Dealing with a collector takes knowledge and some thick skin. Hopefully when you are done reading this article you'll have the knowledge that you'll need to be able to really deal with a collector. In knowing how to deal with that next phone call that you know is coming, perhaps your thick skin will provide for a much easier time of it for you.
Collectors and Collection Agencies Get Tough
With the onset of bad credit that is associated with the problems associated with the mortgage industry it stands to reason that more and more of us are going to be faced with a collection account. With the collection comes the phone calls at dinner time from the collector. Do not expect the collector to be nice. Perhaps you will get the social grease on the first call, but soon after that anything goes so beware.
Collections On My Credit Report
What does it mean to have a collection on your credit report? A collection account on your credit report means that a lender, or landlord, or someone that you supposedly owed money to has taken an action against you in an attempt to collect what they think you owe them. Okay, I say it that way because not all collections are accurate or even yours.
So if you have found out that your credit report has a collection account, or more than one, on it and it is not yours there are ways to deal with that inaccurate information. A collection account can be filed by either the original creditor that you may or may not owe or to an outside, or 3rd party, collection ageny. Learn more about repairing your credit report.
How Does A Collection Agency Get My Information
Let's just take the case that you owe a credit card company $2,000 as a balance and you decide to stop paying them. After a certain period of time and after repeated attempts to get you to start paying them again the credit card company gives up and sells your delinquent account to a collection agency. They will sell your account in two primary ways.
The first is where they just sell it flat out to get rid of it for some super discounted amount. Maybe they sell the account for $200 and you owe $2,000. The other way that they will deal with your account is where they will hire a collection agency to collect your owed debt. The collection agency in this case will get paid a percentage of the money that they collect from you.
The credit card company has every right to use any means within reason to collect the money that you owe them. This includes hiring an outside company. In doing so, they will give the collection company the information necessary for the collection agency to be able to collect your debt.
If you get out your original signed agreement with the credit card company you'll probably find some writing in it that suggests that the credit card company has the right to exercise a third party collection service to collect from you if you fail to make payments.
How To Avoid Getting A Collection
Avoiding a collection account is simple - pay your bills. Okay, don't hang up yet keep reading. This one suggestion sucks, but I need to write it. I don't know if you have ever heard of the saying "give up being right about something, even though you know you are right." It will cost you more in the long run to be right and not pay than to protect your credit report by resolving the account one way or another.
Consider this: rare is it that someone just makes up that you would owe them money. Now there might be some disagreement to this, but it isn't something that just happens all the time. I can't remember the last time that I had someone call me up out of the blue to tell me that I owed them money and I didn't know about it.
Not paying someone on principle, or your morals is not a great reason for passing on a bill that you owe. This is especially true when the entity is in a position to file a collection against you and your credit report. Collections on credit reports are bad news. I have seen credit scores drop 100 points or better with just one collection account. Is it really worth your credit score going down to win an agrument based on principle?
What To Do If I Have A Collection
- Get Educated. If you get a collection account and find out by getting an unexpected call from either your creditor or a collection agency you will want to get freshened up on the Fair Debt Collection Practices Act. Collectors have rules to follow. If you know that you are going to have more calls coming your way, you should read this Act. Here is a link to it: Federal Trade Commission - FDCPA.
- Communicate with the collector. More communication is better than less or none at all. None at all is probably the worst thing you can do. This is especially true if you owe more than a couple of hundred dollars. It is not worth the collector's time to sue you over a couple of hundred bucks, but if you owe more than $1,000 you really do want to talk to the collector. No talk or communication with the collector coupled with owing a lot of money will probably spell more hassle and bad things for you. But you get to set some ground rules according to the Fair Debt Collection Practices Act.
- Avoid paying in full - Negotiate. As a reminder, collection agencies purchase delinquent accounts for pennies on the dollar so you should never agree to pay the account in full. Often the collector (who works for commission) will often start with you paying in full. However, with them only paying a small fraction of what you originally owed, offer to pay them something like 15-25% of the original balance. They probably won't take that on the first negotiation try you have with them, but you can negotiate up from there. Always remember, they make more money if they collect more. They will almost always bend to you to some extent because getting paid something is better than getting paid nothing.
- Get everything in writing before you pay anything. If you don't get it in writing and you make a payment - it is likely that what you were promised might not ever materialize. Collectors will promise anything to get payment - that's okay, just make sure you get it in writing. A letter from the collector can go a long way to getting things removed or adjusted on your credit report. So do the right thing and get it in writing.
Okay, now for this article really fast: pay your bills to avoid collections, if something happens and you get a collection account - resolve it asap by either paying it or negotiating a payoff for it. Do not ignore it. Make sure to get something in writing up front before you pay them and then get something in writing saying that you have paid them. And at last, make sure that your credit report gets changed to reflect that the account was paid.
