Came across an interesting series of articles about credit repair. No idea about the validity of it, but thought it may be an interesting discussion point:

The shocking truth about credit repair the banks don’t want you to know

The summary is that if you take pains to query older debt records on your credit history, then by dragging your feet and making it difficult for the credit history company to validate reported debts, then you may be able to get such debts wiped out from your record - because if the credit company cannot verify the existence of such debts within a reasonable time frame, then they are expected to strike off such debts from your record.

The third section is especially interesting:

The shocking truth about credit repair the banks don't want you to know part 3

And in summary:

The shocking truth about credit repair the banks dont want you to know part 5

Well, aside from my moral issues that say this is horribly, horribly, wrong. It is true. The problem is that once they find you out, your name goes to the top of the pile even if you send them spaghetti-covered napkins. Essentially you are ripping the company off by using these underhanded practices.

What's to stop them from making a "big" mistake right after you inquire about your credit report? Every time you look at it it will hurt your score a little bit after the initial inquiry, and your score can be royally messed up in countless ways. Also, if they can prove that you're defrauding them, there are even more severe consequences.

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Never sign intellectual property agreements...

You make some good points Mark, but there are other things to consider as well. Morals and credibility certainly do enter the picture, but unfortunately being a "good guy" often turns you into the sheep about to be slaughtered. Being honorable and forthright with these guys will often take you to the cleaners.

The majority of companies who offer credit realize they will have a certain amount of loss or "shrinkage", just like many other businesses do. Because of that, they tend to sell off their debt and write off the loss on their taxes. In a very real sense, the original lender has recaptured his loss from this tax credit. Once a collection company steps in, the rules of the game change tremendously.

First of all, once the debt has been written off, the collection company buys the debt for literally pennies on the dollar. If it has gone to two or three collectors, their investment is in the tenths of pennies/dollar. At the same time, they immediately start adding late fees and high interest to escalate the apparent balance.

Many of these companies cross the lines of legality on a regular basis. There are specific rules concerning collection activities including call times, proper identification, calling you at work, speaking only to the debtor, harassment, contacting neighbors and other family members and so on. These rules are so frequently broken that companies have been forced by the courts to close (opening under another name) or have stiff penalties imposed upon them. In spite of all this, they know there is big money to be made in intimidating these people.

With a cost basis of virtually nil, even a small token payment will earn them back their initial investment, and at the same time reactivate the account for reporting purposes and starting a fresh 7 years on the credit history.

If you choose to be honorable and avoid bankruptcy, It seems the best way to deal with these wolverines is to save some money up, then try to negotiate a payoff. Typical payoffs can range from 20-60% of the original balance. Never show them all your cards. They are liars and cheats. They are experts at the game and will kill you if you let them. Never give them access to your bank account information. Never write them a check from your bank account - they will clean it out, no matter what they agreed to.

Finally; ALWAYS, ALWAYS, ALWAYS, get the payoff agreement in writing before you give them any money. Be certain it includes their statement of closing the account and entering a "paid" entry on the credit report. Then be prepared to send them a cashiers check immediately to close the deal. This document is now one you need to keep forever, right along side your life insurance policy, so when they come knocking again in ten or twenty years, you have proof that is was paid.

This is great consumer information. So many people are blind to the ability of fixing their own credit, or even getting misinformation removed. Whether these practices are moral or not is negligible. At least with this information consumers can decide for themselevs how ethical to be in dealing with the companies that hold their lives in their grip.

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Warm Regards,
Melissa Fish

Home Loans, Health Insurance Quotes, Student Loans, Auto Loans

While Dru has very valid points, the bottom line is that if people put 1/10th the effort into paying their debts (or avoiding debt all together) that they put into attempting to sidestep their obligations, they would not be in that situation to begin with.

With that said, one of the most significant things that people overlook is that each state has a specific statute of limitations on debt. I currently have a collection agency that just "found me" about a charged off credit card from 15 years ago. The bottom line is that I am sure that I paid it years ago but have no proof. The truth is that it does not matter because the debt is no longer valid in the state of Maryland (3 year SOL) and has been off my credit report for around 7 years. I will get around to sending the a C&D letter one day to keep them from filling my mailbox.

Persoanlly, I think most people accumulate debt because they don't know any better.

The key is that assets buy liabilities but the majority uses liabilities to purchase liabilites.

The debt problem has been for quite some time a huge problem and it seem to increase in size due to very poor financial education, terrible spending patterns and on top of that a Fed that is incapable mostly due to Mr. Bernanke.

One reason to believe that the credit crisis is far from over and could have more negative impacts on the economy as a whole.

One problem of terrible spending patterns is that many refer to their home as an assets rather then a liability and used it as an ATM.

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It is not smart to play it safe but it is safe to play it smart.

Another thing to keep in mind, is speak with an accountant if you settle with one of these agencies. Let's say you owe $1000, and you negotiate it down to $400. The government considers that $600 difference as gross income, and you need to report it on your taxes as such. I cannot find the article where they had discussed this, so consult an accountant for specific tax advice.

Of course, that's the US Government for ya.