Some people neglect to pay their debts, and others are left without a choice but to forgo making payments on specific debts in order to afford others. Whether you lost your job, your medical bills piled up to the point you can no longer afford them, or some other situation prevented you from paying you bills, you’re not alone. Many Americans fell behind on their credit card debts since the crash of the economy in 2008, and many found it impossible to make payments to their creditors. Those who haven’t made payments might find themselves in a situation in which their accounts are in collections, which has a long-lasting negative effect on their credit score.
How Debt Collections Work
When you fail to pay your bills, debt collectors come calling because your accounts are sometimes sold to their companies by credit card companies. The companies write off debts as bad debts, sell them, and take the little profit they make from the collection agency as their own. When the debt collection agency is finally in control of your account, they call. They’re required to abide by a long list of requirements, and many are strict.
Some of the requirements they must abide by include times in which they can call, the language they use over the phone, and how many times they can call. The federal government requires these laws are in place to protect consumer rights, and they don’t take it lightly when debt collectors don’t abide by the laws in place protecting consumers.
Debt Collection and Your Credit
When your debt is sold to a debt collector, you must worry about your credit. It’s going to drop substantially as a result of a collections account. The amount it hurts your credit depends heavily on the amount you owe, the score you had, and several other factors. The debt is one that remains on your account even after it’s been paid. However, there is a good chance that creditors are more willing to overlook paid accounts that remain on your credit. This could allow you to qualify for more loans and other options.
Your credit score will drop, but there’s nothing you can do about that once a debt is in collection. In fact, many consumers choose to ignore those debts as they can only remain on your credit for up to seven years from the first day of delinquency. This is true whether a debt is sold to a collection company or not. Since collectors can’t sue past four or five years in most states, the statute of limitations passes long before a debt collector begins calling.
No More Debt Collection Calls
When you find a debt in collections, it takes a notice in writing requesting they can no longer contact you at all. This is a law they must abide by if you put it in writing. This prevents debt collectors from calling you at work, at home, on your cell, or on any other past number they might have for you and your accounts. It’s not always easy to get a debt collector to stop calling by asking, and it’s not always easy to prove how often they call. Putting it in writing helps you keep your phone from ringing incessantly.
The best thing you can do with a debt in collection is pay it off as quickly as you can or find the best debt consolidation company to simplify your life. You can work out a deal with the debt collector, pay it in full right away, or spend some time waiting on it to disappear from your credit report. If you’re past the statute of limitations in your state, you might decide it’s worth your time to wait a year or two for the debt to fall right off your credit report. It’s up to you.
Debts in collections affect your score if they’re big debts, if your score is excellent, and if you have substantial debt. You have the power to get rid of the lasting negative effect by paying them off, but it’s not always possible for consumers to do that when it’s time.