When my husband and I were dating, he told me he had several collections and had never run a credit report. I almost fainted. Immediately, a variety of advice spun out of my mouth at rapid speed. Once finished, I glanced at him and he was beyond overwhelmed. Not knowing exactly how to start completely unnerved him. The helper inside of me emerged and I found how to remove all collections off his credit report. Note: Some would advise to run the other direction; however, I chose not to. We all have our weaknesses. Together, we make each other whole. If we can be whole without one another, then marriage would not be necessary. On the other hand, if my husband would have chosen to keep his finances in shambles and not help, I would have walked away. He helped through it all and paid everything with his money.
Although I knew bits and pieces, actually being in collections was something I had never experienced. The first step was to obtain his credit report so I could get a better idea of what we were dealing with. As I looked at the report my insides were screaming. I slowly turned to him and smiled. Okay, I thought to myself, this is going to take some serious work! We took the problem one step at a time. When we started, he was unable to obtain a gas credit card. Once all steps were finished, he was able to obtain a Chase credit card. The steps did work!!
The first step is to run a free credit report. Once all three reports (TransUnion, Equifax, and Experian) are downloaded, be sure to save both soft and hard copies each report.
Verify all information in each report is correct. If any information is incorrect, you should report it to the agency immediately (directions are on the report). For example, if you find incorrect information on your TransUnion report, complete their form and mail it to the address they provide on the report so they can update their records accordingly.
Create Accordion Folder
Creating an accordion folder will enable you to keep all documents organized and in one place. If folders are not for you, binders are another great way to stay organized.
List of debts
Make a list of your debtors from least to greatest. This can be done in Word, Excel, or good old fashioned pen and paper. I personally used pen and paper; however, you should use what you feel most comfortable with. Keep a copy of this document at the beginning of the accordion folder for easy access.
Decide how much you can pay each month. If you do not have a monthly budget planner, EveryDollar is a wonderful system that is very user-friendly. They have a free 15-day trial so you are able to try it out to see if you like it. After that, it is only $9.00 per month!! You are able to access this from your computer or smartphone so it ensures you stay on track no matter where you are.
Contact First Debtor
Once you know how much you can pay each month, contact your first debtor via phone to get the exact amount owed, set up a monthly payment plan, and get the mailing address. Tip: Sometimes they will lower the amount owed if you pay within a certain time frame so be sure to explain your situation. I once had a bill cut in half just by telling the creditor I wanted to pay the debt off as soon as possible and asked if there was anything they could do!
Send Monthly Payments
When sending your first payment, you should include a letter that states the amount owed and the monthly payment plan agreed upon. Always put the account number on your check. Make copies of both the letter and check and then send via certified mail (this can be done at the Post Office). Place the copies of the check, letter, and certified mail receipt in your accordion folder. Once you receive the certified mail green card in the mail, place it with the other documents in the folder. Now you have proof the letter was received and payment plan was agreed upon! Tip: All other payments can be submitted either via check or through online banking. Just be sure to always reference your account number.
When the last payment has been made contact the debtor to confirm you have a zero balance and the account has been closed, if necessary. Be sure to request a letter from them stating just that. Place the letter along with the other documents for that account in your folder.
You have paid off your first collections debt, yah, happy dance!!! Now go to the next on your list and repeat steps 6-8 and continue the process until all collections have been paid. Some amounts may be small and some may seem it will be eternity before they are paid. Do not give up! And, don’t forget to periodically call about the larger amounts to see if it can be lowered!
Keep All Documents
Once all collections are paid, keep all documents in the accordion folder(s) and place the folder in a safe place such as a fireproof safe or a safety deposit box at the bank. Another option is to scan everything and save it in a “cloud,” such as, JustCloud. I personally do both with extremely important documents.
People will look at your credit for numerous reasons. Employer, house loan, car loan, credit card, and the list goes on. Your credit report determines if you get the job/promotion, house, and low interest on loans. This is not something to take lightly!
Now that your credit report is clean, the money you were using each month to pay off debt should first be used to do something nice for yourself. A small reward for a job well done! Some financial gurus would not agree with me; however, when you are new to budgeting, climbing out of debt is huge! The KEY is to only use the amount you were using to pay off your debt and to pay CASH for the reward. Otherwise, you are opening the door to get right back into debt. And, keep the reward small.
Now it is time to take your finances to the next step, savings! Start by looking over your monthly budget and cutting out what is not needed so you can save more each month. Note: We do not have cable, just Netflix. Cable, dry cleaners, eating out, weekly pedicures, unnecessary clothes shopping, etc. can seriously hinder your finances. We have six savings accounts and pay cash for everything. More money in “Vacation Savings” means we can take a longer vacation and have precious family memories. More money in “Emergency Savings” means we do not have to worry about how to pay for a new washing machine or flat tire when the time comes.
Remember, you are trying to keep from having to do the above ever again!! Financial peace of mind is really a beautiful thing! Dave Ramsey is a financial expert and I highly recommend his books, no matter what stage you are in!
What do you do to ensure your credit report is clean?Charissa