Your credit score is one of the most important numbers in your life. Your credit score is the score that makes it possible for you to secure a loan, and it directly affects the interest rates you’re offered. Without good credit, you can’t get a low rate. Without a low rate, you might not be able to afford the house you want or the car you need. Without good credit, you might not even qualify for a loan. Many employers won’t hire a person with bad credit, because they fear allowing people with financial difficulties around the personal and financial information of others. Your credit score matters, which is why it’s imperative consumers are made aware of precisely what happens when you have a debt in collection.
The first thing consumers should understand is there is nothing to worry about regarding collections if a bill is just a little late. If you find the mortgage payment in the bottom of your handbag a week after it’s due, you needn’t worry. You have a 10 to 15 day grace period with most banks, and a simple phone call can help rectify this situation. You can pay over the phone or online in most cases, which means your payment is never officially late.
When it comes to credit cards, medical bills, and other debts, collections agencies typically don’t come calling for at least 180-days. Some creditors find it nearly impossible to seek repayment from customers, and they end up sending their accounts to collections. Delinquent payments or payments you accidentally made late are not a cause for collections.
When a payment is sent to collections, it’s best to pay it as quickly as possible. Collection agencies don’t hesitate to put that on a person’s credit report, and it has a seriously negative effect on your overall score. It can make your credit score drop dozens of points or more. The longer it sits in collections, the more damage it does to your account. If you find an account in collections, there are a few steps you can take.
Sometimes collections debts are real, and sometimes they’re a mistake. A creditor might mistakenly forget to post a paid bill to your account and send your bill to collections. When you see it come through, verify the debt is real. You can do this by checking your own financial records, or by calling the company where the debt originated to explain to them you’re positive that bill is not delinquent. Oftentimes you’ll find it’s not delinquent, but a mistake was made. Then it’s up to the company to make the collections act go away.
Pay the Debt
If the debt is valid, pay it off as quickly as you can. Even though collections stay on your credit report for years, lenders aren’t going to deny you a loan simply because there is an account on your credit report if it’s been paid off. They are favorable to consumers who can show they’ve paid their debts and corrected their financial mistakes. It’s something many lenders look for when they see collections on someone’s account. If you cannot pay the bill in full, ask if you can make arrangements to pay it off in smaller installments, or if there is a way you can pay it off for a discounted rate. You’d be surprised how many people are willing to work with you. Any payment is better than no payment.
Collections are serious business, and it’s a good idea to get them paid off as quickly as possible. You don’t want your credit affected more than it already is, so you’ll want to pay the bill and make the negative marks go away. It’s not always easy or enjoyable to deal with collections accounts, but it’s imperative you handle them as quickly as possible. Your financial future depends heavily on how quickly and efficiently you act to handle accounts of this nature and this level of seriousness.