Friday, September 20, 2013

Going from Bad to Worse – Collections are a Curse!

What do you know about collections? I get a lot of questions like: How long can they stay on my credit report? What effect do they have on my credit score? What’s the best way for me to pay them off and get them out of my life? 

Do you wonder about these things? A lot of folks do. Every day I get questions from our members about collections and how they affect their credit. Let’s see if I can give you some answers!

A collection takes place after we have been delinquent on a payment. That payment can be on a utility, a loan or a payment for other services where you may be billed later like a carpet cleaning. Technically, you can be late up to 89 days on your utilities like your water bill, heating bill, or even your phone or cellphone bill, even that invoice from the carpet cleaner. So long as you pay it by the 89th day, no one at the credit bureau needs to know about it. Sure, the water company might charge a late fee or the cellphone provider might temporarily cancel your internet service, but it will not appear on your credit report and cost you a reduction in your credit or “FICO” score.

But, if you allow that bill to go unpaid that additional day so that is it 90 days late, your credit score will suffer. As a general rule, most businesses turn unpaid debt that is 90 days old to their internal collection departments or they may sell unpaid debt to a collection agency for further collection. What that means to you is a severe beating of your credit score. If you had an excellent score, it is now just okay. If you had a good score, your score has dropped significantly. An unpaid collection on your credit has the same power on your score the first day as it does seven years later when it expires and drops off your report! Unpaid collections drag your score down and prevent you from accessing future credit on good terms and rates.

My debt went 90 days delinquent and now a guy named Ralph is calling me from the collection agency. What can I do to stop this? You have a right to privacy and can write them a letter requesting they stop calling you. That’s the law and it works! Write the letter telling them to stop calling you and send it certified mail to the collection agency. Then, they can only call you to tell you they will stop calling or if they decide to take further legal action. Otherwise, all phone contact stops. Remember to keep a copy of your letter!

However, the best recommendation is to pay it and get it out of your life. This sort of debt is not your friend. Once you pay a collection, it changes from an upaid, also known as an open collection, to a paid or closed collection. Immediately upon paying it, your credit score will bump up a bit. As time goes by and the debt is 24 months, 36 months, and further into your past, you will see your score improve. With the collection’s status changing from an open/unpaid collection to a closed/paid collection on your credit report; it will still be a negative item, but much, much less than a collection that is unpaid. It will remain on your report for the balance of the seven years after you have paid it; i.e. if you pay it after two years, it will show as a paid collection for the five remaining years. 

With older collections some agencies may be inclined to provide you a fairly steep discount to pay them. Collection agencies buy your debt at a discount. You just have to ask for a lower pay off amount and start negotiating with the representative. If you decide on an amount, get it in writing and attach your check to it when you pay it. Then you have a contract with the agency. Do not send any money until you get your agreement in writing. 

Also, good debt offsets bad debt. This means that if you have other credit obligations besides that one debt that went bad, each time you make a payment on them you will improve your credit position. On time payments and keeping your debt balances low and under control are the keys to improving your credit score.
Questions? Ask the Your Credit Union Guy, Greg Meyer at
*   *   *
 Our next Credit Myths Financial Workshop will take place this Wednesday Sept. 25th at our Main Office at 6:30pm. If you wish to join us, please contact me at or 408-365-6328 to reserve a spot. Don't be shy. We have space! 

Our October Workshops will be held at our Sunnyvale Financial Center on El Camino @ Fair Oaks in Sunnyvale. 

Auto Financing 101 
October 16th - 6:30pm to 7:30pm
Learn how to plan for, research, and negotiate your deal and financing for your next car. Be a step ahead of the car dealer. Take this class! 

Credit Myths
October 23rd - 6:30pm to 7:30pm
What are the top ten myths of credit? We will tell you and reveal the truth behind these myths. 

Both will be held at our office at 563 E. El Camino Real, Sunnyvale CA
Please RSVP with me at or 408-365-6328 to reserve your spot.

Friday, September 6, 2013

Money Scams – Everyone wants your Money!

