Expert: Christine Janklow - 10/30/2007

Question
QUESTION: I was involved in an LLC about a year ago.  I was considered a partner, however, no paperwork had ever been done to confirm this.  We opened a business checking account and started a credit card through U.S. Bank.  My SS# was used to establish our limit.  After about 6 months I bailed out of the business.  My "partner" and I went to the bank to close the account and I thought the card as well.  When I left the business there might have been a couple hundred dollars on the card as we didn't use it a whole lot.  I got a call from a collection agency over a year later saying the card was at 6400.00 and I owed the money.  I contacted my old partner, didn't recall the debt at first, but called the next day and left a message that he had used it after I left the company and that he would take care of it.  I explained this to the collection agency, they eventually gave up.  It's been several months and I tried to get a loan for a car.  I was informed that this was marked on my credit as a charge-off and it was causing my score to be about 100 points lower than what it should be.  I don't think I'll be able to contact my old partner.  Do you think in the long run it would be cheaper to maybe reach an agreement with the bank if I can talk them in to removing this from my credit history?  I had in mind maybe paying them 2000.00 if it would save me 4000.00 long term on a car loan.  Or do you have a better option in mind?  Thanks in advance for your help.

ANSWER: Dear Josh:
Thank you for your inquiry. This is an unfortunate occurrence but should be handled immediately to avoid and accumulate additional penalties and interest. I have consulted with a business associate that heads up a very reputable credit repair service. Here are the steps that she would recommend:

"1) Make sure that the card is closed and notify that bank that the charges that were incurred were not authorized by you.  Order the records on signatures for each transaction so that you can prove that they were not your signature. This will help protect you from anything in the future. Doing this will not relieve you of the debt because you are personally liable, but it will help you negotiate.      

     a. If you ever become a partner again it is better to have an LLC in where the corporation applies for the credit, and no one is personally liable.

     b. You should draft an agreement with your old partner that indicates that he will pay you instead of the collection agency.



2) Once you have retained the records you can then proceed to negotiate with the creditor.  You will want to write a letter and provide them with copies of the records proving that you did not make the purchases.  In the letter I would mention that you would like to settle the account and as apart of the agreement you would also like the account stricken from your personal credit record.  

     a. You must get everything in writing from this collection agency. If they say that they are going to delete it, they must clearly identify that in their letter to you.

     b. Once you have agreed on a settlement amount and you have paid the debt and received the deletion letter, you can now send it to all three agencies to be removed.



Your statement is true with respect to fico scores.  Any negative account that has an outstanding collection can negatively effect your credit history and score.  The only way to truly increase your score is to remove negative history and keep your revolving debt ratio below 30%. Do not pay the collection if they will not give you a deletion letter. Paying 100 cents on the dollar and getting a deletion letter is worth more than getting a settlement so keep that in mind."

You also can have a professional credit repair service do this work on your behalf. I hope this helps and if you found this advice useful, please take a moment to rate it so others may benefit as well.

Respectfully,
Christine Janklow









---------- FOLLOW-UP ----------

QUESTION: Thanks so much for your help.  I'm pretty sure I will not contact my old partner.  I tried calling him when this all came about and the phone number I have for him is "temporarily out of service."  I even contacted his ex who was somewhat involved in the business.  There are other debts/issues with the business that he hasn't dealt with as well.
I don't know if it makes a difference, but the company was originally under his ex's name.  After I left the business my old partner had signed papers taking full ownership of the company and all it's debts (this is actually right about the time of the last payment received on the account).  I have copies of these documents from his ex.  I'm pretty sure it doesn't matter though because I understand the rate we had and limit established was based on my credit because his was not so good.  I just wished they had shut off the card when we closed the account like I thought they would/should.
Looks like this is going to be an expensive lesson.  Do you have suggestions for a proffesional credit company?  I'd like to look into that and see if it would be worth it because I feel like I've been banging my head against a wall trying to get answers on what I need to do.

Answer
Josh:
I do appreciate the follow up, and want to state that every situation is different and suggestions provided here are only that, it is up to you to make the best decisions for you. As this is not a forum to outright solicit, I will only be able to provide you a web address and name to contact a credit repair service, visit www.conquercredit.com. If you call ask for Angela, you can tell her I sent you. As for lessons learned, I don't know any that come without a significant price tag. Best of luck, and feel free to update if all works out.
Respectfully,
Christine Janklow