Let’s talk about debt collections. Many of the visitors to this blog ask me about collections. For example, what exactly is a collection, how do they affect your credit score, etc, etc. I want to dedicate an entire article to debt collections in order to clear up many uncertainties people have when it comes to collections.
What Exactly is a Debt Collection?
It’s important to keep a couple of things in mind when it comes to understanding how collections work. First of all, collections come into play when an account, such as a medical bill, goes unpaid for a period of time. Usually the original creditor will attempt to collect the debt for a period of time (somewhere around 90-120 days) and if they are unable to collect the payment, they will send it to a professional debt collector.
When I say the original creditor “sends” the account to a debt collector, this actually means the creditor has probably sold the account to the collector at a much lower price than the debt balance. This account is usually sold at a substantially lower price than the account balance.
However, this isn’t always the case. Many times a debt collection company is simply hired to collect the debt. It’s older debts that tend to be sold off to debt collectors. Very large companies often times have their own internal debt collection departments. You’ll see this almost always with credit card companies.
What Happens When an Account Becomes a Debt Collection
When an account is sent to a professional debt collector a few things happen. First, the account will show up on your credit report as a collection. Second, your credit score will take a big hit.
Next, you’ll start receiving correspondence from the debt collector. The level of correspondence depends on the natural of the debt as well as the debt collection company. It will usually start off with a letter in the mail or a phone call.
If the debt isn’t collected right away, they’ll progressively get more aggressive with you. If you’re interested to know how bad these people can be, check out the article when I interviewed a debt collector.
What to Do When a Debt Collector Contacts You
The first thing you should do when you are contacted by a debt collector is write them a letter requesting that they validate the debt. This is a process in which the debt collector is legally required to provide documentation that the debt is indeed yours. Sometimes they simply don’t have the documentation for this and it will result in them ceasing to attempt to collect the debt.
It’s important that when you write this letter you specially say that if they can’t provide documentation that the debt is yours, not only do they stop contacting you, but they also remove the collection from your credit score.
What If the Debt Is Validated?
It could also be the case that the debt collector is able to validate that the debt is yours. In this case you need to take proactive steps to negotiate with the collector to not only pay off the debt, but also remove it from your credit report. I can’t tell you how many times people have came to me telling me that they cut a deal with a collector without including the requirement that the collector remove the negative entry from their credit report.
This is called Pay for Deletion. The idea is simple: You agree to pay the debt (or part of it) in exchange for the account to be paid in full as well as removed from your credit report. You can read more about this technique in my article dedicated to removing a collection from your credit report.
What’s the Fastest Way to Remove a Debt Collection?
Lastly, you can hire a professional to attempt to remove the debt collection. This is often times much quicker than removing it yourself. For this I suggest you check out Lexington Law Credit Repair. They’ll take care of you. Give them a call at 1-844-764-9809 or Check out their website. (They are open on weekends)