Debt in Collection – how does it affect your credit report???
The Fair Credit Reporting Act (FCRA) is Federal law and is very clear regarding the credit bureaus responsibility regarding what the requirements are of anything they report. The account (trade line) must be accurate, verifiable, and timely in reporting.
When a collection hits your credit report it will have major impact on your credit score. Ideally you want to try to talk to the original creditor (not a debt collector) before it gets to that point. Perhaps they will accept a payment plan and agree that as long as you make the monthly payment you agree on they will not turn it over to a debt collector. This is typically effective with medical debts. Call the provider as soon as you get the bill and ask for an affordable payment plan, as long as they agree to keep the debt and not give it to a debt collector.
Once it is being reported by a debt collector, it has become very rare that they will delete it from your credit reports if you pay them. This is because that would violate FCRA. The credit bureaus are required to give accurate and valid information. The best they can do is show the collection with a zero balance. This does nothing to help your score, in fact it will lower it because when you pay the clock resets and becomes current, even if it is a few years old. I do suggest calling and asking if they will delete for payment, but if they say no get off the phone. If they say yes, make them put it in writing the day you make the payment (via email or fax). Tell them if you do not receive this letter by end of the business day you will stop payment.
Reality is they just don’t delete for payment anymore, and I have seen cases where a customer was told they would, and was lied to. Had nothing in writing to prove it. So hurt the score, and the debt collection remained with a zero balance.
It is over at this point? Is there anything else that can be done to get a debt collection off your credit report, especially if you don’t recognize it or think it belongs to you? No it’s not.
The CFPB (Consumer Financial Protection Bureau) is an additional excellent resource for information about this topic and more.
More about that next blog post.
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