www.FixMyUglyCredit.com!

FICO’s latest report stuns economists, stating 43.4 million people with 599 credit scores or worse!  43 MILLION!

If this stat is not ugly enough for you, try this one: another 112 million possess what is termed “bad” credit.

Bottom line: debt collectors smell easy paydays. They know they can scream, threaten & twist your arm until you pay what they demand.

In my last article, I talked about re-aging, just one of many powerful debt collection tools debt collectors utilize ILLEGALLY to chase you beyond your state’s legal collection limits.

In this article, you will discover another sneaky trick debt collectors use to STEAL your money and DROP your credit scores.

Paying off past debt will not improve your credit. In fact, 3 reasons why you should be careful about paying off alleged debt:

  1. Paying off alleged debt updates bad credit account to current. Your credit scores derive from most recent 24 months, and 35% of your credit scores derive from payment history. You pay off a bad credit account the “wrong” way and you lose your money and your credit scores.
  2. Alleged bad credit account might be outside legal statutory limits on collecting.
  3. Paying off one collector typically opens door for yet another debt collector to pound on your door wanting to collect.

Two likely situations occur, demanding you attempt debt settlement:

  1. You want something that demands you get rid of this bad credit account.
  2. You have a debt collector bearing down on you with a lawsuit.

In the first situation, absolutely do NOT allow anyone but you to pull your credit, especially a mortgage lender.

To settle and improve your credit scores according to #1 demands you negotiate favorable reporting (or deletion) in exchange for money but only if:

  1. Alleged debt is yours.
  2. Debt is validated.
  3. Debt is within statutory limits (for your state).
  4. Debt collector agrees to provide signed letter clearly stating (it) will delete or update xyz account with each of 3 credit reporting agencies. **Don’t believe a debt collector’s verbal assurance it will delete or update. Get it in writing.**

In the above, if you have proof the debt collector has violated Fair Debt Collections Practices Act (FDCPA), use these violations for leverage.

However, if a debt collector sues you, you must:

  1. Get an attorney from www.naca.net. Avoid the pro se approach. Too dangerous.
  2. Confirm 100% the alleged debt is yours?
  3. Confirm the debt collector is legally permitted to sue you in your state.
  4. Confirm you were served according to your state’s laws.
  5. Confirm alleged debt is reported 100% accurately on all 3 credit reports. That is, is the original creditor correct? Is the debt collector legally permitted and registered to collect in your state? Were you “dunned?” Did you respond to the dunning letter within 30 day statutory limit? Is the account number the same across your 3 reports? Is the payment history the same across your 3 reports? Is the amount the same across your 3 reports? You get the picture here?
  6. Confirm the Date of First Delinquency on your Equifax report. That is, what is the date (month/year) you went delinquent?
  7. Confirm you have not signed anything admitting the debt and promising to pay, even a penny? Debt collectors try to get you to agree in writing to make a token payment so they can reset statute of limitations.

Who knows, these debts already might be outside your state’s statute of limitations, which means they are time-barred and you’re home free.
Always remember, a debt collector can sue you to scare you into paying. Debt collector knows it has no case against you. There’s no proof the debt is yours. Chances are, your attorney will send the debt collector’s counsel a letter stating debt collector has filed ‘materially inaccurate information’ with the court.

Stay turned for my next article: How to add good credit when no creditor wants to give you a chance. Credit repair is just one aspect. You have to have active, seasoned (good) credit as well.

Disclaimer: Credit Advocate Mike Payne is not an attorney and is not dispensing legal advice. This information is to be used for educational purposes only. If you are contacted by a debt collector, please refer to your legal rights under Fair Debt Collection Practices Act and strongly consider consulting with an attorney who specializing in FDCPA.

Check out Mike Payne’s training materials over at http://www.FixMyUglyCredit.com!