How Will Collections Affect A Credit Report
After a financial meltdown, many are reluctant to view their credit reports. They know negative reports from collection companies and creditors will affect their credit score. Therefore the question they most frequently ask is: What do I do about my credit score if I have a collection on my credit report?
This is a justified concern because creditors are unlikely to grant a loan if there’s a history of slow or no payments. A collection account is not as severe as a foreclosure or a bankruptcy, but your credit score will suffer.
The best way to handle delinquent debt is to pay it, right? Wrong!
Paying a delinquent bill could be a double whammy on your credit report. Why? Making a payment on a bill in collection may cause your credit score to suffer again because bills turned over for collection hurt your credit score the most for two years. After that, the decrease in your credit score is not as great.
If you make a payment after two years, you renew the seven-year period in which an item stays on your credit report and your score will be damaged again.
So what do you do about those pesky collections on your credit report? Paying your bills is your responsibility, even if it causes your credit score to suffer. However, you can and should negotiate with the creditor or collection agencies to minimize the damage.
Negotiate with creditors or collection agencies to pay less than the full amount of what you owe. This will not remove the collections from your credit report, but it will help your pocketbook!
The best solution is to negotiate for a smaller payment and a letter of deletion.
FYI: A letter of deletion is not a letter of payment. A letter of deletion is what a creditor or collection agency sends to the credit bureaus. It allows the bureaus to remove collections from your credit report. This is obviously the best-case scenario. Your credit score will surge if you can get a letter of deletion that wipes the collection from your credit report!
Qualifying for a letter of deletion is not easy. If the collection item was sent in error to the credit bureaus, it’s much easier to receive a letter of deletion.
The Fair Debt Collection Practices Act limits the ways creditors and collection agencies can contact you. If you believe they have violated the Act, you might be able to get a letter of deletion, so long as you promise to pay the collections on your credit report.
The most common violation of the FDCPA occurs when a collector fails to advise debtors about their right to dispute part or all of the debt within 30 days of first contacting the debtor.
Click here if you would like an introduction to a FDCPA attorney who can help you.
