We are often asked if paying an account will lead to the listing being removed from a credit file. This is an interesting question.
From a purely legal standpoint there is no association between paying an account and the removal of a payment default. The law states that there needs to be an error with the listing or the process followed by the credit provider in order for a default to be removed. Paying the account will allow for the status of the listing to be amended to “paid” or “settled”, however in today’s tough financial markets this change in status is unlikely to make a great deal of difference to the borrowing potential of a consumer.
Removing a Default Listing
If a consumer was to contact a credit provider and say “I will pay the account if you remove the default listing”, the answer will almost certainly be no. Even if a credit provider wanted to remove the negative listing on this basis, it’s still not that easy. The credit reporting agencies require a written request from the credit provider asking for the credit listing to be removed, which includes an explanation stating what fault occurred. Simply stating “please remove the listing as the account has been paid” will usually result in the credit reporting agencies refusing to remove the listing.
If it is found that the listing is inappropriate or was not entered correctly, then the listing must be removed regardless of the status of the account. It is important to note that the removal of a default under these circumstances does not expunge the debt and the credit provider would be free to continue recovery action, including the transfer of the debt to a mercantile agent which could result in a new default listing being recorded.
Credit Repair and Default Listings
It is important to note that the reason the credit provider listed the default was because they felt they were owed money and of course they would like to be paid.
From our experience the payment or settlement of a debt is often a very important part of credit repair. If we are approaching a credit provider to remove a default listing for an unpaid account, it’s only natural they are going to try and resist as they feel the removal of the listing will weaken their position and reduce their chances of getting paid.
It’s only natural that when we’re talking with a credit provider where the debt has been paid, they are generally far more relaxed and flexible in how they interact with our company. The ability to pay or settle an outstanding debt at the time we are talking with the credit provider can be a very powerful tool as they often feel this may be their only chance to get paid. I’m not saying that paying or settling an account will always lead to a positive outcome, however doing so will give the consumer the best possible chance of success.
It’s important to note that the removal of a default from a credit report often comes down to a breech of legislation and like most laws these breeches can be subject to interpretation. As you would expect, a credit provider who is owed money will most likely try and protect their position as strongly as possible. However it’s more likely for them to be more open to our point of view when the account in question is paid.
Different credit providers have different attitudes towards this and while some may not approach the matter differently given the status of the account, to many companies the payment of the account is of major importance and can be a significant factor in the outcome of the matter.
For this reason we would always recommend a client either pays their account or allows us to negotiate the debt as a part of the credit repair process, as this will give them the highest possible chance of a successful outcome. There are of course situations where the payment of the account is not appropriate, such as disputed amounts, fraud, etc. These matters are handled on a case by case basis.
It is important to note that the removal of court listing such as a Judgment or Writ is almost always dependent on the payment or settlement of the debt. This is due to the fact that the removal of a court listing is less about fault and error and more about the cooperation of the plaintiff. The line of least resistance to achieve the removal of such a listing is to have the plaintiff agree to execute a legal document that allows the matter to be reheard and set side with the court. You will appreciate that a plaintiff is highly unlikely to consent to this if they feel they are owed money because following the matter being set aside, the plaintiff waves their claim and their legal action is no longer active.
There are credit repair companies that try to bully and intimidate credit providers into submission. In our experience this approach seldom leads to a positive result and can alienate the credit provider, making effective communication impossible. It is this kind of behavior that is drawing unwanted attention to the industry in general by organisations such as the ASIC which is a great shame. When administered correctly, credit repair is a highly valued and needed service that has the potential to change people’s lives in a very positive way.
It is important to understand that honest and effective credit repair is often about reaching a positive outcome for all concerned including the credit provider.