How To Deal With Collection Items On Your Credit

Many people have collection items on their credit. It could be from a medical bill that you thought insurance would pay, to library fines (yes the library can put a collection item on your credit) to a credit card that was not paid. Other frequent collection accounts are utility bills, cell phone bills and apartment rent.
The first step is one that we have already discussed, make sure it is yours. If it is not yours, then file a dispute as detailed in last month’s article.
So, the collection item is your unpaid bill, what do I do?
 * Option 1, pay it. You can call the creditor or collection agency and make arrangements to pay it off. Make sure any payment arrangements or paid accounts are documented in writing. Why? So you can show a lender when applying for a new loan and to have proof if the creditor or collection agency does not remove the item off your credit report. Just like disputing a credit item that is not yours, you can dispute an open collection account that you have proof that you paid.
* Option 2 is to do nothing. If there is no activity on a collection account for 7 years, it must be dropped off your report. Inactivity is the key work. Let’s say that you have a collection account that was in 2010, and in 2015 you make several payments on this collection account. That started your 7 year clock all over, so now, that item can stay on your credit until 2022, not drop off in 2017. Creditors/collection agencies can sue for a collection account and get a judgement. The time limit on that depends on the State rules for statute of limitations. If a judgement is received, that will report on your credit as a negative item and that judgement can be renewed depending on State rules for judgements. So there are ways for creditor to extend the 7 year rule.

It is true that a collection items that is 5 years old will impact your credit score less than a collection item that is 5 months old. So time does help soften the blow. Ignoring derogatory credit items like collection accounts or judgements will not make them go away. So if you are ready to start addressing collection items which should be paid off first? That is not an easy answer, and will depend on whether a collection agency is staring to take legal action against you in the form of a judgement or garnishment. Once attorneys are involved, the cost of that collection item will start to rise, because yes, you will be required to pay for their fees.
It is true that there are many bad actors in the collection field. The #1 complaint that the Consumer Financial Protection Bureau gets is about these bad actors – to file a complaint go to www.consumerfinance.gov/complaint or call (855)411-2372.
Paying off past due credit items is hard. It requires time, it requires patience and it requires you to document every step.

Article written by CEO, Robin Romano.

Click here for more articles

About the Author