If you should ever find yourself in a position where an account falls behind and you can no longer make the payments it is best to try and address the account before it moves through the phases of collections. Speak with your lender as soon as possible about setting up smaller payment plans to keep your account in a current or pays as agreed status. Remember, the longer you wait the more likely your debt will be turned over to collections. Generally the original lender will attempt to collect the debt in-house for several months. Between 150 and 210 days past due the account will be charged off and notated as such on your credit report. At this point the original lender will likely turn the account over to a third-party collection agency, or sell it for pennies on the dollar to recover whatever they can.
You have the right to dispute a debt and request proof that you owe it when a collection agency contacts you. By ensuring the debt is valid you will avoid paying for a debt that is not yours. A FTC report found that debt buyers were often very limited on sharing relevant information regarding the debt such as date of last payment, original lender, and details of principal and interest fees. These debt buyers and collection agencies usually receive very few necessary documents to go with the debts or are limited to access of getting them at a later time. Either way asking for validation is worth it! In many cases the collection agency may not be able to provide any lawful proof under Fair Debt Collection Practices Act to validate you owe the debt.
If the validation is provided and shows the debt is yours, negotiating a payment will help you save money. As we mentioned the original accounts are often sold to third-party collections for pennies on the dollar. Minimal returns are profit so collectors will generally be willing to negotiate. When settling a debt that has been validated, be sure to review your budget and offer an amount that is affordable. Before making any payments, or entering a payment plan make sure you have the agreement in writing. Keep in mind that any accounts with an owing balance that are left unpaid can be resold to other collections as well. Once validated, payment is the best option to avoid any debts moving into the hands of any other collection companies and hurting your scores.
One of the final steps the creditor and/or collection company can take is to pursue you in court and seek a judgment. This will show as a public record on your credit report much like a bankruptcy or tax lien. In most cases consumers feel threatened by a court summons and do not show up to court or answer the summons. This is what the collection agency is counting on, especially if the debt has not been validated. A judgment can remain on your credit report for up to 20 years depending on your state. Once a collector has a judgment you could also have your wages garnished, liens put on your property, bank accounts seized, or in extreme cases a Sheriff’s auction to liquidate your belongings to satisfy the debt. If you are currently facing a debt collection lawsuit the best option is to show up, and possibly seek the advice of a consumer-law attorney.
If you are in need of assistance in disputing inaccurate items, or requesting validation we are here to assist you and make the process as smooth as possible. We have worked on behalf of thousands of clients to clean up inaccurate and incomplete information from their credit files.
MSI Credit Solutions provides superior credit restoration and comprehensive consulting services that are reliable and affordable. For any questions or to schedule a free credit consultation, contact us at (866) 217-9841.
*The information in this article has been provided strictly for educational purposes.
