The biggest credit misconception
Today, we’re going to talk about the biggest credit misconception and I’m going to share with you one tip that’s going to save you a lot of headaches and a much better credit score. The first thing we want to talk about is late payments.
The biggest misconception about credit is this. I’ve got several late payments, for whatever reason. You went through hardship, you went through a divorce, you lost your job, you had a family member sick, whatever the case is.
What happens is during that period, it slipped your mind, and as it slipped your mind, you ended up making a payment after the 30-day window after the payment was due.
You see, you don’t get a late payment until after 30 days after the payment was due. If it’s due on the first and you don’t make another payment until the following 2nd, which is actually day 31, your payment will be still good.
You can make a payment up till 29 days after it’s due and still will not have a 30-day payment late on your credit, but when it gets to day 31, it becomes a late payment.
The game changers for fixing credit
Here’s the biggest misconception. We’re going to talk about late payments first, and then we’re going to talk about collections.
On the late payments, guys, if you get a 30-day late and let’s say it slips your mind again and you go to 60 days late, and then you end up getting a job, we’re going to say that you didn’t make your payment because you lost your job, but then you end up getting your job, and you say, “You know what? I got a little bit of money now. Now I can make my payment so it’s not late anymore.” Wrong.
The minute you make your payment from going from 30-day late to 60-day late, and then you come into some money and say, “Hey, I’m gonna make that payment to catch it up,” the biggest misconception is that people think that it erases the 30-day and the 60-day late. It does not.
Just because you caught it up in month number three does not forgive month number one and two where you have a 30-day and 60-day late.
Being that that is 35% of your credit score, remember this. Just because you caught it up, those late payments never go away.
In fact, they stay for seven years. Seven years they’ll be on your credit report.
Guys, the best thing to do is try to make, even if it’s a minimum payment, do something, if you have to borrow the money because, for the next seven years, it’s going to be on your credit.
Let’s talk about collections for a second. What is the biggest misconception in terms of a collection?
Well, what happens is it goes 30-day, 60-day, 90-day, 120, and then it goes to collection or charge off. Charge off just simply means that another bank, ABC Collection Company, has picked it up, the collection when it is a collection.
Sometimes, they keep it right there in-house. It goes 30, 60, 90, 120, and then they put a collection on your credit report.
What I don’t want you guys to do, and this is going to sound crazy, is I don’t want you to pay the collection because here’s what happens.
Tip #1: Don’t acknowledge the debt is yours
Tip number one, and the absolute game changer for your credit is that the minute you acknowledge that that debt is yours, then you have paid collection on your credit.
The collection doesn’t go away. Just because you paid the collection, now you say, “Yes, this is my debt, and I’ve made a payment, and I’m a great citizen.” The problem with that is, on your credit report, for the next seven years, you will have paid collection. The collection doesn’t go away.
If you don’t make the payment and you need help removing it, it is much better not to pay the collection that ABC picked up for pennies on the dollar and just have it wiped off your credit.
Have it wiped off your credit as opposed to paying it because if you pay it, you’ll have a paid collection, and this is going to hurt your chances of getting funding, lending, getting credit cards.
Just because it’s paid does not necessarily mean that it wasn’t bad, but what if it was never there? My question was, “What if it wasn’t there?” That’s tip number one. I’m going to help you guys out today.
Tip #2: Don’t make late payments
Tip number two, what I’m going to tell you guys to do, instead of making your payment, after it’s become late a few times, what I want you to do is, if it goes late, let it go late.
Let it go 30, let it go 60, let it go 90, let it go 120, and let it get to the collection status because, then, it can be challenged as inaccurate information, and the entire account gets removed.
Going back and forth, making a payment, late, late, make a payment, late, late, make a payment. It’s messing with your credit score. Just let it go late until it gets to the collection, and then if you need help removing it, we can help you.