Do you have bills in your credit report that have gone to collection? For that matter, have you even seen your credit reports lately. You have three of them, one from each of the three credit-reporting bureaus – TransUnion, Equifax and Experian. You can get all three of your reports at the site www.annualcreditreport.com or individually from the three bureaus.
Look for these items
When you review your credit reports, be sure to look for these items
- Charge offs
- Late payments
- Debt collections
- Tax liens
What you will learn from reading this article
Here are six things you will learn from this article.
- The importance of learning who you really owe
- Why you need to contact your original creditor(s)
- The four types of collection accounts and which you should pay off first
- Deciding what to do about the others
- Why you need to know your states’ statue of imitations
- The truth about debt repair companies
If you have collection accounts
If you find that you have collection accounts the first thing you need to do is figure out whom you really owe. Older accounts may have changed hands several times. Your original creditor might have sold the account to a debt collection agency that, in turn, sold it to yet another collection agency. When this occurs, you can actually get letters and calls from half a dozen or more agencies – about basically the same debt.
Contact your original creditor
If you have an old collection account, you need to contact your original creditor to learn whether or not they had placed it with a collection agency. Your original creditor is the company to which you first had the debt – a cell phone company, a hospital, a credit card issuer, a bank and so forth.
If you learn that your creditor has sold the account, be sure to get the name of the collection agency they sold it to. If you are dealing with several accounts, make a list of all the accounts you have been able to identify, including the name of the original creditor, the name of the agency, the current balance and the date you defaulted on your debt with the original creditor. Don’t call a bill collector without first grabbing a pen and paper. Be sure to take detailed notes. You want to make sure the bill is accurate. Write down people’s names, extensions and where they are located. That way you will know with whom you talked in the event you need to do a follow-up. File these notes along with any correspondence and copies of your credit reports. You will need to keep this file for a long time – just in case.
For more good information about handling calls from debt collectors be sure to watch this video.
The four types of collection accounts
Collection accounts can be divided into four types:
- Those bills you know you owe and the amounts are correct
- Accounts you don’t remember at all and are not sure you actually owe the money
- Debts that have changed hands
- Debts where you don’t agree with their existence in the first place
The first group or those where you know you owe the bill and the amount is correct are “low hanging fruit.” You should pay them off first and in full. As you might guess, the debt collector will be very happy to hear from you.
Deciding about the others
This is where it gets trickier. If you find a debt you don’t recognize, you should request verification in writing from the collection agency. The law mandates that a debt collector send you a letter telling you what you owe and proving it has the right to collect the debt. They must send this “verification letter” this within five days from the time it first contacts you. If you legitimately feel you don’t owe the debt, you can let the collection agency know this, and for it to not contact you again. If you have proof of why the debt is an error, you can ask the collection agency to quit reporting it to the credit-reporting bureaus. You will need to include documentation proving your side of the story – if you have it. For example, if you were erroneously billed for an item you bought online and returned to the vendor, you should have some kind of receipt proving that you did return it.
Check your state’s statute of limitations
If it’s a really old debt, you should contact your state’s attorney general’s office and ask what’s the statute of limitations on debts.In the case of credit card debts it’s usually four or six years but could be longer. If you find that the statute of limitations has expired on your debt, you can use this as a defense against any lawsuit. However, keep in mind that if you make even a small payment on a debt and the statute of limitations has expired, this could start the clock ticking again. As a result, you could be opening yourself up to a lawsuit at a later date.
Watch out for debt repair scams
There are numerous companies on the Internet offering what’s called debt repair. Avoid them at all costs. These companies can’t really do anything that you couldn’t do yourself. They would go through your credit reports looking for errors and then dispute them. However, it would be easy for you to do this yourself. All three of the credit-reporting bureaus have online forms where you can dispute what you think are erroneous items. If you have documentation proving your claim, the credit-reporting bureau must delete the item from your file. If you review your credit reports and simply can’t make heads or tails out of them, you might then want to hire an attorney to help. But keep one important thing in mind: It is impossible to get negative items removed from a credit report if they are legitimate. Like it or not, you’ll have to wait seven years for them to fall out of your credit file. There’s just no other answer.