How to Report a Non-Payment to a Credit Bureau

Banks, landlords and creditors can report non-payments to a credit bureau. Credit bureaus collect consumer credit information and furnish it in the form of credit reports. Reporting non-payments allows lenders to include negative information in debtor credit reports or credit files. Negative credit information can affect a consumer's ability to borrow money, apply for housing and receive employment.

Instructions

1

Compile the non-payment information. You will need to put together the details surrounding the debtor's non-payment. This can include his name and address, the number of invoices outstanding, the invoice amounts and the number of days payment is past due. It is also useful to have the details concerning any collection activity you may have documented (telephone calls and collection letters).

2

Contact a credit bureau. The major consumer credit bureaus are Experian, Equifax and Trans Union. Call them to report the debtor non-payment information (see Resources). Notify them of your relationship with the debtor (bank, landlord or other creditor). They may request that you mail the non-payment details to them.

You may be eligible to apply for membership with one of the major credit bureaus. This will allow you to directly report credit information on all of your consumer customers and gain access to credit reports. Membership eligibility will depend on the number of debts or payment lines you have. Typical requirements ask for as many as 500 debts or payment lines to qualify for membership.

3

Receive confirmation of the reported information. You can ask the credit bureau to provide notification in writing that the information was added to the debtor's credit report or file. This will ensure that the non-payment is on the debtor's record and it will negatively affect her credit report. It may also encourage the debtor to resolve her debt so that it does not continue to adversely affect her.

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Can a Credit Card Lien Take Money Out of a Checking Account?

Credit card companies and other debt collectors can place a lien on your property, such as a house. The lien forces you to satisfy the debt to the credit card company if you sell the property. The lien must be paid off as part of the real estate transaction. However, a lien does not allow the credit card company to take money from your bank account. Another legal process, called garnishment, allows for that.

Timeline

Generally, credit card companies close your account after you fall six months behind, according to MSN Money. The account is closed, listed on your credit report as charged off and sold or assigned to a debt collector. The debt collector may continue to contact you by mail or by phone for months or even years until the balance is paid. At some point, the debt collector may file a lawsuit demanding that you pay.

Summons and Complaint

The lawsuit usually is delivered by a courier to your home, place of business or anywhere the courier can find you. Some states allow for the lawsuit to be left at your house. A cover letter, called a summons, is attached. It is the notification of the lawsuit, followed by a longer document called the complaint. The complaint is the actual lawsuit and details the allegations against you.

Court Action

The lawsuit is eventually heard by a judge, and debt collectors usually win in court if they prove the debt is legally yours and you never paid it. The judge issues a legal order called a judgment, which orders you to pay the debt collector or card company a specific amount of money. If you refuse, the debt collector can take further action, including liens and garnishment.

Frozen Bank Accounts

Although both actions can be taken at once, debt collectors usually opt for bank or wage garnishment before filing a lien. A lien may never pay off for the debt collector if you do not sell the property, while garnishment can lead to money being sent immediately to the debt collector from your bank account and paychecks. Garnishment starts with the judge signing a court order forcing your bank and employer to comply with garnishment. Once the bank receives the notice, your accounts are frozen and the debt collector is allowed to withdraw money as it is available. In the meantime, you are not allowed to access the account except to deposit money. Your paycheck is affected, because your employer follows court orders by sending a percentage of your salary to the debt collector each payday.

Ending Garnishment

The best way to end garnishment is to negotiate a deal with the debt collector. You can offer to settle the agreement for the full amount owed payable in installments. You should insist that the debt collector end all garnishment activity as part of the deal. Get the agreement in writing and follow the terms to avoid garnishment being restarted.

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Are There Any Lending Options for Someone With Very Bad Credit?

Generally, anyone who takes out credit from a reputable lender is provided with a credit score, a measurement of the likelihood that he, if given a loan, will pay it back on time and in full. This score will change often. If a score goes down, it may become harder for the score holder to get a loan, as he presents a strong risk of default to lenders. However, he may have several options.

