If you’ve ever let debts to creditors go unpaid, you’ve probably had to deal with collection agencies. Collection agents will get involved in a wide range of unpaid debt, including unpaid utilities, bank account deficits, unpaid personal loans, and medical debt.
Given the level of intimidation and panic these agencies may attempt to foster, consumers should educate themselves on how collection agencies operate, how they acquire and manage your debt, and what your rights are when repaying debt and protecting your credit history.
A collection account is any unpaid and overdue debt that is now in the hands of a collection department or agency. The collections process typically begins within a few months of an account becoming delinquent.
While some companies have internal collections departments that will make an aggressive effort to collect payment on your debt, it’s also normal for businesses to sell that debt to a collection agency specializing in debt collection practices.
The ultimate goal of debt collection agencies is to collect payment on the debts you owe. These agencies will use a wide range of strategies to motivate payment of this debt. These strategies can include letters to your home, phone calls to your home, or even attempts to contact at your place of employment.
Many local and state governments have laws dictating what collection agencies can and can’t do when attempting to recover a debt. While tactics will vary from one agency to the next, you can expect some collections agents to be very aggressive in attempting to contact you and motivate a payment.
If you’re being pursued by a collection agency to repay a debt, this is because the original creditor has sold the debt to that agency. This is a common practice of collection agencies, which will purchase debt at a discount and then attempt to recoup that money for a profit from the individual who owns that debt.
Since it’s highly unlikely you would have unpaid debts directly from a collection agency, you would only be contacted by an agency after your debt is sold to that business. In most cases, the collection agency will let you know the original creditor whose debt they are attempting to collect. They may even be willing to offer you a deal in exchange for partial payment.
While a bill can theoretically remain in collections indefinitely, what matters most to consumers is the length of time that bill remains listed on your credit report. This negative listing can sink your credit score and make it difficult or impossible to get credit for everything ranging from a mortgage to home Internet service.
Collections agents are most active in pursuing repayment when these bills are still listed as delinquent on your credit report. In most cases, these debts will stay on your credit report for seven years, plus 180 days after the account first became overdue.
If you have bills in collections that appear on your credit report, remember that you may not be able to remove those negative marks even if you repay your debt. In most cases, the best thing you can do is monitor those negative marks and make sure they fall off your credit report after they’ve expired.
Once a collection agency acquires your debt, that company is able to post new information related to that account. This information includes updates to the owner information of that debt, along with a payment history and/or the remaining amount outstanding, if it has changed from the original amount owed.
This does not mean, though, that collection agencies can add information that is incorrect, such as new origination dates for your debt, or higher amounts owed. As a consumer, you’re entitled to dispute any information on your credit report that you believe is inaccurate—including any information added or changed by the collection agency.
If you notice a (collection agency reporting old debt) with new, more recent dates, this may be a strategy used by the agency to make the debt more current—which has a stronger negative impact on your credit score, and gives the agency more time to try and collect that debt.
Fortunately for consumers, this practice is illegal, and you have the ability to file a dispute with the credit bureau to have this information corrected. Collection agencies can’t try to recreate old debts as new ones to give themselves more leverage as they seek repayment. Once a debt is created, its date of origin can’t be changed.
If you’re currently being targeted by collection agencies for repayment of old debt, you’ll have to make a choice between paying debt you believe you rightly owe, ignoring those collections agencies and their efforts to collect payment, or disputing information you believe is incorrect. Keep in mind that, when (paying collection agencies), you may be able to negotiate a lower rate and/or secure other changes to the listing on your credit report in exchange for payment.
Even though you owe debt, you still have rights and leverage as a consumer. Stay calm in the face of this pressure to pay, and seek out a resolution that will benefit your finances and your credit report.
