How Long Can a Debt Be Reported to Credit Bureaus?

reporting debt bureaus

An unpaid debt, depending on its nature, can remain on your credit report for up to ten years in most cases.

Unpaid debts can put a dent in your credit score that can last for years. The type of negative item on your credit report – whether a late payment, bankruptcy or civil judgment – determines exactly how long the negative information stays on your credit report.

Seven Years of Bad Luck?

Under the Fair Credit Reporting Act, the length of time that negative information can remain on your credit report is limited. There are exceptions for such things as bankruptcies and unpaid tax liens, both of which can stay on your Experian credit report up to 10 years. The clock starts running from the date the creditor first reports the debt as delinquent. Items that are neutral or positive can remain on your credit report indefinitely.

Delinquency Date Doesn’t Change

The delinquency date is part of what determines when the debt comes off the credit report. The creditor may update the status of the account – for example, to report the debt as written off or turned over to a collection agency – but the change in status doesn’t change the timeline for removal. If you know you have old debts, even if they’ve since been paid, you may want to check your credit report and review it to verify the delinquency date for each negative item.

Going to Collections

If a creditor turns your debt over to a collections agency, the matter may end up appearing on your credit report as a closed account with the original creditor, or as an active account at the collections agency. The collections account will be listed as having been opened on the date the agency obtained your debt. Naturally, this will be later than the original delinquency date

Not Necessarily Out of the Woods

Be aware that just because an old debt drops off your credit report, that doesn’t necessarily mean you’re no longer responsible for paying the debt. Each state has its own law that determines how long a creditor or collections agency can continue to try to collect on a debt.

 

About the Author
Cam Merritt has been a professional writer and editor since 1992, specializing in articles about personal finance and law. He has contributed to USA Today and the Better Homes and Gardens family of magazines and websites. Merritt has a Bachelor of Arts in journalism from Drake University.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Credit Reports, Debt | Leave a comment

How to Teach Your Teenager the Importance of Paying Taxes

paying taxes

Paying taxes is a fundamental requirement for living in the Unites States. Educate your teenager and help them avoid tax penalties.

While paying taxes might not be a fun thing to do, it is a fundamental requirement of living in the United States. The responsibility to pay even stretches to children and teenagers who earn enough to reach the Internal Revenue Service’s income minimums. Whether it’s preparing a teenager to pay taxes now or letting him or her know what will be expected when landing a new job, explaining the basics of the tax system can save your child from surprises down the line.

Step 1

Describe the many services that the government provides, perhaps putting special focus on those that will be of interest to the teenager. Explain the concept of “public goods and services,” which encompass roads, defense, parks and recreation – and all cost money. Break it down for your child and explain how the government funds roads to their favorite skate park or public safety at their city amphitheater.

Step 2

Explain that the government collects income taxes from people who earn money. These funds are then allocated by the government in some other good or service.  Describe that taxes normally get automatically taken out of paychecks through a process called withholding but that your child will probably still have to file the correct income tax  forms to let the government know how much tax he or she actually owed.

Step 3

Teach your child the difference between owing taxes at the end of the year and getting a return from the Federal Treasury. For many Americans, sending in a tax return means that they get a tax refund check from the government, giving them back some or all of what they paid throughout the year, so filing a tax return could work out well for her. Owing simply means you didn’t pay enough in taxes throughout the year and getting a return simply means you overpaid.

Step 4

Explain that the IRS can add penalties and interest to the tax bill if it isn’t paid or if a return isn’t filed. Talk about how the IRS can collect unpaid taxes, interest and penalties.  If you fail to pay taxes, the IRS can file a notice of federal tax lien, which is a public record that can be accessed by the credit bureaus. Depending on the scoring model used, this can have a huge impact on your credit score.

Step 5

Tell your teenager about other taxes. Remind him or her that many purchases are subject to sales tax, which pays for state and local services. It can also be a good time to talk about state taxes, property taxes and other taxes that are tied to specific services and purchases like vehicle license taxes. It can be a great opportunity to teach your teenager about good credit management.

 

 

About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Budgeting, Debt | Leave a comment

Estimated Tax Payments & Your Credit

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estimate tax payment

If you didn’t have taxes withheld from your income during the previous year, you may be able to make estimated tax payments. Learn more.

