5 Things To Know About Debt Collections
Debt collection can be a painful experience. The impact of a debt collection item on your credit score is not positive. So, how does a debt can end up with a collection agency?
- A collection agency takes control of your account when they buy the debt or when they are hired by the entity that owns the debt to collect on their behalf. Typically, For the first 180 days the entity that owns the debt will attempt to reach out to collect payment. After 180 days of unsuccessful collection of the debt the entity has the opportunity to “write off” the debt. Often times at this point a collection agency is hired to collect the debt on the entity’s behalf.
- A collection agency often is able to negotiate the debt to a lower balance then what it originally was when the debtor defaulted. However, they collection agency needs to collect money from the original debtor to cover what they paid for the debt.
- A common type of debt that ends up with a collection agency is medical debt. Hospitals and medical facilities will hand a debt over to a collection agency after about 60 days of nonpayment. Given the complexities of our medical system, there are often errors when it comes to medical debt.
- Any debt can ultimately end up with a collection agency. If you owe money to your utility company, phone provider, or anyone else – the debt can be handed over to a collection agency.
- When debt is with a collection agency, it will show up on your credit report as a “collection account” and this will have an impact on your credit score. A collection agency can remove the item from your credit report by reporting that the debt has been paid. Agencies will sometimes offer a “pay for delete” deal where the debtor agrees on an amount to pay, and then the agency will remove the collection item from the report.