There is a big misconception about what credit repair really is. Many people believe that the data reporting on their credit reports are really linked to the actual debts. They have gotten the notion that if you remove a debt/account from their credit report they are no longer liable for the debt. That is simply not true. The truth is credit repair is not for everyone.
Armeis came to us with a very unique situation. She had a few inaccurately reporting accounts and needed her personal information updated. She had paid all her current bills on time and was able to buy a new car. She was a responsible person so she wanted to clean up and optimize her credit. When thinking about our perfect client, she was a customer sent to us from the Gods! Then something terrible happened that disrupt her life leading her to ask us a great question.
If you can believe it, one month into our service. Armeis wrecks her beautiful new car and the insurance company doesn’t want to pay. Talk about bad luck. She asked us if we can just remove the account from her credit report. She was thinking that if an account is deleted from her credit report the debt just goes away. She was hoping that her $20,000 plus car loan could be completely erased and she could go on with her life and buy another car.
We regretfully had to tell her that the credit bureaus only report data. They are data collectors and have nothing to do with the debts they report on. Thus, when an account is removed from a persons credit report the debt still exists with the company owed. Another point to make, if the last payment you made on the debt (date of last activity) is under your states statute of limitations for collecting a debt then the company can take you to court and possibly place a judgement, garnish wages, etc. to collect what is owed. So in this case, simply removing an account from her credit report would not help her at all.
So, what would her options be? That is really not a simple answer especially when it comes to preserving your credit worthiness. I felt that credit repair was not a good option. I suggested that she decide based on what she could live with. Here is what I thought her options were:
- The car was not salvageable but if she really wanted to preserve her credit she could pay the car note for the next 5 freaking years. In my opinion, this option sucks!
- She could try to settle with the bank to satisfy the loan. However, in most cases this would destroy her credit because the comment “settled” on your credit report is almost like charged off as it applies to your credit scores. Over time her credit scores will recover. This option would require that she have access to cash to settle.
- She could file bankruptcy and start new. Albeit, this option will have an effect on her credit, she could recover and start rebuilding immediately after the bankruptcy is discharged. Which means what – A NEW CAR!! It also means you have to wait to buy a house at least 2 years and the BK could be an obstacle to other opportunities like business credit, etc.
So, you see she had some real thinking to do on the matter. We definitely did not make any suggestions to her, we just laid out some options for her. As difficult as her circumstance was she decided to file for Bankruptcy. Which means after everything is complete with the filing we make sure everything is reporting accurately on her report.