If you didn’t have income taxes withheld from you income, you may be able to make estimated tax payments. The IRS provides the following information:

  • You may need to make estimated tax payments if you didn’t have taxes withheld from your income. This applies if your income is from self-employment, dividends, interest, or capital gains.  Making these payments during the year may help you avoid a penalty.
  • If you believe you may owe $1,000 or more in taxes when you submit your federal return, you may need to make estimated tax payments
  • In figuring out your estimated taxes, you can include tax deductions and credits that you’re eligible to claim.
  • You can use Form 1040-ES to figure estimate and figure what your taxes will be.
  • You’re able to pay your tax obligation online, by phone, money order, check, debit card or credit.

Failure to Pay Taxes Can Come with Penalties

Ignoring your taxes won’t make them go away. If you default on your taxes, the government has the option of filing a federal tax like and reporting it to the credit reporting agencies.  Thus, it can find its way to your credit report—negatively affecting your credit score.

If you think you may need to make estimated tax payments, but are unsure, consult with a credible tax-preparer who can guide you. Paying your taxes on time has its benefits—like helping you maintain a positive relationship with the IRS.

 

About the Author
Mark Kennan is a freelance writer specializing in finance-related topics. He has worked as a sports editor and published articles on a number of online outlets.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Credit Scores | Leave a comment

Retiring Alone? Advice for Solo Retirement Planning

Singles retire too! And saving for retirement is even more important when you know you’ll be entering your golden years solo.

Singles retire too! And saving for retirement is even more important when you know you’ll be entering your golden years solo.

It’s easy to find advice on retirement planning – and most of it is geared towards married couples. But singles retire too, and saving for retirement is even more important when you know you’ll be entering your golden years solo. Yet, studies by the Vanguard Center for Retirement Research indicate that singles save far less for retirement than couples do.

Singles saving for retirement have the same ultimate goal as couples – to have enough money to ensure they’ll have an adequate (or better) monthly income after they’ve stopped working. Singles have access to the same basic sources of retirement income that couples do, including Social Security benefits, IRAs, 401(K)s, employer pensions, and investment earnings.

However, singles need to give extra attention to certain areas of retirement planning. For example, if you are a widow or widower, you need to ascertain if you are better off taking spousal Social Security benefits or your own. If your spouse made more income than you did during your working years, his or her benefit might exceed what you would receive on your own.

Long-term care planning is also vital for solo retirees, who won’t have access to care from a spouse if they become unable to care for themselves. Long-term care insurance can help ensure singles don’t need to rely on the kindness of relatives or strangers for the help they’ll need later in life.

Housing is also particularly important to anyone retiring alone. Your retirement home should be just big enough to meet your needs without being a burden to take care of. The home and city where you retire should afford you easy access to health care, shopping and social or cultural outlets. Remember, you won’t need extra space to share with someone else, but you also won’t have a spouse to rely on to do all the driving or all the chores if you can’t.

 

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Budgeting, Retirement | Leave a comment

Do Parking Expenses Count for Itemized Deductions?

deducting parking costs

Itemized deductions can help increase your tax refund. The dollars you save can help you pay down debt—benefiting your credit score.

Can I Itemize My Parking Expenses?

Itemized deductions can help increase your tax refund, and each extra dollar you get back is an additional dollar you can use to pay down debt, which can be beneficial to your credit score.

According to Forbes magazine, when it comes to parking expenses, you are able to write off your costs as an itemized tax deduction if they are incurred when visiting customers for work. Whether you should deduct these expenses is up to you. Here is what you should consider:

Should I Itemize Other Tax Deductions?

Just because you’re eligible for an itemized deduction doesn’t necessarily mean you should claim it. On your taxes, you have the option to take either the standard deduction, which is $6,100 if you’re single or $12,200 if you’re a joint filer as of 2013, or the sum of your itemized deductions.

Learning whether you can itemize your deductions is a sensible pursuit though. For many, the standard deduction is easier. On the other hand, itemizing may be able to lower the amount you’ll have to pay in taxes.

A professional tax consultant can help you decide whether or not to itemize deductions or use the standard deduction.

  • Standard Deduction – A standard deduction reduces the amount of income for which you will be taxed.
  • Itemized Deduction –Allows you to use itemized deductions if your allowable itemized deductions exceed the amount of your standard deductions.

Tax Time and My Credit Score

How you spend your tax refund is a personal choice. Some people choose to invest in their retirement, some choose to embark on that long-awaited vacation, and others choose to stash it away in savings for a rainy day. Then there are those who use it to pay off credit card debt and bring down loan balances. Which are you?

 

 

About the Author
Mark Kennan is a freelance writer specializing in finance-related topics. He has worked as a sports editor and published articles on a number of online outlets.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Credit Scores | Leave a comment

Settlement vs. Charge-Off

resolving delinquent debt

Even though debt settlements and charge-offs can lighten your load of having to pay back a debt, they can have a negative impact on your credit score.

