How a debt in collection can impact your credit score?

When you are late in paying your debts, the creditor sends your debt for collection. It means that a third-party collection agency like Cedar financial is trying to recover the debt that you owe. Click here to read reviews about the collection agency and figure out how they work.

A lot can happen when your debt goes to collection, one of them being the decreasing credit score. In this blog, we will learn how debt can affect your credit score and also understand what steps a collector takes when they get your account.

Impact of debt on your credit score

A debt can impact your credit score a lot. For starters:

It can decrease your credit score

A single collection can decrease your credit score a lot. When your credit score decreases, it can have a lot of consequences like creditors think you are a high risk debtor and thus you have trouble getting loans in future.

A collection stays on your credit report a lot longer than you would like

It doesn’t matter if you have paid your debt, a collection stays on your credit report for as long as seven years or until the statute of limitations gets over. It can affect your credit score and your potential to score a loan.

The only you can remove a collection from your account sooner is if a collection agency deletes the debt from your credit report. You can opt for ‘pay for delete’ deal, which implies that if you agree to pay the outstanding amount, the collector can delete the collection. It is something that they are not supposed to do, but some collectors are likely to offer this deal.

Steps taken by a collector after they get your account

When a creditor sends your account for collection, the collector takes these steps.

They will send a debtor a collection letter

After 180 days a creditor hires a collection agency to recover the debt. But before they do, a bank or the creditor tries to make contact with the debtor themselves to recover the debt. For that, they make calls and contact the delinquent using letters or fax. If they don’t get any response, they send a letter of demand to the debtor to ensure that they pay the amount. If still, the debtor ignores the debt, the creditor sends the debt for collection.

A collector will try to contact the debtor

A collector will then try to contact the debtor and will call at their office or contact their friends, family, and neighbors to make contact with the debtor. If none of this works, they will use the skip tracing method to track down the debtor.

Once they contact the debtor, they will ask them to pay the debt. A delinquent can ask them to provide evidence claiming that the debt is theirs and also ask for settlements or negotiations.

A collector can sue the debtor

If you after knowing that the debt is yours still refuse to pay, then a collector can sue you. The court will ask the debtor to make an appearance in the court, and, if you don’t go the court, you will lose by default, and you will have to pay the debt.

Court makes the last decision

If the collector sues you, the judge will decide based on the evidence whether you are at fault or not. If the judgment is against the debtor, he/she will be held responsible for collecting costs, and so on, and also the collector can garnish their wages.

The next time you have a debt and it goes to collection, keep these points in mind.

Jackson Gilbert is a Blogger. With his skills, he has been helping fellow marketers and brands worldwide. When not glued to his laptop, he can be found making travel plans that rarely happen.