A collection account features on your credit history when you have failed to pay one of your bills. The lender has some choices once you don’t make your scheduled payment. One of them is selling your account to a debt collector or collection agency. They then have the full right to pursue all lawful means to get the money you owe on the account.
The result is a collection account that pops up on your credit score. Future lenders will view this as a red flag and reconsider lending you money. A collection account indicates financial irresponsibility, regardless of the reason that it’s there.
A collection account can stay on your credit history for up to seven years. But all is not lost. Here are things you can do to mitigate the effects of a collection account:
Double-check
It is possible that there’s been an error on the credit bureau’s side. When you find out about a collection letter, do some investigation. Keep records of all your transactions so that you can prove payment if necessary.
There are many fraudulent accounts set up in innocent victims’ names that ruin their credit score. The sooner you find out about such a crime, the sooner you can report it and have it removed from your credit score.
Rehabilitate your credit score
After you’ve got a collection account against your name, you might have a hard time finding someone to lend you money. However, you need to build credit fast to improve your credit score. Credit builder loans from Kikoff.com can be the solution. These microloans can put your credit history back on track.
A credit builder loan is a small sum that you can apply for, and then it is paid into your savings account. Don’t be tempted to use it to pay off the problem debt. Leave it in your account and make the monthly payments. Afterward, the interest in the account is yours to spend.
Make arrangements
It’s not uncommon for people to run into financial difficulty and be unable to pay off their debts. But sticking your head in the sand like an ostrich so that you can pretend it isn’t happening is where the problem comes into play. Avoiding the lender will do nothing other than getting you a collection account on your credit history.
As soon as you know that you won’t be able to service your debt, go and see the lender. Lenders will accommodate you more than you might think. It’s as much in their best interests as it is in yours to arrange a way for you to pay off your debt.
There are lots of options you and the lender can explore. These include a payment holiday, reduced payments, or an extended repayment period. If your account is handed over to a debt collector, negotiate with them as well. They might be agreeable to the options above as well.
Check on the collector
Some collectors can be rather unscrupulous and sail a bit close to the wind when it comes to the regulations that govern the industry. If you can prove it, this could work in your favor.
There have been numerous instances when collectors have tried to extend the length of time the collection account stays on your credit history. Some debt collectors transfer your collection account to another collector without informing the credit bureau.
That means the name of the collector on your credit report isn’t the same as the one that is pursuing you for repayment. In either case, you can dispute this with the credit bureau, and the collection letter could be removed.