There are a lot of scams out there. People use them to separate you from your goods and money. One of the latest in the San Francisco Bay Area is the “Snake Scam.” This is where a nice looking lady in an Animal Control uniform appears at your door and tells you that there is a snake infestation in the neighborhood. She needs to show all the members of the household where she will set the traps. Once the lady has you in your backyard, her associate is pillaging your home for cash and jewels. They can also present themselves as a gas & electric worker or a cable TV installer. Ask for ID from anyone attempting to enter your home to perform services. If you are suspicious, call the company and check on them before allowing them in. If they are scamming you, they will run away.

Another popular scam used on older people is the “Lottery Ticket Scam.” Two people approach the “Mark” and one will say he has the winning lottery ticket. He will have a ticket with the winning numbers purchased on the date of the lotto drawing. However, the time is after the drawing, but the victim does not usually see that. The scam is that the person with the ticket is an undocumented alien and cannot cash the ticket and needs a citizen to cash it for him. The victim is asked to put up thousands in “good faith” money in cash. Yes, eventually the bad guys disappear with the good faith money and the Mark, our victim, is left holding a worthless lottery ticket.

Let’s not be victims. Let’s do some things that will protect us. Sometimes, little things make a big impact.

1. On all debit and credit cards, take a permanent marking pen and write, “Ask for ID” in the signature portion on the back of all your cards. Don’t sign it. You are only giving the bad guys an example of your signature to copy and forge. The idea is when a thief is buying a big ticket item he gets stopped when asked to present ID. Per Visa, a merchant may ask you to sign the card, but cannot refuse your transaction if you produce valid government identification such as a Driver’s License or State ID Card.

2. Utilize a good firewall and antivirus program to protect your computer and any data from hackers and spammers. A good firewall makes your computer anonymous to the internet, meaning your computer and your transactions cannot be seen by hackers. Good internet security software might cost as much as $60. Never download or click on links from someone you do not know. What is your peace of mind worth today?

3. Consider electronic banking and bill pay to avoid ID Theft. -Paying your bills with a check provides a thief with your name, address, bank routing number and your account number, as well as an example of your signature. Online Bill Payments are electronic and leave nothing like that to be used against you. Plus they save on the cost of checks and postage.

Utilize e-statements instead of a paper statement mailed to your mailbox. It’s easy for thieves to access your mailbox during the middle of the day. E-statements provide access to your account transactions and details quicker and are more secure. Not to mention they save on paper and postage, so you’re helping the environment. And if you need a copy, you can download and save your statements or print them from your home computer.

Consider “Alerts” with online banking. Setting up alerts can provide you with information on what’s happening to your accounts at any time, including transfers, withdrawals and deposits.

4. If you don’t want to use online banking, don't mail your bills by sticking them in your mailbox to be picked up by the postman. Thieves patrol streets on the 3rd thru the 5th of the month and after the 15th to fish for money in bill payment envelopes. Mail your bills in a U.S. Postal mail box or at the post office only!

5. Shred old banking documents you no longer need. It keeps your personal data away from thieves. If you don’t have a shredder, I would bet your local credit union branch will help you by taking a small stack of documents and adding them to their secure shredding. Also, many office supply stores offer secure shredding at low prices.

*          *          *

Free Financial and Business Workshops presented at Meriwest Credit Union

Writing an Effective Business Plan and Access to Business Capital
  • Write a business plan that gets noticed!
  • Gain an understanding how lenders view business loan applications

Sept. 12th – 6 PM
Meriwest Credit Union Main Office
5615 Chesbro Ave
San Jose CA 951123
Please RSVP with Dan Golding at or 408-632-4180

Real World Budgets for Young Adults
  • For Teens and College Students: Learn about money while building your post college budget!
  • Start managing your money today!

Sept. 18th – 6:30 PM
Meriwest Credit Union Main Office
5615 Chesbro Ave
San Jose CA 951123
Please RSVP with Greg Meyer at or 408-365-6328
Credit Myth and Repair
  • Learn the Top Ten Myths of credit that are not necessarily true!
  • Learn how to correct errors on your credit report.

Sept. 25th – 6:30 PM
Meriwest Credit Union Main Office
5615 Chesbro Ave
San Jose CA 951123
Please RSVP with Greg Meyer at or 408-365-6328