Night of the Living Dead Debt

I have to admit, I’m not really a big Halloween fan. Sure, I loved it as a kid. There was all of the candy, the class party, all of the candy, a later evening out trick-or-treating, and then there was all of the candy. But now? Ehh. I think it’s the whole zombie invasion thing that bugs me. Seriously? The living dead? There really are people out there preparing for the zombie apocalypse as if it were more imminent than the threat of snow this time of year. (If you weren’t in eastern South Dakota, we got our first round of snow yesterday.) And this seems to be their holy day of the year, the big blood festival.  Come on people!  REALLY?!?

My Christian faith and the existence of Heaven aside, the idea that someone could come back from the dead or be half-dead or whatever they are calling it while walking around my neighborhood is just ridiculous. But hang on all you zombie fans – I have one little hang-up that keeps me from completely dismissing the idea of the living dead.

If you’ve read my blogs before (or the title of this one, for that matter) zombiepandemic comyou’re probably guessing I’m talking about past financial history. And you would be right! (A whole lot more right than expecting the brain-eating half-dead to rise up.)

Just last week I had a client in. He was in the middle of purchasing a home and, without any credit changes on his part, his credit score took a notable drop. Now, it wasn’t enough to keep him from getting the loan, but it was enough to get his attention. He just couldn’t understand how his score could drop without any action on his part.

Without a complete review of his credit history, we could make a few educated guesses at what impacted his score. Because of the length of time that some items are on your credit report, it may truly be a resurrection of the dead debt that impacts your score. Here are some past items and how they can affect you.

Credit Inquiries – Specifically applications for credit, or loans, these inquiries into your credit history stay on your credit report for two years. While FICO states they only use inquiries within the last 12 months, that is still a sizable time frame. Should you hit that point where an inquiry or two drops off of your report, that may positively impact your score without you doing anything recent.

Negative Events – Anything from a collection being noted on your account to a single late payment, they can stay on your report for seven years. Again, hitting that drop-off date can positively impact your score. At the same time, if you didn’t realize you even owed that payment (hey, statements really do get lost in the mail), you may have missed a payment and not even known it. If you see a significant, sudden drop, make sure you find out why.

Closed In Good Standing – I’m all for paying off your debt. If you can, pay it off early. Should you get that installment debt (like a house, car, student loans, etc.) paid off, the account is usually automatically closed. But that closed account will stay on your record for TEN years. Because it is an example of a positive history, you get to take credit for that longer than most negative items. But, should you hit that ten-year date and a closed account falls off of your credit report, it may actually cause your score to drop, especially if you don’t have a lot of other positive accounts on your record. Because we don’t tend to give much thought to accounts closed in good standing, and because of the ten-year time frame, these are often the ones that sneak up and surprise us (but hopefully not as much as an actual zombie apocalypse would).

gavelCollections and Judgements – This one is a little tougher to see coming. The statute of limitations may vary a fair amount depending on where you are and what the debt is. You may not even know you owe it. But suddenly they decide to take action and pursue payment. Depending on the circumstances and your reaction, it may actually bring that old debt from years ago back onto your credit report, dragging your score down along with your bank account balance.

I recently talked with an individual who had cosigned for someone else to get cable and electricity. The individual had now been out of the apartment for quite a while and the cosigner had no clue there was money owed….. until the collector got a hold of them. They paid the two judgements totaling $3,000 immediately, but they will most likely still be on their credit report for the next seven years.

Causing almost as much terror as the threat of a zombie sucking their brains out (insert sarcasm here), the individual found out that the collections on their credit report were going to increase their insurance premiums by $800 a year. How’s that for a living dead debt?

Now if you find yourself being chased down the street by a hoard of zombies, don’t call here. We can’t help you. (I’ll probably just laugh long and loud.) But if you find old, dead debt rising again to hunt down your credit score, that’s the time to give the Center for Financial Resources a call. We can help you work through your credit report to find what really is out there, give you guidance on how to clean up your report, and even help you deal with the legitimate debt before it eats your brains (oh wait, that’s zombies that do that). Just race to the nearest phone, probably in your pocket, and call us at 605-413-7522.

And if you have any candy left after Halloween, feel free to drop that off too. I kind of like the candy part of Halloween.

written by Breck Miller
images courtesy of zombiepandemic.com and freedigitalphotos.net, respectively

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