How Collections Affect Your Credit Score

How Collections Affect Your Credit Score

Understanding What Collections Are and How to Deal With Them Positively

Neglecting to pay the bills will always adversely affect your credit score. In fact, charge-offs and collections are two of the worst items a person can have on their credit history. While sometimes falling behind on a payment is excusable, after a long period of delinquency, a creditor may feel you are no longer trusted to repay your debts. As a result, the firm may sell your account to a third-party collector without notification.

When a creditor charges-off your account (records the debt as a loss), a calamitous statement appears on your history, which not only lowers your credit score but also remains there for seven years. If the debt is settled quickly, however, the consequences may lessen after some time.

If your account has been updated to a collections status, your credit score will drop. By how much depends on two things: the debt owed and your current score. The more points you have, the more points you stand to lose. Similarly, the more you owe, the more serious the damage can become. A collections statement can impede a person’s future financial plans, so it’s important to try and eliminate it from your history altogether.

Many people have room to dispute a collection but are afraid to do so. Within the first 30 days, the newly assigned collection agency must contact you or else you can request a validation, which requires the collector to provide proof that you owe money. Since collections pass hands often (roughly every six months), the paper trail is sometimes lost during extended cases. If you believe there has been a mix-up, the absence of proof clears your name and sheds light on the fact someone’s made an error.

The best approach, however, is to send the collector a letter. State your intention to pay and negotiate a way for the collector to remove the entry from your credit report. Even if the agency refuses to do so, paying the debt immediately will minimize the consequences in the long run.

For individuals in such a situation, there are ways to repair your credit score — so all is not lost. Visit a few of our older blog posts to learn more about how you can repair a credit score and how Trillium Auto Group is here to help. Collections happen, but it is how one handles them that will determine the end result. Stay calm and orderly and your credit score will heal in time. Contact Trillium Auto Group today and ask us how we can help repair your credit score while taking care of your transportation needs!