I live in the US and gave a private loan (evidenced by a formal promissory note duly executed and signed by the debtor) to another US resident. The loan was for a non-trivial amount which exceeds 1000 USD and might be of interest to other creditors of this person.
How do I report the existence of this loan and my experiences regarding repayment to the standard US credit reporting agencies so that this can be reflected on the debtor’s credit report?
I am not a bank or collection agency and don’t have a merchant account or anything like that, I’m just some random guy who holds a multi-thou promissory note. I’ve never heard of this being done- is it even possible without incorporating as a bank or something? Last I checked, it was legal to loan money to other people so we don’t need to worry about that.
I think that for an individual you will have to sue them and win a judgement, and once that judgement is recorded (assuming you win) it may be picked up by the credit reporting agencies. If it’s not automatically picked up I’m not sure what you have to do at that point to bring it the credit companies attention.
I’m pretty sure you can’t just call or write and say someone is in default.
Isn’t this just how regular companies do it, though? I’ve always wondered what safeguards there were against random companies claiming that I owe them money and ruining my credit. I presume I’d be forced to use more money I haven’t got to take them to court?
The note I hold gives terms for repayment, and it would not be difficult (assuming that my record keeping procedure is practically and legally sufficient) for me to determine whether not the debtor is fulfilling their obligations or not, though it doesn’t specify how many days late constitutes “default”.
I am fairly certain that, if I were to sue after such time as I have concluded that payment is late and the debtor is not forthcoming with the $$$, the court would hold that the note (which I can produce physically) is valid.
It seems that credit card companies can report you to the agencies without a judgment or otherwise getting governmental permission, leaving you to complain if the report was false. Might they (companies that report you) have gone through some application process with the agencies that involves a background check or something that helps, say, Experian feel confident that they are a legitimate lender and not some crime front that was formed to file false late payment reports to wreck the credit of rival gang members, cops, and other enemies, etc?
The note itself and any oral agreements that went along with it don’t formally and explicitly grant me permission to report the debtor’s performance to credit agencies (it seems that many credit applications do), so that might affect me, but there is no NDA or anything saying that I must keep anything confidential.
Private citizens cannot place information on other’s credit reports. All the companies that do report stuff also pay for the right to place positive or negative info. It is done this way to prevent malicious reporting from disgruntled folks. This question is brought up frequently at a legal forum I frequent, one of the senior forum members is an employee of one of the CRA’s.
Some governmental jurisdictions will also join so judgments awarded in courts can be placed on a debtor’s report. The county I live it will automatically place info about judgment debtors if a lien is placed on real property, otherwise judgments awarded to private citizens do not show up on a debtor’s report.
That does seem disappointing - does anyone know how much it costs to become a reporter, and would they even accept me? This was a good faith loan.
Though it does make sense to not allow every random joe to make reports - imagine angry teens reporting their parents and teachers for a delinquency of $666.69, people “reporting” each other for trivial matters like “defaulting” on the loan of a pen, etc.
Also, on the flip side, the ability to report anyone could lead to “credit booster parties”, where everyone sits down and makes a $5 microloan to everyone else at the party, then everyone has coffee and then repays all the loans with $0.01 interest each, and then everyone goes and files N-1 satistfied loan transaction reports with the CRAs (where N= number of people at party). That would undermine the credit rating system and would likely mean major reforms would be necessary in credit scoring so that one can’t balance out a foreclosure with 100 silly party loans.
Have you checked your counterparty’s credit? If they are being a deadbeat borrower to you, then they probably don’t have good credit anyway. What is your motivation to report your problems? As I said, they may already have a terrible credit score, which is why they borrowed from you.
I own a business. When someone doesn’t pay (usually because their check bounced) I send their name, address, SS#, etc to a collection agency that attempts to collect and reports to credit bureaus.
I looked into this regarding some clients who were not paying their bills. I knew that reporting would be effective because they were out buying and selling real estate even though they weren’t paying me. (Note to people: don’t stiff your accountant. We know whether you can afford to pay us.)
Anyway, the answer I got from the major bureaus is that they only accept reports when monthly payments are involved and when you have at least 100 people to report on each month. (Plus fees and other requirements, but those two knocked us out.)
We then checked with our collections agency and found out they don’t report to the credit bureaus either! So we changed collections agencies to one that will.
A few years ago, I got a frantic call from someone who had stiffed me for some relatively small amount. They were trying to buy a home, and the situation I had sent to collection was causing a problem with their getting a mortgage.
They wanted me to meet them at my place of business (it was my day off), accept payment, and type them up a letter stating that all was cool.
Vindictive bastard that I am, I told them to deal with the collection people, and hung up.
My advice would be not to stiff anyone, accountants and vindictive bastards especially!