Dear Liz: You wrote an article about how the credit bureaus are removing civil judgments and tax liens from people's credit reports. I've been denied credit due to a few tax liens. Creditors won't negotiate, even though the IRS has already deemed me unable to pay due to my disability. (I'm receiving Social Security disability income.) My question now is, how can I be sure it is being removed? Do I need to call the bureaus? Order another credit report?
Answer: Your unpaid tax liens may disappear, or they may not.
Starting in July, Equifax, Experian and TransUnion began removing liens and judgments when those records lack enough personally identifying information to ensure that the negative marks wind up on the right people's reports. Another new requirement is that the records be properly updated, so that accounts that have been paid or resolved aren't still showing as unpaid.
The error rate for these records was high, leading to many complaints, disputes and lawsuits. The bureaus expect to purge virtually all civil judgments but only about half of the tax liens.
If your liens aren't purged and you can't pay them, you may have to wait a while for them to fall off your credit reports. Paid liens are subject to the seven-year limit on how long most negative items can appear on credit reports. Unpaid liens can technically remain indefinitely, although the bureaus typically remove them after 10 years.
What to consider before giving money for law or medical school
Dear Liz: Our daughter is in medical school using scholarships and student loans. We are now in a position to help her out, but worry that financial help might work against her sources of aid. Would it be better to pay some on her outstanding loans, give her money, pay some of her living expenses or put the money into a savings account to give her when she graduates to use towards paying down her debt? The amount we could give her would not be enough to pay for everything each semester, just something to ease her burden. We don't want to jeopardize her ability to receive aid.
Answer: While nearly all graduate students qualify as independent — which means that parent financial information isn't required to get aid — some medical and law schools do consider parental assets and income in their calculations.
Your daughter should call her school's financial aid office anonymously to ask about its policy regarding parental aid, said Lynn O'Shaughnessy, a college financing expert at TheCollegeSolution.com. If your help would hurt, you can use the savings account route but you needn't wait until she graduates to give her the money. Once she files financial aid forms for her last year, she should be able to accept your largesse without consequence.
An Internet search isn’t the best way to find a credit counselor
Dear Liz: You've mentioned finding a nonprofit credit counselor and I was wondering the best way to go about that without feeling like I've been scammed. I'm wise enough (in my later years) to know that "nonprofit" does not mean free or even cheap services, so I didn't want to just search for "nonprofit credit counseling, McKinney Texas." Suggestions? Or should I do just that?
Answer: You can find a nonprofit credit counseling organization in your area using the National Foundation for Credit Counseling site at www.nfcc.org. NFCC is the oldest and largest credit counseling organization. Member organizations provide a variety of free and low-cost services. Those include financial education, credit report reviews and counseling about credit and debt, bankruptcy, foreclosure prevention, housing and reverse mortgages. If you're struggling with credit card debt, these agencies provide debt management plans that can allow you to pay off your accounts at lower interest rates.
If you think you may need a debt management plan, you may also want to consult with a bankruptcy attorney. You can get referrals from the National Assn. of Consumer Bankruptcy Attorneys at www.nacba.org. Credit counselors — and their clients — are sometimes too optimistic about people's ability to pay off debt, so you should understand the advantages and disadvantages of bankruptcy before you commit.