When it comes to credit card debt, one of the last things you want is a settlement or charge-off on your record, as it will show as a negative item on your credit report. Either one means that you’ve been seriously delinquent in paying your debts. While you can take some steps to minimize the damage, both settlements and charge-off accounts will affect your credit score.

What Is a Settlement or Charge-Off?

When you settle a debt, it means you don’t pay back the full amount you owe. A creditor will usually only accept a settlement if it appears that you can’t afford to pay back the total debt. This generally occurs when you have missed at least a few payments and if it appears that you don’t have the ability to pay off your debt. Rather than end up with nothing, a creditor may agree to a settlement. A charge-off means that a creditor has given up entirely on getting paid back and has recorded your debt as a loss. Typically, this occurs after about six months of non-payment but varies from lender to lender and can be as early as 90 days.

How Do Settlements and Charge-Offs Impact my Credit Report?

Both settlements and charge-offs are bad for your credit report. In both cases, the delinquent account stays on your credit report for seven years, even if you ultimately pay off the accounts in full. The reason for this is that your past behavior is considered a predictor of your future behavior. If you get an account charged off and later settle it for less than you owe, both notations will show on your credit report.

What Is the Consequence of Negotiating a Settlement or Charge-Off?

The negative impact on your credit score due to settlements and charge-offs begins will eventually lessen. However, any creditor that looks at your credit report will still see these notations for the full seven years. Any time you apply for a car loan, a home mortgage, or a new credit card, your creditor is likely to take your past actions into account. Depending on the creditor, this could result in a denied application. If you manage to get a loan, you may have to pay a higher interest rate to compensate the creditor for the extra risk involved in granting you credit.

Which Is the Lesser of Two Evils?

Both settlements and charge-offs reflect credit delinquencies. If you’re in the unfortunate position of facing a settlement or charge-off, consider which course of action will harm you the least. While negotiating a debt settlement of pennies-on-the-dollar can help you in the near-term, you may face long-term consequences from having an account listed as settled for less than the amount owed.

If you pay that account off, at least your credit report will show that you paid in good faith when you were able to do so. Letting an account drift to a charge-off could lead to lawsuits and judgments against you, which in turn could ultimately lead to bankruptcy.

 

 

About the Author
John Csiszar began writing in 1989 and his work appears in various online publications, including The Huffington Post. Csiszar earned a B.A. in English from UCLA and served 18 years as an investment adviser and certified financial planner.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Credit Cards, Credit Reports | Leave a comment

Pros & Cons – Bank Debit Card Usage

debit or credit

Debit card or credit card? What are the pros and cons of using my bank debit card?

Debit cards look like credit cards, can usually be used like credit cards, and in many ways are as convenient as credit cards. When you use debit cards, you don’t run the risk of having a credit score harmed by a late payment, either. On the other hand, they don’t affect your credit, which is something you may want to do if you plan to finance a home or apply for a personal loan.

Little Application Process

Getting a debit card is relatively easy and can be a benefit. Many banks give them to you automatically when you apply for a checking account and as long as you’re in generally good standing with the banking system, you should be able to get one. However, some financial institutions may still check your credit report before issuing you a debit card.

No Monthly Payments

Your debit card is directly linked to your checking account. When you use your debit card to make a purchase, the money is immediately withdrawn from your checking account. This means that you don’t have to pay back what you buy — you’ve already paid for it. It also means that you don’t have to budget to make monthly payments and run the risk of paying them late and harming your credit.

No Credit Score

A debit card looks like a credit card and often works like one, but it isn’t one. Since you aren’t borrowing money and paying it back, you aren’t establishing a record of payment history. Your debit card won’t show when you review your credit report, and using it won’t affect your score since it isn’t a credit account.

Helping Your Credit

One of the ways to build credit history is to use a credit card moderately and pay it off regularly. Using a debit card won’t provide this added benefit. This is because payment history is a factor used to calculate your credit score and making on-time and in-full payments can contribute to your score.

Identity Protection

Most credit cards have similar fraud protection safeguards in place. If a thief uses your debit card maliciously, they may have direct access to your financial institution. Banks also track for suspicious activity or signs of fraud. Both your credit card and debit card can be protected from fraudulent activity—depending on the issuer’s policies. However, fraud can happen to anyone, so it’s best to check your credit report regularly to verify the information included is accurate and report any unauthorized activity.

