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Debt "relief"
I can't help but feel like it's cheating, at least the way a family member did it. Basically, and I believe this is how most of them work, you dispute all the charges on a card. If they don't respond to even one claim, the money is written off and taken off your credit report. The thing is though, you DID buy all those things. So you're cheating the system and lying and getting it all for free. It is so aggravating when I just spent a ton of time and money actually paying the debts I had off instead of lying to get them off my record.
Was anyone else aware of this is what those debt credit counseling places do? They just keep writing letters hoping that a collection agency or credit company doesnt respond and then its written off. This family member had his credit score go up almost 200 points and was able to buy a house based on this.
Re: Debt "relief"
I feel like there have to be some details missing here. This can't possibly be accurate. You're saying that the charges were already turned over to collection agencies, and the credit counseling place was contacting the agencies to work out a payment or consolidation plan?
Even if the debts were forgiven, I'm pretty sure the debtor (your family member) would have to claim the forgiven amount as income and pay tax on it, since technically this would be considered income. This is how short sales of homes work, anyway.
Nope. I'm not sure if it is to a collection agency or directly to the creditor, but this family member actually works for a collection agency so this is how he knew what they did and why he signed up for it. At his work, they have two people in a department whose entire job is to respond to disputes. If they miss ONE letter, that dispute gets written off like it never happened. He said they get 400 letters a week, on average.
This wasn't to work out a payment plan. This was to say "This $400 charge shouldn't be here. We didn't purchase this [say] television". If they don't respond to the letter, that debt is written off.
If they are disputing the claim, then its not income because the debt was never "supposed" to be there in the first place. Meaning, they are claiming they never purchased XYZ even though they did.
Am I the only person who finds this ridiculously immoral and just wrong?
I have a friend who went to a debt consolidation agency. Here is how it worked.
She paid the company a certain amount each month. The company contacted each credit card company and asked if they would consider settling for a lower lump sum or monthly payment. They then used her money to pay off the most important balances first and budget her monthly payments (after taking out their own cut, of course). They also had lawyers to represent her if any company chose to take her to court. Also, if a collections agency called her, she referred them to this company and then they weren't allowed to call her again because it would be harassment.
That seems way more legitimate than what my family member did. This wasn't a consolidation company though. I don't even know what the heck you would call it.
It sounds like your family member
a. has no idea what is going on
b. isn't educated enough to know what went on with the company they contacted.
If all he needed was 200 points to buy a house with, then his credit doesn't seem like it was that bad to begin with.
I actually think he does know, which is the scary part. He works at a collection agency and knows how to get things written off. It's just sad is all it takes is one person not replying. And it's even more sad that I know someone who takes advantage of it.
His credit score is only in the 600s now....which means before it was in the 400s...which in my opinion is pretty bad.
I guess I should just be more proud of the fact that I did the "legit" way but it still makes me mad. Even if it didn't happen the way he said it did, the bottom line is he didn't have to pay for things he knowingly purchased on credit.
We need a cringe emoticon!
MrsC is right, this will catch up to him!
Still doesn't add up. If you dispute your whole credit card bill, chances are only the smallest of charges won't respond to the dispute. I find it highly unlikely that most creditors wouldn't respond; i.e., I imagine only a couple of things actually get written off.
Now, if you do with every credit card bill you receive, wouldn't your credit card company either (1) raise your interest rate significantly or (2) drop you as a customer altogether?
It also doesn't make sense that your credit score would go up by 200 points just because you had a disputed charge or two removed from your credit card. It does nothing to improve your credit profile.
I'll ask him tonight. It was MUCH more than just a charge or two, that I know. It was at least a few hundred, if not thousands, of dollars that were written off. But the more you have removed, the less your debt to limit ratio is and the higher your score. Plus, just overall debt ratio. I'll try to get the nitty gritty- since he thinks he's being so smart and "beating the system" by doing this, he won't mind sharing.
I'm not sure of the exact termology off the top of my head, but she's correct. It's the ration between your available credit to the amount owed. I once tried lowering my credit limits, thinking that would help me out from spending too much, but it actually hurt my credit score. When before I had owed $300 on a $1000 limit (30%), I know owed $300 on a $500 limit (60%), which was a higher ratio and brought my score down. Another reason not to close accounts, cause it will affect your overall ratio. If you do close them, do 1 every 6 months. I learned a lot of this the hard way.
I used a credit counseling company in my early 20's, the type that negotiates interest rates and you pay them, they pay the cards. I still had to pay off all my debt, just with some lower rates and a set monthly payment.
The way your relative is doing is just plain wrong. Kudos to the rest of us who do it the right, although much harder, way.