Lending Options

A person with very bad credit may be able to take out a loan from a variety of lenders, but often only at a very high rate of interest. If the lender does not turn him down immediately, the lender will want to be compensated for the risk he is taking in lending to him. The challenge for the person with bad credit often becomes not finding a loan, but finding a loan at an affordable rate of interest.

Secured Loans

One way that a person with a bad credit history can reduce his interest rates is by securing his loans with a form of collateral. For example, some borrowers try to build their credit score by taking out secured credit cards -- credit cards that use a bank account as collateral. In some cases, lenders will accept another form of collateral on loans, such as a house or a vehicle.

Payday Loans

Some lenders do not inquire about an individual's credit score. For example, many payday lenders, who offer small, short-term loans in exchange for high interest rates, are willing to lend to anyone. However, these lenders typically charge high rates of interest to offset the risk of not being repaid. In addition, some lenders, such as payday lenders, charge exceedingly high fees to people who miss their payments on the loan.

Considerations

Although a prospective lender's credit score is the first thing that lenders look at when considering providing a person with a loan, there are other factors that the lender will consider as well. For example, a lender may be willing to lend to someone with a bad credit score who has a significant income or considerable savings. This will help offset the borrower's risk, as it makes clear that he is financially secure.

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Federal Foreclosure Protection Act

On July 30, 2008, President George W. Bush signed the American Housing Rescue and Foreclosure Prevention Act into law. Tax reductions aimed at stimulating the failing housing market dominated the act's provisions. New homeowners, those who pay property taxes, builders who construct low-income rental housing units and investors who floundered in the sub-prime-loan market, could potentially benefit from this piece of legislation.

First-Time Homebuyer Credit

One of the main provisions of the American Housing Rescue and Foreclosure Prevention Act, commonly referred to as the Foreclosure Prevention Act, was the homebuyer tax credit. The refundable credit was developed to assist citizens in making a down payment on a first home. The credit topped out at $7,500. Those who took the credit have to repay the credit over a 15-year period.

Additional Property Tax Deduction

The FPA also allowed taxpayers an additional standard deduction of $500 to cover state and local property taxes. The deduction increased to $1,000 for those couples who filed married filing jointly. This provision of the act was for the 2008 tax year only.

Low-Income Housing tax Credit

To promote the development of affordable rental housing, FPA temporarily increased the current low-income housing tax credit from $2 per person in a state, by an additional 10 percent. The act also decreased the paperwork associated with the credit and simplified the application process in hopes of recruiting more builders into the affordable-rental housing market.

Increase in Mortgage Revenue Bonds

Another major aspect of this act allowed for the issuance of $11 billion in tax-exempt bonds aimed at refinancing subprime loans, and making loans on reclaimed homes available to low- to moderate-income citizens. Lenders could also use the additional funding from the bond issue to provide loans for first-time homebuyers and to assist in the financing for construction of low-income rental housing.

Other Provisions

If a business lost money in 2009 or 2009, the act allowed a refund of taxes the business paid over the past four year as opposed to current law that allows credit over the past two years. The FPA also allows for special handling of military members who face foreclosure action upon returning from service overseas. This act also provides tax breaks for homeowners and businesses rebuilding after Hurricane Katrina and other Congress-qualified natural disasters.

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How to Settle a Default Judgment

A default judgment is awarded to a party filing a lawsuit against you, after you fail to appear in court to defend yourself. Settling the lawsuit may not be easy. The judgment allows the other party to garnish your bank account or wages. That means a settlement negotiation could be difficult, because you have little leverage. "The New York Times" reports that default judgments are common in credit card lawsuits.

Instructions

1

Contact the attorney for the party filing suit. You should have received a legal notice from the court informing you about the default judgment. Find the attorney's contact information on that notice.

