Debt Collections and your Credit Reports and Scores. Part 2

Debt Collections and your Credit Reports and Scores. Part 2

If you missed part 1 of this post— you can view it here. 

Debts in collections hurt your score.  It does not matter if it is a medical collection, credit card, automobile repossession.  They all hurt your score.  A mortgage loan officer can grant some leeway to a medical collection, but only when your credit score is where he/she needs it to be.  So if your score is too low that medical collection is part of the problem.

It used to be that standard practice was if you paid the collection it would be deleted from your credit reports and your score would go up.  This has now become rare; technically it is a violation of Federal law to delete a collection for payment.  All that happens is the collection will still show up for 7 years but by paying you reset the clock to day 1 and you lower your score 8-10 points.  Should a debt collector be willing to delete for payment, get that in writing prior to paying it.  We had a client that the debt collector told her they would delete for payment, she paid and they did not delete.  Nothing was in writing so nothing could be done.

What you should do with any debt collection is demand validation.  When you get a letter from a debt collector it should state the debt is assumed valid unless you challenge it within 30 days. Challenge it every time.  The burden of proof is on the debt collector.

How can Best Credit Rx help?  We will utilize Federal laws (The Fair Credit Reporting Act and The Fair Debt Collection Practices Act) to force the debt collector to produce required specific documentation they are required to have in order to be reporting to the credit bureaus and attempting to collect on a debt.  We know that debts in collections are bought and sold time and again, in batches of thousands for pennies on the dollar.  No lawyer is reviewing all of that to be sure it meets the letter of the law, they are banking on their various scare tactics to get you to pay without question.  So when we come along and we demand, under your legal rights, specific documentation we are banking on them not having it.  In which case game over.  They must cease and desist all collections efforts and have it removed from your credit report.  You’d be amazed at how many of these get deleted.  If we never challenged them the right way they would still be on the reports, still harming people’s credit.

Finally; know your rights. A debt collector may not:

  1. Threaten or harass you
  2. Claim to have a warrant for your arrest
  3. Impersonate or imply they are with law enforcement
  4. Threaten to freeze bank accounts or garnish wages (unless they are doing so, in which case you will be notified in advance by the court.  Not on the phone.)

If you are being hounded by a debt collector send them a letter via certified mail instructing them to immediately cease and desist ALL phone calls.  Let them know they can reach you by US Mail and provide a good address.  Once that letter is received, if they call it is an automatic $500 fine against them each time they call.  Complain at www.consumerfinance.gov

If you missed part 1 of this post— you can view it here.