 

 

About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Budgeting, Credit Scores | Leave a comment

Which is Better? Paying Off My Debt or Starting a Savings

pay debt or save

It’s a difficult question when you have to decide between paying off debt or start a savings. Here are some tips to help you decide.

As the saying goes, when it rains, it pours. And while it might seem more responsible to pay off debt first, if you don’t save for a rainy day, you might find yourself right back in the debt you just got yourself out of. Instead, find a balanced approach to paying off your debt, while also putting away should an emergency arise.

According to the experts at Mint.com, you should have between three and six month’s salary saved in case of emergencies. But this doesn’t mean you should put paying your credit cards or loans on hold – that could ruin your credit and have you drown in debt.

First, organize your finances and calculate how much you’re spending. If frivolous spending has you exceeding your budget, learn how to cut expenses so you can put more toward your savings instead. Continue to stay up current with all of your payments while putting away as much as you can in your savings.

Once you have met your initial savings goal, consider taking a closer look at your debt. If high-interest rates and are cutting deep into your budget, consider paying more than the minimum due to get yourself out of debt faster.

The secret to balancing your payments between paying off your debts and saving for an emergency is to avoid accruing additional debt. Once you’re out of debt, you can increase your efforts to build your savings. This will only help you meet your financial goals, could help change your credit ratio as well!

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Budgeting, Saving | Leave a comment

Five Budgeting Ideas for New Parents

lower baby costs

A little strategy can save money both in the long and short term when welcoming a new baby.

Planning for the arrival for a new baby can be exhilarating. Then sticker shock sets in. The truth is, having a new baby doesn’t have to completely drain your wallet. Let’s take a look at a few ways you can budget for the arrival of your new bundle of joy.

Plan for Expenses
Before doing any sort of financial planning, you need to understand the ongoing expenses you should expect in the long and short term when welcoming a new baby into your life. This includes clothing, daycare, formula versus breast-feeding and using disposable diapers. It doesn’t include one-time costs such as baby furniture, gear, nursery items and toys.

Develop Financial Safety Nets
Given the costs of bringing a baby into your life, having a safety net to cover a variety of risks is essential. Reduce your monthly expenses as much as possible to pay down debt and then save cash for emergencies. Consider taking out life and disability insurance to take care of your family in the event you die or become disabled and unable to provide for them. Also, don’t forget to add Junior to your health insurance policy so that his or her medical issues don’t compromise the family’s well-being.

Think Creatively About Child Care
Daycare can be so expensive that it takes your breath away. Depending on your income, you may consider staying at home to reduce or eliminate the cost of childcare. Some parents “nanny share,” where two households split the cost of one nanny. They may have the nanny work out of one home while caring for both children while the parents split the costs. Another option is part-time care given by a relative.

Spend According to Your Budget
If money is tight – which describes the situation for most new parents – now isn’t the time to spend frivolously. Going to flea markets and yard sales for baby clothes or toys can be a budget saver. As your baby grows out of these items, you can sell them or donate them for a tax deduction. However, while you may be in the mood to save money, think twice before purchasing used baby items that may have safety issues. For example, a used car seat might have outdated safety features or hidden damage could cause it to fail in a crash.

Get Help From Uncle Sam
Quite a few tax advantages can help defray the costs of supporting your little one. If your employer offers a flexible spending account, you can set aside pretax funds to cover costs such as daycare and inevitable medical expenses. Be sure to get the account started soon enough to cover childbirth expenses. Come tax time, one of the larger tax breaks is the child tax credit, which is up to $1,000 for a child under 17. Also, claiming your child as a dependent reduces your overall tax liability.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Budgeting, Family | Leave a comment

Can You Lose Your House for Not Paying the Second Mortgage?

You can lose your house if you don’t pay your second mortgage, according to the Consumer Finance Protection Bureau. Your second mortgage – or any lien like a home equity loan – is secured by your home, meaning that your lender can foreclose on it if you don’t make the required payments.

However, that doesn’t mean a second mortgage is something to be avoided at all costs. If your payment history and credit usage is in a good place and you qualify for a low interest rate, you may be able to save money on interest payments by paying off high-interest debt.

foreclosure second mortgage

Your second mortgage is secured by your home so if you don’t pay it, you could lose your house.

If the value of your home has dropped since you took out your initial mortgage or home equity loan, you might want to consider refinancing. You may still need equity in your home to qualify so check with your lender first to see if this option might work better for you.

Review your credit report and score to get an idea of how your credit looks and see if this approach makes sense for your situation. As an added benefit, the interest you pay on a second mortgage might potentially provide you with an income tax deduction.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Credit Reports, Credit Scores | Leave a comment