First and foremost before I give you any tips, the most important tip I want to give you is DO NOT LET YOUR DEBT GO INTO COLLECTION! It won’t go away! If anyone ever told you to ignore a debt and with time it will go away, that is a completely false statement. What the creditors actually do with your debt is sell your debt to a collection agency in hopes that the collection company can collect the balanced owed from you by calling you and/or sending you consistent letters by mail. Then during that process the collection agencies report it to the credit bureaus and damage your credit score. A collection can affect your credit score by having the score drop as much as 100 points, that is big! A BIG deal! Do not let this be you, if you have a $300.00 debt, pay it! Don’t think it’s too much because by the time it gets to the collection agency that $300.00 debt will turn into $635.00 debt all because of interest.
Original Creditor v. Collection Agencies
Before I begin to give you tips on how to handle collections let me explain the difference between the original creditor and the collection agency. Let me tell you how handling the debt with the original creditor can be so much better for your credit score and history than letting it go to collection and then handling it once it is sold to the collection agency. If a collection agency reaches out to you that means the original creditor has officially sold your debt to a collection agency for pennies on the dollar. Wait… If you feel like I’m already losing you, don’t panic.. Just contact my office, UrChoice Credit, and we will help you restore your credit and straighten out these collections. Feel free to send me your contact information and we can help you handle your debt.
So, when dealing with the original creditor no debt has been reported to any of the credit bureaus just yet. You still have a chance to speak with the creditor and come up with a payment plan to get rid of your debt without them reporting it to the credit bureaus and damaging your credit score. Now, if you ignore the original creditor, don’t answer their calls and completely go missing in action, THEY WILL send your debt to collection.
Sometimes we think it’s easier when the debt is sent to collection agencies because some assume if it goes to collection, the debt will be erased. WRONG! The debt is still there, the best thing you can do when it’s been sold to a collection agency is pay the debt or negotiate and pay your debt for less than original balance. Is that always a good thing? NO, not at all because while you may have finally paid your debt off either in full or less than owed, you’ll still have this collection reporting on your credit report.
Best Thing To Do With Your Collection Accounts
Always review your debt. Before you move forward and do anything with your collection account, confirm that everything reporting is correct. Not always is the collection agency information correct. In the process of your account being sold sometimes information can be transferred with errors. You want to make sure before making any payments, all information is accurate.
Know Your Rights! Understand your rights when it comes to collections through the FAIR DEBT COLLECTION Act. You want to know what collection agencies can and cannot do while attempting to collect payment, such as harassing you. A collection agency cannot call you 10 times a day or let alone every single day, they cannot call you before 8 am or after 9 pm. Once you let a debt collector know you no longer want them calling you, even if it’s the first time they’ve reached out to you, they are not allowed to call you anymore. If they continue to harass you, you can always take legal actions against the debt collector. Now guess what? Instead of you having to pay them, they’ll have to pay you.
NEVER, NEVER EVER admit to the debt collector that is your debt. No matter how much accurate information they are given you of the debt, do not admit the debt is yours on a recorded line. Ask for a validation of debt letter and have them mail it to the address on file. Once you’ve received your validation of debt letter and are now ready to move forward with paying your debt, try to negotiate. Usually debt collectors are willing to negotiate with you and settle for a lesser amount than owed. If you decide to negotiate be sure to have the negotiated amount ready to be paid. Usually debt collectors give you up to 7 days to make the payment. If you haven’t made payment within the agreed time, the offer on the table is thrown out the window and your debt balance goes back to the original debt. A small but major tip, once you’ve settled your account with the debt collector be sure to receive by email or mail a satisfaction letter aka your receipt. You need this proof as confirmation of payment.
Whew, finally! Now you’ve officially paid your debt and finally your debt to ratio on your credit report has lowered. You pat yourself on the back, you no longer owe anyone. Your bills are now all caught up and are being paid on time. You’re feeling good, now an entire year has gone by and you notice your score has only increased by 30-45 points and the collections are still reporting to your report.
What do you do now? Contact the credit bureaus and dispute the paid collections to have them removed from reporting on your credit report. Do not forget to forward each credit bureau your confirmation of payment letter when disputing the removal of the account. You want to make it as easy and quickly as possible for you to get the paid collections removed. If you don’t know how to dispute an account with the credit bureaus feel free to contact a credit repair company, like UrChoice Credit, to have them dispute the paid collection accounts with the credit bureaus for you.
Remember handling collections sooner than later is ALWAYS the better choice because having excellent credit is a choice, it’s UrChoice!