What to Know If You Have Debt in Collection
You just checked your credit report and discovered an item in collection. What do you do? First off, don’t panic. Take a deep breath and get to work resolving the issue.
1. How Can I Know If I Have Any Debt In Collection?
To find out if you have any accounts in collection, you’ll need to check your latest credit report from the three credit bureaus (Experian, Equifax, and Trans Union). Collection agencies aren’t required to report their account information to all three of the national credit reporting agencies, so you’ll need to check all three to make sure you don’t miss any important information.
You can request a credit report from each of the three national credit reporting companies once every 12 months. If you’re interested in applying for a loan or mortgage in the near future, you should check your credit report three to six months before you plan on applying. This will give you time to fix any discrepancies on your credit report.
2. Where Did The Debt Come From?
Discovering that you have debt in collection can seem like the worst thing ever. But it’s actually more common than you might think. In fact, around 30 million Americans currently have at least one debt in collection.
A major portion of debt sent to collection is from banks and credit card companies. The average household in the U.S. has almost $15,000 in credit card debt. And the average mortgage debt in the U.S. is almost $150,000 per household.
If someone is unable to pay these bills, the banks and credit card companies usually try to collect the bill themselves for the first 180 days. If this doesn’t work, they’ll often hire a collection agency to collect the debt. If the bill is still not collected after a few more months, the bank will typically sell the debt to the collection agency and wipe their hands free of your debt.
More than 20 percent of U.S. households have unpaid medical debt. Medical bills are complex and costly, so they are hard to keep up with. Hospitals and doctors are usually willing to work with patients and set up monthly payment plans. However, if someone doesn’t make any payments after 60 days, the bill will be sent to a collection agency.
There are a variety of other places that might send your bill to a collection agency. You might owe money to your phone company, utility company, student loans, or auto loans. Look at your credit report for information on where the debt in collection came from.
3. How Do I Work With A Collection Agency To Pay Off My Debt?
You usually don’t have to work too hard to contact a collection agency. It’s safe to say that they’ll find you before you even go looking for them. And they’ll continue to contact you until you’ve paid your bill.
Before you start making payments, make sure you understand what you owe. It’s best to pay off the debt as soon as possible, especially if you want to take out a loan anytime in the near future. However, you should get a statement in writing from the collection agency with details on what they’re asking you to pay. Also, find out if there are any interest or fees so you’re not caught off guard.
A collection agency usually pays a small percentage towards the debt. So if they paid one cent per $100 of debt, they’ll often try to get two or three cents from the debtor. They want to get their money’s worth to make it worth their while.
Once you know the circumstances, you’ll need to work with the collection agency to pay the bill. Sometimes you can negotiate with the collection agent to request the collection agency remove the account from the credit report. This isn’t common, but it’s worth a try. Otherwise, the collection account will remain on your credit report for seven years from the original delinquency date.
4. What Are My Rights?
Don’t let a collection agent push you around. Yes, you owe money and should try to pay it off, but collection agencies are governed by laws in regards to how they communicate with you. There are a few important rules a collection agent must follow when contacting you about unpaid bills. Here are just a few:
1. A collection agent should never call before 8 a.m. or after 9 p.m.
2. If you request that they don’t call you at work, they are legally required to follow your request.
3. If you disagree with what they claim you owe, send them a written document informing them about it, and they are required to stop contacting you until the debt is verified.
4. No calls more than once a day.
5. No verbal abuse
6. A collection agent can contact your friends, neighbors, coworkers, or family members to ask for information about your address, contact number, or where you work. But they’re not allowed to tell your friends or family that you owe money.
5. Get Everything In Writing.
When it comes to debt, especially with a collection agency, make sure all of the paperwork is in order. You don’t want to make any mistakes or get taken advantage of. Make sure all of the details you agree upon with the collection agent is in writing to avoid future misunderstandings.
Having an account in collection can be really stressful. It can really put a dent in your credit report. And it can be annoying to have a collection agent constantly contacting you about it. But you can get through this. Just make sure you understand all of the facts, know your rights, and cooperate with the collection agent to put your finances back in order. And, next time, try to pay your bill before it goes to collection to avoid future grievances.