Common Debt and Credit Repair Terms

Knowing credit repair terms is essential. Dealing with debt collections agencies can be very frustrating for many consumers. One of the most difficult parts of dealing with a debt collection agency including the debt collection vocabulary that they are using. Below is a list of most commonly used terms, their abbreviations and their meanings in alphabetical order of common credit repair terms.


What is Assigned Debt?

Assigned Debt This is the most typical kind of medical debt, and usually the easiest to negotiate a settlement offer. Not 100% sure as to why it’s so easy to settle, I think it’s because the hospitals just want to get anything they can. This is when a creditor “gives” or “assigns” the debt to a collection agency for them to collect. The collection agency gets a percentage of the amount collected or a set amount, by the creditor upon a successful collection. Collection Agencies take their cues from the original creditors, if the original creditor won’t allow a settlement offer less than 100% of the amount owed, the collection agency can’t offer or accept anything other than 100% of the amount owed. Simple as that.


What is Purchased Debt?

Purchased Debt This is the most common type of junk debt that collection agencies purchase. It can be literally any type of debt that a collection agency purchases to attempt collections on. Typically credit cards, etc..


What is Bankruptcy?

Bankruptcy The legal proceedings to discharge your debts owed under the various chapters 7/13 (or Chapter 20 as some call it when people do a 7 followed by a 13 a bit after). A bankruptcy stays on your credit report for 10 years before it will fall off. Chapter 7 is a “clean slate” where almost all your debts are forgiven. Chapter 13 is a payment plan program where you make a set amount of payments for a set amount of years. Failure to abide by the payments and payment dates can toss the proceedings as well as any fraudulent activities. Many of the other credit repair terms are related to bankruptcy.


What is a Charge-Off?

Charge-Off  This is the accounting term a creditor uses when they have decided to move your debt owed off of their books to the “bad debt” ledger. You will most likely get a 1099-C form listing the debt owed as income from the IRS. Why, because the IRS deems the forgiven amount as income! Another important thing to remember is that a charge-off does NOT mean the debt is forgiven, or that it disappears! It just means the creditor has decided it is no longer worth their effort to collect and is then sold to collection agencies as junk debt.


What is a Collection Agency?

Collection Agency These are firms that specialize in buying junk debt, and pursue collection activities against debtors. Some follow the rules in collecting, but the majority do what they can to collect.


What is a Collection Clock?

Collection Clock This is in reference to the amount of time a debt can be collected on, tied with the statute of limitations listed below. This term is interchangeable with the statute of limitations term because each state is different in regards to the amount of time allocated for various debts. This also is tied with collection agencies as depending on what you say to them, it can reset the collection clock/statute of limitations on said debts owed. More on that in the examples to follow. Also tied to the Date of Last Activity.


What is a Credit Reporting Agency?

Credit Reporting Agency(CRA) These are in reference to the big 3 reporting agencies: Equifax(EQ), TransUnion(TU) and Experian(EX;) that list, and report your credit history. Make sure you understand credit reports and that your report is accurate.


Who is a Creditor?

Creditor. This is the bank/lending institution(or a personal acquaintance in bankruptcy proceedings) that a debt is owed to.


What is a Credit Report?

Credit Report Just as it states, given by the big three credit reporting agencies.


What is Certified, Return Receipt requested(CRRR/CRR)?

Certified, Return Receipt requested(CRRR/CRR) Actually two terms in one. Certified Mail, and Return Receipt requested. This involves delivering mail through the USPS. This is very important when communicating with collection agencies and the credit reporting agencies, as letters sent CRRR are physical proof of your attempt to contact/deliver correspondence and they are literally impossible to refute.

What is Date of First Delinquency(DOFD/DFD)?

Date of First Delinquency(DOFD/DFD) Just as it states, the date the credit line was FIRST delinquent. This is often confused with the Date of Last Activity(DOLA) but it is VERY important to be able to differentiate between the two. This affects the date to which the negative credit line will remain and eventually fall off your report. IT CANNOT BE CHANGED, except if a judgment has been issued against you! Many collections agencies try to change this as it affects how they can collect on delinquent accounts, but it is ILLEGAL and is known as re-aging. Debts fall off your report 7.5 years from the DOFD.


What is Date of Default (DD)

Date of Default(DD) The date the original account became 180 days past due. Debts fall off your report 7 years from the DD.

What is Date of Last Activity(DOLA)?

Date of Last Activity(DOLA) Again, just as it states. This refers to the date that any activity, whether it be a partial payment, full payment, etc. or debt validation was made on the credit line. As with the DOFD, collection agencies use this as a way of collecting, and it affects their collecting practices. This is tied with the statute of limitations/collection clock.


