When working on repairing your credit, you can run into all sorts of problems, not the least of which is simply not knowing what people are talking about when they bandy about terms like Lien, Judgment, and Third Party Collection Agency. Here are a few definitions to cover some of those strange terms only commonly used by lawyers, collection agents and credit companies. Visit: http://aaacreditguide.net/charge-offs/

1. Credit Rating Repair: 6 Terms You Need to
Know
When working on repairing your credit, you can run into all sorts of problems, not the least of
which is simply not knowing what people are talking about when they bandy about terms like
Lien, Judgment, and Third Party Collection Agency. Here are a few definitions to cover some of
those strange terms only commonly used by lawyers, collection agents and credit companies.
KD – key derogatory
This is a term you may find on your credit report if you’re trying to do some credit rating repair –
it means a negative incident appearing on your record, be it charge offs, judgment or other
negative event, of which there are many, which will affect your credit score. Derogatory and key
derogatory share the same meaning in most cases, but while the other two credit report bureaus
use them this way, Experian does not. Experian requires that to be a Key Derogatory, it must be
a government debt, such as an unpaid student loan, term default (defaulting on the payment
terms of a contract, such as mortgage default), a bankruptcy, settled debts (this includes short
sales), or unpaid claims (collections, etc.)
Judgment
A judgment is the last result of a legal action. Unpaid judgments can stay on your record for
seven years from the filing date or the statute of limitations – whichever is longer. Each state has
their own statutes, so check on your state’s SOLs if you want to know how long you have before
you will be able to consider it done with. Also, they often have renewal terms – that means if you
don’t pay it, it can be renewed against you and that can go on for a very long time. This makes
credit rating repair especially difficult, and you’ll want to handle any judgments that can be
disputed first in your credit repair efforts.
Paid judgments are different. They can only report for seven years, regardless of the statute. In
some cases, a paid judgment may be removed from your credit file before the 7 years are up if
you dispute the judgment before it has been updated to reflect its paid status.

2. If you have the cooperation of the plaintiff (the person who got the judgment against you) you
can also ask for a ‘set aside’ letter, which is a motion to get the judgment overturned – but this
requires either complete cooperation from the person who won the judgment against you or an
airtight case and a lawyer.
Lien
A Lien is a legally binding claim to secure a debt. A lien could be a tax lien – the government
uses these on all sorts of unpaid taxes – or a property and mechanics lien. What a lien does is
make you pay before you are allowed to pay anything else, and make it impossible to sell or
refinance whatever it is upon which they have placed the lien.
It’s fairly common practice for businesses to place liens on property to insure they’ll get paid.
You cannot remove a lien from your credit until it is satisfied, so you will want to get this paid
off if you’re going to attempt credit rating repair.
Collection Account
One of the biggest hurdles to successful credit rating repair is the presence of multiple collection
accounts. A collection account is what happens when you stop paying on your debt and it
remains unpaid for a certain length of time.
The owner of the debt will then attempt to collect on the unpaid balance by transferring it from a
normal account to a collection account. In other words, you have been kicked from the good
standing list to the “doesn’t pay his bills” list.
A collection account may be handled by the business’s own collection department, or they could
be handed off to a outside or third party collection agency. Either way, they want you to pay up
and are willing to spend a lot of their time (and yours) doing it.
Charge-off
A charge-off is not, as some think, when a debt’s been just canceled out. When you get a charge
off, that means the account is no longer open for you to use, and you still have to pay it off.
You’re just marked in their books as a loss. This adds a negative entry, a charge off, to your
credit report. They will still try to collect on the debt or get an outside agency to work on it.
An account is usually labeled a charge off when its in 180 days of less than minimum payments.
To get one removed, you have to wait for seven years or your state’s Statute of Limitations, or
negotiate with the debt holder to have it removed if you pay up. Just paying it will only change it
to ‘settled’ or ‘paid’ but it will still be there. Removing a charge-off is essential to credit rating
repair.
Third-Party Collection Agency

3. A third-party collection agency is simply an outside collection agency that came in late – they
are not part of the original contract. The agency takes a percentage of the debts collected. The
type of debt and age of the account determine the percentage the agent gets for collecting the
debt – it could be as low as 10% or as high as 50% depending on the agreement or whether they
buy the debts outright.
While there are many legitimate businesses that use outside collection agencies, many incidents
of harassment and illegal collection methods used by the less scrupulous. Third-party collection
agencies in the U.S.A. are subject to the Fair Debt Collection Practices Act of 1977, which was
created in an attempt to control how third-party agencies are allowed to proceed.
Understanding these terms and how they apply to your particular situation will help you to
successfully complete your credit rating repair and get the financial freedom you deserve.