Monday, June 20, 2016

Accounts in Collections

When a person doesn’t pay a bill on time or at all, the related account often goes over to collections. Once this happens, the consumer’s credit score is negatively impacted, and other problems and
challenges can arise. For this reason, it is extremely important that consumers do everything they can to keep their accounts out of collections. When that doesn’t happen, however, then they need to be aware of how being in collections will affect them so that they can mitigate the damage as much as possible.

For those confused about what exactly it means to be “in collections,” this simply means that the original company that the consumer borrowed from or purchased a product or service through has written off the debt as a loss. In order to recuperate some of the cost, the company then sold the consumer’s debt to a collection agency, which will attempt to collect on the money and profit.

Every company has its own policy regarding when it sends accounts to collections. However, generally, after 180 days of non-payment, most creditors will send accounts to collections. Soon after, the consumer’s debt will often appear on his or her credit score

Once an account is in collections, this can lead to a serious drop in the person’s credit score. And, even a good score typically can’t survive having an account put in collections. In fact, the higher a person’s score is when the account goes over to collections, the more likely it is to drop significantly as a result.

Another big problem with having an account go over to collections is that this will typically mean owning even more on the debt than was previously owed since most collections agencies will assess additional fees and charges for handling the debt.

What to Do

When a consumer has a debt go over to collections, the first thing he or she should do is determine whether or not the debt is accurate and has been accurately reported.

If so, then consumers are advised to try and work something out with the collection agency to pay off their debt and bring their credit scores back up.

If the information reported is incorrect, consumer can file a complaint with their credit bureau.

No matter what the outcome or situation, it is important for today’s consumers to understand the truth about collections accounts and how they can negatively impact their lives and their credit.

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