Debt Collection 101
Many consumers face calls from debt collectors from time to time. It can happen easily when life gets hectic and a bill accidentally goes unpaid. If your payment is more than 30 days past due, however, you may be turned over to a debt collection agency to collect payment and close the account. Don’t panic if this happens – you still have options. Read on to learn more.
First, know that your credit score might NOT be impacted. According to federal law, you must be at least thirty days late on payment to be reported to the three credit bureaus, and you’ll get an even longer leash with medical debts – they can’t be reflected in your credit score for 180 days. This means that working quickly with the debt collection agency may save you a ding on your credit report.
Second, you may choose to work with the original creditor, rather than the debt collection agency, if that is more comfortable for you. Do you have a longstanding relationship with the creditor in question? Do you prefer speaking with a customer service representative, rather than a third-party debt collector? If so, it’s within your consumer rights to reach out to the original creditor and work out a payment plan. If you’re a first-time offender, many companies may even offer forgiveness on full or partial late fees.
Lastly, although debt collectors will often begin negotiations by offering a monthly payment plan to allow you to pay off your debt slowly, impacting your finances less in the short term, this isn’t the only option available. If you dread the thought of sending a check to a debt collector every month for a year or more, consider asking for a lump settlement instead. Typically, you can negotiate a lower lump sum payment, as long as you can pay the agreed upon amount in full over a short time period.
Remember, debt collection doesn’t always have to be a smear on your financial record. Knowing your options means you can take control of your financial health and correct a missed payment with minimal damage to your credit.
Image via Flickr/collectionservices