How Do Debts In Collections Affect Your Credit?

Debt Collection Agency

Debt collection is the procedure of pursuing unpaid balances of monies owed by businesses or individuals to third parties. An agency that practices debt collection is also called a collection agency or debt collection agency. Debt collection agencies buy outstanding debts from delinquent businesses or individuals, sell them to other collection agencies and then attempt to recover money owed on those debts by attempting to contact the original creditors. If they are unsuccessful in doing so, the collection agency will seek to have the original creditors to bring the matter to court. A federal law called the Fair Debt Collection Practices Act regulates the collection agencies.

As with any other process, there are advantages and disadvantages for both parties. For the debtor, the advantage is that there is usually no need to repay the outstanding balance as long as the debtor has made prompt payments in the past. The disadvantage for the creditor is that he or she is usually unable to get much if any money back, even if the debt collection agency is able to collect an amount equal to the balance owed. The Fair Debt Collection Practices Act makes it illegal for most creditors to engage in abusive or oppressive practices including:

calling people on a continuous basis. Repeated phone calls and messages over a long period of time could constitute harassment and can be considered a violation of Title 17 of the United States Code. Some collection agencies make money by charging their customers to check their unpaid debts. These companies do not make money until the customer agrees to pay. Others make money by selling the information they gather about their customers to other financial products companies. There are many different types of financial products and services, such as credit cards, loans, investment securities and other products and services offered by these types of companies.

Debt Collection Agencies can access your credit reports, if you give them permission. If you do not dispute what the debt collector says, they can legally obtain your credit reports. Most Debt Collection Agencies will tell you what items on your credit reports they can look at to contact you. If you do not pay your outstanding bills in a reasonable amount of time, you can be contacted by one of these types of companies. If you dispute the claims made on your credit reports, the Debt Collection Agency can attempt to remove the disputed items from your credit reports, but you must write and dispute the item with each creditor separately.

How do debts in collections affect your credit? This really depends on the original creditor and the debt collection agency. If you owe a substantially higher amount than you can afford to pay monthly, you may find yourself having a lot of trouble getting any type of credit. If the original creditor has sent you a letter stating that you are in default of your agreement, this will have a negative impact on your credit score, but it will not prevent you from purchasing anything. The Fair Debt Collection Practices Act allows the original creditor to go after you for the money that you actually owe, and if you can prove that you cannot pay the full amount owed, this can stop any or all phone calls and letters from the debt collection agency.

Unfortunately, if you choose to ignore a Debt Collection Agency, the collection agents can also file legal actions against you in order to collect their money. There is a statute of limitations on many of these actions, so the debt collectors may go after you for years, and if there is no contact with the buyer, the debt collectors may decide to file federal court against you. If the collectors have made repeated attempts to contact you or your family members about the unpaid debts, they can be fined by the Federal Trade Commission. The Federal Trade Commission enforces the Fair Debt Collection Practices Act, and all debt collectors must comply with its guidelines.

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