Account In Collection
An account in collection usually stays on your report for seven years, and 180 days after the date when the account first becomes past due. After this period has passed, your account in collection becomes deleted from your files. It will then be reported to the credit agencies as being paid in full. While this is going on, you are not allowed to take payment from any new creditors. You may be restricted from taking payments from your former creditors.
A number of collection agencies are now reporting to credit bureaus that they are actively pursuing delinquent accounts. When a collection agency places a notice of collection in your file, the delinquency status is either “paid in full” or “in collections”. If you did not have delinquent debts, and wish to remove an account in collection from your file, your best option may be to negotiate with the original creditor. If the original creditor agrees to remove your account in collection, the collection agency should advise them in writing. Be sure to send copies of all correspondence to the original creditor.
As previously mentioned, collections do not remain on your report forever. The 180 days late requirement only applies to accounts that you close and pay in full. If you fail to pay an account in full within the prescribed 180 days, the account in collections is updated to reflect a deficiency balance. This is the status of the debt collector has your debt when they send you a letter stating they are seeking a deficiency judgment. This status does not transfer over to a charge-off status until the account in collections has been updated to reflect a charge-off. Charge-offs cannot be transferred to any other collection account.
Nowadays, debt collectors also use non-disclosure contracts to prohibit you from speaking about your debts with anyone except the collectors. Essentially, these contracts spell out the consequences if you discuss your debts with anyone. According to one California based attorney, “the collection agencies essentially are saying if you don’t keep quiet you’re going to end up in court and they’re going to get your money.” While these contracts are commonly referred to as NDA’s, or non-disclosure agreements, they are not legal documents. They are not black and white, and they are not self-enforcing. You can challenge a collection contract in California if it is abusive, but in most cases it is best to just ignore them and move on.
A separate, but related problem that many people have with third-party debt collectors is the invasion of privacy. In the past, when you took care of a bill in good faith, you did so because it was the right thing to do. At some point, though, you may find that a debt collector is calling or sending text messages at all times of the day or night, using profane language or demanding personal information such as social security numbers, bank account numbers, credit card numbers, or birth dates. In short, the act of maintaining good credit can make you open to serious privacy problems.
Account In Collection Damages Your Credit
Finally, debt collections can damage your own credit report. Credit bureaus allow you to dispute certain collections in writing, but it is very rare for them to delete disputed listings from your file. If this happens to you, it may be due to a serious error on one report, but even then, you may not be able to undo the damage. To protect yourself, avoid taking on too much debt. If it is impossible to pay off all your debts, contact a debt collections lawyer to see if he or she can help. A reputable firm will be able to negotiate with credit card companies to get better settlements, often resulting in lowered interest rates and waived late fees.
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