2

Call the attorney. Offer to pay the account in full -- either in a lump sum or in installments. Usually the goal in a settlement is to pay less money than you owe. However, under this scenario you should be most concerned with avoiding the embarrassment of wage or bank garnishment. Try a two-pronged negotiation: offer to pay, say, 60 percent of the balance in a lump sum or 100 percent in installments. The attorney may elect to take a lump sum offer to get money up front.

3

Ask the attorney to send you the details in writing. Do not make a payment until you receive the agreement. Send the payment or installment payments by cashier's check, to safeguard your banking information.

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Will a wage garnishment show up on your credit report?

When you fail to pay a debt to a creditor, the creditor has the option of suing you to recover the unpaid balance of your account. If the judge presiding over the case rules in favor of the creditor, the result is a judgment against you. When this occurs, the creditor can garnish your wages as well as intercept your state tax refund.

Garnishments

When a creditor files for a wage garnishment against you for an unpaid debt, the creditor will then submit a request to your employer to take a percentage of your wages from each pay period. The federal government limits wage garnishments for creditors to 25 percent of you disposable income. You can have up to 50 percent of your disposable income subject to garnishment for spousal support, child support and tax payments. Individual garnishment deductions do not show up on your credit report.

Judgments

Before you can have your wages garnished by a creditor, you have to have a judgment for the debt filed against you. This happens when the creditor sues you in court. Once the judge awards the judgment to the creditor, the judgment will show up on your credit report under the "Public Records" section. This information will remain on your credit report for up to seven years. Once you pay off the judgment, the judgment remains on your credit report but reflects as paid.

Student Loans

If you default on a student loan insured by the U.S. Department of Education, the Department can garnish your wages before going to court and getting a judgment in your student loan lender's favor. Student loans insured by the Department of Education include Stafford, Perkins and Federal Parent PLUS loans. The Department of Education refers to this as an Administrative Wage Garnishment or AWG. The Department does not report AWGs to the credit bureaus, so the garnishment does not appear on your credit report.

Considerations

A way to avoid wage garnishments from creditors is to discuss payment options with the creditors before they file suit against you. Creditors are often willing to work out a payment plan with people who are delinquent or in default. A payment plan helps to avoid a lawsuit and subsequent wage garnishment by the creditor. It also prevents a judgment from appearing on your credit report. Student loan lenders also have financial or economic hardship forbearances for borrowers who cannot afford to make their student loan payments. Entering into a forbearance prevents student loan wage garnishments.

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Bankruptcy Alternatives for Low Income

Because of severe financial downturns in the economy, many people find themselves unable to maintain debt loads; this is especially true for low-income individuals. Some people choose bankruptcy to resolve credit issues, but there are other alternatives. People with low income or no income can find methods to manage debt without resorting to bankruptcy.

Debt Counseling

Debt counseling is conducted between the debtor and a reputable debt counseling service. A debt counseling service provides financial education and can help with creating plans for repayments and budgets. The National Foundation for Credit Counseling maintains a database of approved counselors across the United States. The U.S. Department of Justice also maintains lists of approved agencies that debtors can work with.

Debt Management Plans

The goal of this alternative is to consolidate monthly payments while gaining reductions in payments or interest from unsecured debt. These plans may involve borrowing against home equity to eliminate credit card debt. Caution should be used with this alternative because the home becomes collateral against the new loan and could be lost if the new payment schedule is not met.

Debt Restructuring

Restructuring debt can be an alternative to bankruptcy if the creditors are willing to negotiate with the debtor. This alternative involves negotiating a reduction of debt, interest rates and payment extensions. This alternative is most often used with secured items, such as cars or homes, because creditors want to avoid the cost and time involved in repossession and recovery of the debt.

Do Nothing

This option is available to low income persons with no income or property because there is nothing a creditor can collect. Proof must be provided by the debtor to show lack of income and property. Caution should be used with this alternative because once income or property becomes available creditors can restart collection efforts.

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