Sometimes your original creditor can send your debt to a collection agency, and you aren’t even aware.
I worked with a client that had never checked their credit report before. I recommended that they pull their free annual reports to examine them for errors, and I wanted them to check their accounts for accuracy.
We discovered a few accounts had gone to collections that they were unaware they owed a balance.
My client wanted to pay back their debt but would need time to pay them all off in full. They believed that it was the moral thing to do since the debts belonged to them. I explained that collections might not remove the negative information from their credit report even if they paid the debt. It was also not a guarantee that their credit score would go up.
Here are a few suggestions that I gave my client that I will share with you. Be mindful that this is not legal advice, and some of these options aren’t guaranteed a squeaky clean record. You’ll need to check your state laws and limitations for specific rules for your State. You will also need to learn to speak with representatives to win them over. I also suggest getting a consultation from a lawyer specializing in Consumer Law if you have further questions.
Check Your State’s Statues of Limitations
Before you do anything, check your State’s statutes of limitations to see when your debt will drop off your report.
The law honors oral agreements (consider friends and family), written agreements (contracts), promissory notes (think about student loans), and open-ended accounts (think of credit cards). It is crucial because it will show how much time a creditor has to sue you to reclaim their money. Keep in mind that when most of us think of debt owed, we only think about written contracts.
For example, suppose your State’s statutes of limitations are seven years before your debt drops. In that case, your creditors have seven years to try to reclaim their money, beginning with the first date reported on your report that you failed to make payment at the agreed-upon time.
Once that seven-year is over, you’ll have more protection under the law not to pay back the money.
If you file a dispute before the statutes of limitations have ended, you reset your debt clock. You can potentially give your creditors an additional seven years to pursue suing you for the full payment.
Negotiate to Pay Off The Debt
If you’ve checked your state statute of limitations and have some time before the debt drops from your report, consider contacting the collection agency to negotiate to pay off the debt. Only say how much you can pay and over how much time.
I suggest saving as much money as possible before calling the collection agency so that you can win the negotiation. If you cannot pay at least 50% in one lump sum, the odds might not be in your favor. Inform the agency that you would like the terms and agreement sent to you in writing if they agree with the negotiation. Do not send any payments before you receive a written statement. Make sure to state that you agree to pay the lump sum payment(s) only if the agency removes any information about the collections from your account. Take accurate notes during the conversation with the representative, including the date, time, and representative name.
Remember that the collection agency can only remove collection information from your report. You would have to contact your original creditor to remove any negative information. Make sure you are incredibly kind yet assertive about what you are requesting because they aren’t legally required to honor your request.
Dispute The Information
Only consider this option if you have proof that the debt reported is inaccurate or does not belong to you (sometimes, they can have the wrong person on your report).
I had another client having trouble getting approved for apartments because it showed that they had an outstanding balance on their account from their old landlord.
My client had receipts showing that they paid the balance in full. The landlord sold the property and gave the outstanding balances over to collections by this time.
I called the collection agency to inquire about the account on behalf of my client. The representative was unwilling to speak with me directly since my name was not on the account. I requested that they send my client the paperwork proving they owed a balance.
I suggested that my client send a copy of the receipt for the months the collection agency reported owed. Request to remove the inaccurate balance and update all their accounts with all three credit bureaus.
The collection agency updated my client’s account because they couldn’t prove that the reported information was inaccurate.
Suppose the collection agency is unwilling to honor the dispute. In that case, there are three ways that you can dispute your account with the credit bureaus. Go directly to the credit bureaus’ website and submit an online dispute. Call now the credit bureau to make a dispute, but take excellent notes and get all of the representative’s information. You may send a letter with a copy of your documents (not the original paperwork) to request that your account be changed.
Get a Lawyer
If the collection agency doesn’t accept your negotiations, your statutes of limitations have years before your debt drops; they won’t receive your disputed information, or you are uncomfortable going through this process alone, get a lawyer.
You may have to sue to recover damages. You can visit https://www.legalshield.com/consumer-finance/ to get a referral to an attorney in your area. This will be your most expensive option, but it is an option nonetheless.
Sometimes life hits us unexpectedly when we find ourselves in situations like these. My advice to you is to exhaust all options before throwing in the towel and always do your research before proceeding with any advice.
For more information on improving your credit, check out this blog post: https://willitacherie.com/checking-your-credit-report-for-errors/.
For more financial resources, check out this link: https://linktr.ee/willitacherie.