Check Credit Score / Credit Score Information / Credit Articles / Personal Debt / Dealing with Collections on Your Credit Report
Dealing With Different Types of Collections on Your Credit Report
Posted: June 2, 2014
This may seem obvious but the first thing you need is a copy of your credit report from all three credit bureaus before you can begin to deal with collections on your credit report.
Once you have a copy of your credit report you will be able to not only know exactly what collection items are in your credit files but you will know the name of the collection agencies handling each item and at the back of the credit report will be contact phone numbers for those collection agencies for each item showing on your report.
Your first task is to make sure that all the collections on your credit report are really your debt. If you look at the collection information and know that it is yours then move on to the next item. If you don't know what the debt is or don't believe it belongs to you then you will need to request that the debt be validated.
While you are waiting on the items you don't recognize to be validated then continue to work on the rest of the collections on your report.
Medical collections are treated differently than other type collections when it comes to approval for new credit. They usually carry less weight with new lenders. So, focus on the none medical related collection items first.
Rules For All Collection Items
It is in your best interest to stay informed on the laws and rules regarding debt and collection thereof. Collection agencies will try to step outside the bounds of the law in order to collect debt if they feel you don't know what they are doing. Debt may continue to appear on your credit report long after the statue of limitations has expired.
The type of debt is what determines the statue of limitations for that debt and each is treated differently as far as how long you are obligated to pay them. In addition, the term is different depending on the state where the debt was incurred.
- Oral Contract - You are obligated to pay an oral agreement to debt even though you haven't signed anything showing that you owe the money. An oral agreement is a lot harder to enforce in court.
- Written Contract - A written contract shows an obligation of the borrow to repay money borrowed. This type of contract is binding in court and much easier to enforce.
- Promissory Note - This is a written document with a "Promise to Pay" statement that outlines how the note will be paid. A home mortgage is an example of a promissory note.
- Revolving Line of Credit - This is a credit line that is opened for the consumer to use at their discretion. A few examples of a revolving line of credit are credit cards, home equity line of credit (HELOC) or just a personal line of credit with a bank for investing. This type of credit can be an unsecured or secured type of debt.
Depending on the type of debt and the state the statue of limitations can vary from 3 years to 15 years. This is based on the date of last activity for the debt. If your debt is older than the statue of limitations for collection and you make a payment then you start the clock running again. So, you might not want to actually pay this collection unless you can get a "delete for payment".
Non-Medical Collection Items
Many collection items on people's credit reports are for small amounts. A common collection is from the TV service providers for an unreturned box. I have worked with people who have returned their boxes but still have a collection debt on their credit report for the box. If you have not saved your receipt then you pretty much don't have much to work with. The best thing is to just pay the collection amount, get a receipt and send it in to the credit reporting agencies yourself to be sure that it is zeroed on your credit report.
Any other collections for small amounts you may just want to pay in order to save yourself time and hassle.
Collections for large amounts you may want to negotiate for a settlement amount. Even though you can bargain for this with the collection agency you may get a better deal by going to the original creditor. By the time your debt becomes a collection it has had many fees and a lot of interest added to your original debt amount. So the original creditor will sometimes settle for anywhere from 30 to 60 percent less than what is showing that you owe. Don't forget to try and get a "delete for pay" also. Be sure to get any settlement agreement in writing before you pay.
Opening The Door
If you have not been getting calls from collection agencies about any of the collection items showing on your credit report then odds are that they can't find you; you have moved, gotten married and your name is different or changed or disconnected your phone.
So, be sure that you are serious about clearing up your collections before you start contacting the collection agency about any of these items. You are opening the door to giving them your phone number, address, etc.
This does not mean that you have to put up with rude or obnoxious collection agents. You can send the collector a "Cease and Desist" letter and if that does not stop harassing phone calls you can file a complaint with the Federal Trade Commission.
Get Your Credit Report
As we said when we started this article you have to know exactly what collections are showing on your credit report before you can deal with collections on your credit report. Don't just go and deal with someone that you know you owe money too because they may not have turned this debt over to a collection agency and it may not eveb be recorded in your credit file with the credit bureaus.