Collections agencies near you

How your credit score is affected by collections agencies

A good credit score is crucial to getting a loan, lower interest rates, or making big purchases. Lots of things can lower a credit score, but nothing can land a drastic hit quite like being sent to collection agencies. If you've been dealing with debt collectors, here's what you need to know about the health of your credit score, and what you can do in the future to get back in good standing.

What led to this?

Anyone can be sent to collection agencies for missed or late payments. The most common sources are credit cards, medical bills, or personal and student loans. However, mistakes on credit scores are common. If you discover an error on your credit score you need to act immediately. Write a letter to the credit reporting bureau and to the company that handed over the false information to alert them of the mistake. Monitor your score for the next forty-five days to make sure the error is corrected.

The numbers game

The impact on your score depends on the initial score before you were sent to collections. The higher the score, the lower it will drop. If you had poor credit before collections changed your score, it's possible your score will only a small amount, sometimes as little as ten points.

The amount of money owed to the debt collector really doesn't matter. For instance, if the total is under a hundred, the debt will not register against your credit score. However, whether you owe two hundred or two thousand, the difference is the same to anyone looking at your credit score.

The timeline of credit scores

Your credit score is composed of the last seven years of activity. The past two years carries the most weight, while the five after won't affect your score as heavily.

In the past, paying off collections agencies raised your score, but not anymore. FICO has changed how credit scores are affected by collections. If you pay a debt collector the amount owed, the mark on your score is simply classified as 'paid.' But just because paying off debt won't raise your score doesn't mean you shouldn't ignore paying it.

Why? If you apply for a loan in the future, many potential lenders will look beyond just the number listed on your credit score. When they see you paid off any debt owed to collections agencies, it makes your history look more favorable than more than if you had not.

What to do moving forward

Contact the credit reporting bureau to let them know as soon as you paid the debt in full to hurry the process of raising your credit score.

After the mark is made, there's nowhere to go but up. To raise your credit score, make these practices a routine part of your financial life:

• Pay off all debts possible
• Keep current debts to a minimum
• Don't close or open new lines of credit
• Pay all your bills on time

If your credit score has been hit by a debt collector, search BBB.org for a list of accredited financial counselors who can help you come up with a detailed plan to raise your score over time.

 

8 tips for dealing with debt collectors

Whether you're dealing with debt collectors for the first time or you've worked with them before, collection services are intimidating to nearly everyone. Remember these eight tips that will help get your finances back on track and keep you aware of your role in a stressful situation.

1. Make sure the debt and the agency are legitimate

Ask the collection service for all the information they have about the debt. Ask them to identify the amount owned, the original lender they purchased your debt from, and the timeline of the debt. If they cannot provide this information or prove the legitimacy of their company, it's possible they are a scam— one that operates on most people's fear of collection services. Do not let fear be your downfall. Confirm you truly owe the debt before you make any payments.

2. Know your rights

Collection services are known for their aggressive tactics. Don't let them push you around. If they are making threatening arguments, stop and do your research. Discover your rights. It's highly possible their treat to garnish your wages is nothing more than a bluff. Collections services also have no legal authority to arrest you or accuse you of committing a crime.

3. Don't lie

Be honest while dealing with debt collectors. Avoid any drama. Don't tell your life story and the circumstances that lead to this. Collection services are after repayments, not apologies. While you may have understandable excuses, it is time to make payments and put the debt in the past.

4. Ask questions

Before you enter into any repayment contract, ask questions. Gather all the information so both sides are clear on the rules. This will prevent any miscommunication about payment amounts, dates, and other details.

5. Seek help from a professional

Don't fall prey to the same problems as before. If you are still struggling to keep up with the payments, seek help. A professional financial counselor is trained in the art of dealing with debt collectors and can help you make peace with collection services.

6. Get it in writing

Request everything in writing. Keep a copy for your records. Not only will this keep important information at your fingertips (i.e. payment amounts and dates), but it will save your future-self time if other collection services come along demanding payment for the same debt.

7. Know what you can afford

Make a plan. Know your current total income and debt. (All of it, not just the one in collections.) You don't want to risk getting out of one collection service only to fall into another.

8. Stay on top of notices

Stay on top of your finances. Plan ahead for any struggles and avoid missing any payments. If you are going to be late on a payment, contact them immediately to renegotiate and find out if you qualify for an extension.

Dealing with debt collectors is a stressful experience. Protect yourself with knowledge about your rights and what is expected of you to come out on the other side with less financial burden.

If you've been contacted by collection services, one way you can verify their authenticity is to search and find out if they are an accredited agency listed on BBB.org.

How to use the debt collection process to avoid a lawsuit

The first thing many people want to do when faced with a lawsuit from a debt collector is pretend it's not there. Don't let fear win. Few people are aware of a simple advantage they have when they are on the receiving end of a debt lawsuit. For many, all they need to do if they want to avoid future court dates is to simply show up and take advantage of a common aspect of the debt collection process.

The importance of showing up

If you do not show before the court on the date of your appointed hearing you are essentially declaring yourself guilty. The courts can then garnish your wages, freeze your bank account, or put a lien against your property. If you decide to challenge the ruling later, the judge will not be show you any favor after that first no-show.

How to use the debt collection process to your advantage

The debt collection process is complicated and important files often get lost in the transfer of the ownership of your debt. Use this to your advantage.

Show up to the initial hearing and demand proof of your debt. The court will side with you if the debt collector cannot provide a clear and concrete trail of your debt. Ask for the name of the original lender, the date of the loan and date of delinquency, and the amount owed. In many cases, the debt collector will not have all the proof to hold a legitimate case against you.

Aside from a missing paper trail which proves your debt, there are a few other ways your lawsuit can be dismissed.

• Time-barred debt: A debt collector cannot sue you for a debt that is too far in the past. Although the length of time varies according to local laws, a debt is typically dismissed if it is somewhere between three and six years old, or older.
• Proof of payments: If you have been making regularly scheduled payments in full and on time, the debt collector is ignoring legal agreements by taking you to court.
• Hire a debt collection lawyer. A professional lawyer will be familiar with the debt collection process and can help your case either be dismissed or have the charges lowered.

The most important thing to do when faced with a lawsuit from a debt collector is to act. Ignoring the lawsuit will only hurt you in future. Gather all the facts on your end that you possibly can, be prepared to make your case, and ask the debt collector to present their side as well.

BBB.org contains a list of accredited collection agencies and debt collection counselors. Discover accredited and dependable companies near you that can help you during the debt collection process.

 

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