A BEGINNER’S LOOK INSIDE COLLECTIONS

I’m certain that many of us have heard the term “collection” at some point, and more than likely have received a “collection call” or a letter from a collection agency. I’m also certain that many of us can agree that collection calls can become quite annoying. However, it’s important to know what a collection account is, what it means to be under collections, to know your alternatives, and tips on what to do when you do receive a call or letter from a collection agency. So here it is, let’s take a look inside collections.

What is a collection account?

A collection is a result of an account/debt that has not been paid on time. Let’s say you have a credit card that you have not paid and it becomes notably delinquent, the original company that you owe will write the debt as a loss, and sell it to a collection agency. Accounts are sent to a collection agency after 180 days of non-payment, which means the debt has not been paid for over a 6 month period. You may or may not be notified by the original creditor that your account is being sent to collections, but you’ll surely be informed by the collection agency either through a phone call or letter by mail. Their job is to strive to recover the money that’s owed, so they’re going to attempt to do just that.

What does it mean to be under collections?

If you have an account that’s being reported as a collection it means that the account in question has not been paid. In order for you to be sent to collections, a default must have occurred, which in simplest terms means there was a failure to make a payment on time. Once this occurs, the creditor (company that holds the account) will try to collect the payment by calling you, sending letters to your residence, and will then begin to report the account as delinquent to the credit reporting agencies. During this process, you’ll begin to hear the term “collections” because soon after this is the action that will take place. Now, you find yourself under this category and probably wondering “how do I get myself out?” I know that at times “life happens”, you may have been laid off from your job, went through a divorce, house went into foreclosure, became ill, and the list can go on. Unfortunately, these reasons don’t matter to those attempting to collect the debt, so the next step is on you.

What are the alternatives? How do I get out of collections?

If the intent is to have credit worthiness, it will not be a wise decision to first pay off a collection. I say this because it will still report as a negative account even if it’s paid in full or for less than the full balance. Disputing the collection will be the best option because you’re able to dispute it, and make sure that everything is verifiable, accurate, and complete (www.ftc.gov). If any of your information that’s tied into the collection is incorrect or outdated, the credit bureaus responsibility is to correct it or delete it. Another alternative is to wait it out, but remember you’ll have to wait 7 years from the original delinquency of the debt in order for it to be removed from your credit report upon request. Let’s be real though, who would want to waste that much time. A different approach to satisfying the debt and getting it deleted would be to request a “payment for deletion”, but this is difficult to obtain. Furnisher’s (original creditors) are opposed in providing this type of agreement because they feel the need to record payment history. However, it can be done!

Collection Tips

• Don’t volunteer any personal information
• Request everything in writing
• Ask to be on the “Do Not Call List” when harassed by phone calls
• Register your phone number (landline or cellphone) through https://www.donotcall.gov/
• DON’T EVER IGNORE YOUR COLLECTIONS! (Find a solution)