What Happens When You Have Debt Collection?

Collections can impact your finances and your credit rating, find out how. (iStock)

When you stop paying off your debt, whether it’s a credit card, student loan, car bill, mortgage or even a medical bill – you run the risk of that debt going straight to collection. This means the debtor takes your non-payment more seriously and uses other, more restrictive tactics to get their money back.

Having debts in collection is something you should take seriously as it can drastically affect your credit report and harm your chances of apply for any type of loan down the line. Insure and take steps to prevent collection actions and resolve any collection debt as soon as possible.

What to expect if you have debt in collection

If you’ve received a phone call or letter in the mail informing you that you have debts in collection, it means you’ve probably missed more than one payment. First, the lender’s collection department can contact you to remind you of your debt. This happens right after your first 30 day missed payment.

After that, your details are usually passed to a third-party agency whose job is to constantly remind you of your obligation to pay. Your lender hires debt collectors with one thing in mind: to get you to pay your debt. This third party is called a collection agency.


Once a collection agency collects your debt, the original lender will probably no longer contact you because they have officially appointed someone else to do the “dirty work” of rounding off the debt into collection. for him.

Getting into debt can happen to anyone at any time. Life is unpredictable, and there are many factors that can make you suddenly unable to pay your monthly obligations. With that said, it’s important to remember that your creditors also have the right to try to collect the money you owe them.

Collections can take place any time your debt is past due. Once the collection service or agency is notified of the overdue account, there is little that you can do to prevent the debt from being listed as in collection on your credit report.

What happens if you ignore a debt collector?

Ignoring a debt collector is probably one of the worst things you can do. If you have defaulted on a debt, you could find yourself owing a large amount with additional fees. You may even find yourself in a courtroom. Debt will not suddenly go away. (Unless it’s written off, which is a huge blow to your credit. A debt written off means, after an extended collection period, that the debt collector has given up.)


Many ignore messages from the debt collector and see them as incessant calls and letters. But the more you ignore their calls, the more damage your credit will be. Remember, these agencies are paid to be persistent. Just because you don’t answer doesn’t mean you’ll “win” in the end.

While the laws spell out what debt collectors can do, keep in mind that they cannot harass you with damaging threats, use obscene language, lie about who they represent, or falsely claim that you will be arrested. , according to the Federal Trade Commission.

Do I have to reimburse my collections?

While it is helpful to pay off the debt at this point, the negative note that the account had to reach collection before it was paid will remain on your credit report. This can impact your credit score for five years. However, paying off your collection debts will help improve your long-term credit score, and it is better to have a collection account marked “paid” rather than one that is still open or written off.


A collection account can dramatically lower your score and make you ineligible for lower interest rate loans in the future. But a repaid collection means lenders will see you as a less risky borrower. It will also reduce your overall debt load. If you are running low on funds and your debt is growing, you may want to consider using other sources, like your 401 (k) plan repay the debt before it comes into collection.

TO improve your credit score Once a collection has arrived on your credit report, contact the debt collector to see if they will negotiate with you. Sometimes if you offer to pay off the debt, they will agree to remove the collection account from your report.

Improve your credit score in the future by making sure your bills are paid on time, or at least within 30 days of their due date. Check your credit report regularly, free of charge, so you can stay ahead of any potential fundraising activity.


Sometimes the credit bureaus get it wrong and you may have an inaccurate collection count on your credit report. It may have been paid or the account may not even be yours. Either way, the Federal Trade Commission suggests contesting the debt in writing. Be prepared to send the collector a letter disputing it, and be as specific as possible about why you think the debt is bad. Remember: you have the right to dispute any debt you feel is wrong.

To avoid debt collection, make sure you pay all of your creditors as agreed. If you can’t make the monthly payment, communication is key. Many creditors will try to work with you, and you may be allowed to skip a payment or offer a smaller payment amount.

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