What is Debt Validation(DV)?

Debt Validation(DV) The process by which a collection agency MUST, BY LAW, validate the debt they are attempting to collect on. More on this below.


Who is a Debtor?

Debtor – This is the individual(for this purpose) that owes a debt to a creditor.


What is the Fair Credit Reporting Act(FCRA)?

Fair Credit Reporting Act(FCRA) In a nutshell, the law/act that controls the behavior of credit reporting agencies(CRAs) and specifically outlines what they can and cannot do, plus your rights.


What is the Fair Debt Collection Practices Act (FDCPA)?

Fair Debt Collection Practices Act (FDCPA) This outlines what collection agencies CAN & CANNOT do to collect on a debt. This is VERY IMPORTANT and I urge everyone to read up on their rights. In a nutshell it determines WHO they can contact about a debt owed, WHAT they can and cannot say, WHEN you can be contacted, and HOW you can be contacted. Keep in mind that violations can lead to legal claims against the collection agencies. Fair, Issac & Company(FICO) Started by a mathematician and engineer in 1956, they provide analytic and decision making services, primarily credit scores, for financial lending institutions. In a nutshell, they guesstimate how much of a credit risk you are based on past credit/lending practices. Scores range from 300-850. One either HAS a credit score within the range, or THEY DON’T have a credit score. One CANNOT have a ZERO(0) credit score.


What is a Judgement?

Judgment This is closely tied to the statute of limitations, the collection clock, and the various forms of bankruptcy. When a judgment is issued against a debtor, it means a judge has listened to both parties(collection agency & debtor) and found the debtor liable for the amount asked for by the collection agency. The original debt amount may include attorneys fees, interest, filing fees, etc, anything related to suing the debtor. This AUTOMATICALLY resets the Date of First Delinquency to the date the judgement was issued, and is the ONLY thing that can change the DOFD. The new reporting time is now 7 years from the date the judgement was issued. Judgements stays ”active” for 10 years, and in some states 20 years. This means a collection agency has 10 years to garnish your wages, put liens on your property, seize bank accounts, etc. to collect the judgement owed. If they fail to do so within those ten years, most states allow a judgment to reset for another 10 years, and they allow the collection agency to continue resetting the clock indefinitely, thus literally making the debt never go away.


What is a dormant judgment?

If a judgment reaches the 10 year limit, IT DOES NOT GO AWAY, it becomes dormant. The good news is that while the judgement is dormant, it cannot be collected upon! The collection agency has to file to re-activate the judgment before they can attempt to collect on it. However any collection attempts on a dormant judgement can lead to monetary fines against the collection agency. If a person is ever summoned to appear in court, do not ignore it. This is the single most important thing you need to make sure you don’t miss! Failure to answer a summons means an automatic default judgement against you!


What is a Junk Debt Buyer?

Junk Debt Buyer These are ALL the charged-off accounts that creditors deem unworthy to collect that are bunched together and sold for pennies on the dollar to whichever collection agency will buy them. The collection agency will then turn around and attempt to collect from the debtors, often for the full amount or a settled amount.

Who is the Original Creditor?

Original Creditor The creditor to whom the original debt is owed to. This is VERY IMPORTANT when dealing with collection agencies.


What is Pay for Delete?

Pay for Delete The process where you pay an agreed upon amount with the original creditor OR a collection agency, and in return they remove the negative mark from your credit report. Note that collection agencies are NOT legally required to accept these, an in cases of assigned debt, they may not be allowed to.


What is Re-Aging?

Re-Aging  This is the process where the collection agency lists an old debt, past the collection reporting period, with a newer date on your credit report in order to try and collect on said debt. THIS IS ILLEGAL, and CANNOT be done. The collection agency can be fined if they continue to report the debt after they’ve been informed its past the reporting clock.


What is a Debt Settlement?

Settlement  The monetary agreement that a debtor and a collection agency arrive at, to satisfy a debt is a common credit repair term. This could be for the full price, half price or a fraction of the full amount.  This is the amount of time set by a state(for this purpose) that determines the amount of time legal proceedings may be brought up against a debtor to collect on a debt. In other words, the amount of time a collection agency can legally collect on a debt. This is tied with the collections clock and the statute of limitations, and CAN BE RESET if the wrong words are used when communicating with a collection agency.


What are Time-Barred Debts?

Time-Barred Debts This refers to debts that are PAST the statute of limitations and therefore CANNOT be legally pursued. This does NOT mean the debt ISN’T owed, just that a collection agency cannot legally pursue collections.

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