Credit Collection Service – Cans and Cannots

It’s not easy to know everything you need to about credit collection services, but asking the right questions can help you gain a better understanding of what happens when your bill goes to a collection service and how it affects your credit.

Can debt collection affect credit score?

If you have a bill go to collections, it will have a negative effect on your credit score. The amount that it affects you depends on a number of factors, including your current score. Higher scores are affected more than lower scores. Collections that are paid typically do not hurt your credit score.

The most recent two years is the most important for your credit score. Older collections don’t affect your score as much. Collections remain on your credit report for seven years beyond the date that it went delinquent.

Can a creditor remove a collection credit report?

While there are ways that you can remove a collection from your credit report, such as through a dispute, it is possible for the creditor to remove the collection themselves. The best way to go about this is simply by writing a goodwill letter to the collection agency. While this doesn’t always work, it is worth trying.

Simply write to the creditor telling them your situation and asking that they remove the collection out of goodwill. Explain your situation and why you’d like it removed from your credit report. In some cases, credit collection services will remove the instance, particularly older collections that are nearing the expiration date.

Can credit collection services charge interest?

Credit agencies can charge interest in addition to service fees, collection costs, or other expenses. The amount that they can charge depends in large part on the contract you signed when taking out the original loan or debt or the agreement on the credit card. It cannot, however, be larger than the amount allowed by law.

Since both federal and state laws can affect the amount charged, it’s a good idea to review your state’s laws. In nine states – Alabama, Alaska, Florida, Indiana, Kentucky, Maryland, Montana, Ohio and South Dakota – federal law presides.

Can a credit collection agency garnish wages?

A credit collection service can garnish your wages if it is legal in your state. They must first file a lawsuit against you and you will have the opportunity to defend yourself against such steps as garnishing wages or property.

If a judgement for garnishment occurs, money will be deducted from your paycheck and applied toward the delinquent debt. While garnishment most often occurs in situations like unpaid child support and past due taxes, it can result from delinquent credit card debt.

If you own property or other assets, a lien may be placed on it. When the property is sold, the credit collection agency will receive the debt owed before the remainder is paid to you.

Can a credit collection agency sue me?

Once a business sells your defaulted credit agreement to a credit collection service, that service can do whatever is necessary to collect that debt within legal limits. And they can legally sue you for the outstanding balance.

However, keep in mind that credit collection services have a limited time in which to act on a debt, known as the statute of limitations. The length of time will vary depending on the type of debt and the state in which you reside. Once the time is up, the debt is no longer legally enforceable.

The statute of limitations is different than the credit reporting time limit, which is how long a debt appears on your credit report. A debt may not be enforceable and still be on your credit report and on the other hand, it could not be on your credit report any longer, but still be legally enforceable.

Actions such as making a payment, entering into a payment agreement, or even just acknowledging the debt can restart the time limit in which credit collection services can sue you for the debt.

Dealing with Debt

When you discover that your past-due debt has gone into collections, it’s wise to contact both the creditor and the credit collection service. Ask them about the debt and what can be done to pay it off, whether at a discounted rate or on a payment plan. Never ignore your debt, but rather

be responsible in handling debt whether with the original creditor or a collection agency or service