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How to Deal With Collection Agencies on Your Credit Report

Oct 24

Posted by Ben Casey in Credit | Comments off

Working With Collection Agencies

A collection becomes known as a “charge-off” when it is sold to a third party collection agency. This happens when an initial creditor decides to quit contacting you to collect the debt. Collection agencies are proficient in getting you to part with your money.

Will a Collection Damage my Credit Score?

The reporting of a collection will cause havoc with your credit report. Your credit score will decrease as a result of the charge-off and the individual credit entry will go from bad to very bad. Unpaid collection, collection – paid or settled for less, and paid collection are variations which a reported collection can take with regard to your credit report.

A collection ” even if paid ” alerts lenders or employers that you defaulted in the past. Lenders look for behavior like this as a prediction of future behavior and potential for default.

Can Collections Be Removed?

A charge-off DOES NOT need to remain on your credit report for 7 years. The fact is people are often successful in removing a charge-off from their credit report.

A collection will remain on your credit report for as long as the credit bureau or creditor reports it. Consequently, it is up to you to persuade these companies to report accurate positive information! In other words, you ultimately control how long a collection stays on your credit report.

Under the Fair Credit Reporting Act (FCRA), you have the right to challenge any negative entries listed on your credit report. A copy of your credit report will need to be obtained in order to review the listed information and determine which collection agencies are present. You should not expect your credit reports to be the same as the credit bureaus maintain a separate file on your credit activities.

Ultimately, you will need to dispute every negative entry on your credit report. Often, following this procedure will result in the removal of several negative entries with no additional follow-up.

If a Dispute Does Not Work, What Next?

If your dispute is unsuccessful, you may consider additional methods. At this point, an experienced and knowledgeable attorney may be helpful.

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3 Important Points To Consider When Hiring A Debt Collection Agency

Sep 18

Posted by David P. Montana in Credit | No Comments

To manage a company successfully, every owner has to stay on top of their receivables and watch their cash flow. Whether you promote a product or provide a service, you probably face late-paying or none-paying customers from time to time. That means that you have to have a sound, consistent internal debt recovery policy in place. Part of your policy should include knowing when to contract out problem accounts to a debt collection agency.

One notable reason this is proper is because your delinquent accounts continue to devalue, at a rate of 15% per month. And the longer an account goes delinquent, the more challenging AND expensive it is to collect. In addition to spending more time, money and resources pursuing these depreciating accounts, its also costing your company in lost opportunity dollars, by taking you away from your core revenue-generating functions. It is far more cost effective and efficient to outsource these difficult accounts to a dispassionate third party debt collection agency.

Here are three main tips to bear in mind when hiring a debt collection agency.

When hiring a debt collection agency, you need to make sure they are licensed in the state(s) where your debtors are located. As collection laws can vary greatly by state, its to your advantage to look at collection agencies that are qualified nationwide. Because we live in such a mobile society, and with people moving across state lines frequently, its better to know a debt collection agency that is accredited in all states are familiar with all the various laws and regulations. In fact, collection agencies can only collect in the states they hold a license in.

Fee structures can differ greatly with different collection agencies. Some offer prepaid, flat fee arrangements, as others charge a ratio of any monies collected, normally with no upfront costs required. Still others can propose some blend of the two. Depending on your establishment, there are advantages to either situation. Though there are upfront costs with flat fee based debt collection agencies, you can save a lot of money in the long run, since the collection costs tend to be a small percentage of the total dollars collected.

Because your costs are unchanging, you can also turn over difficult accounts quicker, when there’s a greater probability for recovering your money. Again, the longer you procrastinate, the more difficult it is to collect.

Still, a lot of organizations elect to give up a percentage of whatever might be collected to avoid the upfront dollar costs. Be sure to compare rates though: a debt collection agency can charge anywhere from 20-50% in contingency fees. One thing to keep in mind though: while you might be inclined to seek out the lowest fees, you should also know that if the fees are very low, it can mean the debt collection agency has limited staff, time and assets that they will commit to collecting your accounts. At the same time as percentage fees charged are significant, success in total recovery is far more significant to your organization bottom line. Whichever option you choose, make sure the debt collection agency you’re considering spells out their fee structure clearly in writing.

Finally, when considering a debt collection agency, you need to think of them as an extension of your organization. Seeing as they will be collecting your money and acting on your behalf, its notable that they reflect your organization’s viewpoint. For instance, if you manage a medical practice, your reputation in the community is something you value. You wouldn’t want to associate with a debt collection agency known to engage in harsh, intimidating and/or inhumane behavior when handling patient collections. At the same time, you want a collection agency that while diplomatic, they are determined, steady and constant in their collections activity.

David P. Montana has written extensively and worked as a business consultant in debt collection services for thirty years. David provides more beneficial tools and information about choosing the right collection agency.

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Reforms Make It Harder To Give Credit Cards To College Students

Sep 12

Posted by Takara Alexis in Credit | No Comments

Due to the recent credit card remodeling that are starting up next year, card issuers will have a difficult time getting teenagers on college campuses to apply for credit cards without their parents’ knowledge. As students arrive on campus, card issuers will be there to welcome them at many schools.

“Issuers will try to continue to market to college students between now and the time the legislation takes effect,” said Bill Hardekopf, chief executive of LowCards.com, a site that tracks cards. That means educating them to budget and handle a checkbook and debit card in advance to having a credit card.

Card issuers target mainly young adults because people tend to be faithful to their first card, said Christine Lindstrom, U.S. Public Interest Research Group’s higher-education program director. Plus, young adults are more inclined to carry revolving debt and pay late, producing more interest and fees for the card issuers, she said.

Card issuers also will necessitate a co-signers approval to increase credit limits of a cardholder younger than 21. And issuers won’t be permitted to offer T-shirts or trinkets to entice students. Some credit experts say students need a card to start building a credit history and score.

But there’s no need to rush this, and it can ricochet if students mismanage cards. Young adults should worry less about their credit score and focus more on building good financial habits between ages 16 and 21, said Craig Watts, a spokesman for FICO, the company that created a generally used credit score. “The credit score will take care of itself,” he says.

A survey announced in April by Sallie Mae denotes that many young adults aren’t experienced managers of credit. Undergraduates on average carried record card debt of $3,173, or 46 percent more than four years earlier.

Several schools, out of concern for students, don’t admit marketers to pitch cards on campus. After a few years of living on their own, paying bills and managing credit, they can apply for a credit card under their own name when they turn 21. Never co-sign, advises Janet Bodnar, author of “Raising Money Smart Kids.” Besides, she added, students are more likely to learn money skills if responsible for their own debt.

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