Credit ratings are a simple and easily understood tool enabling the investor to differentiate between debt instruments on the basis of their underlying credit quality. The primary objective of rating is to provide guidance to creditors in determining a credit risk associated with a debt instrument or credit obligation.
According to the latest report in Credit Rating the percentage of debt purchased from the original creditor is 90% and the percentage of debt purchased from another buyer is 10%. Under the Charge off account category we get a clear picture on the impending debts.
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Once you get your credit report, get comfortable and really study it. This means first learning to read it. Your report will include a set of instructions that will help you decipher the symbols and notations used by the credit bureaus. Once you familiarize yourself with the coding symbols used by the credit bureaus, look for and mark any damaging information recorded on your report. You should especially be looking for negative information that is erroneous. If you find any dispute in the credit report you should immediately report it to the concerned credit bureaus.
Your ideal credit rating is should be “Paid as Agreed” or “Account Closed-Paid as Agreed”. Some of the common negative markings in your credit report are as follows:
Unrated:This means that your account is neither good nor bad. This rating does not have a negative impact on your score if the late fees are removed.
“Paid” only:A “Paid” status is negative for a collection account or an account that will reflect as “Paid Charge-off” or “Paid Repossession”. You should insist that the account show “Paid” only and that all other negative notations are deleted at the same time to avoid negative impact on such a listing.
“Settled” only:You can counter-offer that the creditor simply lists the account as “Settled” rather than delete it altogether. “Settled” is an inherently negative listing but not as negative as “Paid Charge-off”. Don’t agree to “Settled” listing until you have exhausted on all other possibilities.
“Paid Charge-off” or “Paid Collection” or “Paid was 30-, 60-, or 90-days late:This is supposed to be your creditor’s first choice and your last option once you have paid. This listing is almost as damaging as showing the same debt unpaid.
In an article appearing on the Internet, John Driggs, wrote of the silent suffering of indebtedness. He defined responsible indebtedness as the gradual repayment of a loan backed by collateral. Problematic indebtedness refers to purchasing items one cannot afford through use of increasing amounts of unsecured loans.
Compulsive indebtedness is an addiction to irresponsible overspending and consumption. Those afflicted with compulsive indebtedness exhibit unrealistic rescue fantasies, a false sense of entitlement and optimism, and a sense of euphoria about receiving a new credit card. This type of consumers denies the inevitable negative consequences. Driggs speculates that such people fill an emotional void in themselves by financial scheming and overspending.
Credit Rating is an interactive process with a prospective approach:It involves series of steps. The process mainly involves negotiation between the debtor and the creditor. The main points are described as below: Confirmation of acceptance of verbal offer: If you have got a verbal offer on the phone and wish to accept it, follow it with a fax and a certified letter.
Counter offer to an offer:If you have received an offer, either via phone or a letter, you don’t have to take it. You can also negotiate with them for a lesser amount.
Unsolicited offers:An unsolicited offer is one you make to a creditor without discussing the specific offer on the phone. Sometimes this is sometimes the only way to get a better deal from the creditor.
The Consumer installment credit increased by $7.6 billion (approx.) in October’04, after an upward gain in September’04. Revolving credit increased by $1.2 billion in October’04, but this follows an $11 billion gain in September’04. Non revolving credit increased by $6.4 billion in October’04 after $2.6 billion gain in the previous month.
This uprising of debt throughout the Nation has brought consciousness to a great extent and people are growing more conscious of their ‘credit ratings’. It is a positive sign keeping in mind the importance of a clean ‘credit report’ and a smart ‘credit rating’.