How does debt collection affect my credit score?

If you’ve had an unpaid bill sent to a collections agency, you may be wondering about your credit score and what to do next. Here are a few answers to some common questions about debt collection and how it affects your credit.

What is a debt collection?

A collection happens when you neglect to pay a  bill, such as credit card or medical bill. The creditor writes off the bill as a loss and sells it to a third-party debt collection agency. Most times, a creditor will not send your bill to collections until you are extremely delinquent – typically 90-180 days. However, it is important to know that different creditors or lenders have their own guidelines for sending accounts to collections. Some companies may send a debt to collection after just one or two months of missed payments. Check your credit or loan agreement to double check the terms as they relate to your specific account.

How does debt collection affect my credit score?

A debt collection will negatively impact your credit score. In fact, it is one of the worst types of accounts to have on your credit report. Your score will drop, and you may be denied credit or loans in the future – until your collection has been paid and removed from your credit score.

How long do collections stay on my credit report?

According to Experian, one of the major credit bureaus, “Most negative information, such as collections, stays on your credit report for seven years.”

What is a debt collection attorney?

A debt collection attorney handles matters regarding unpaid accounts and debt collection. They can be hired by a creditor such as a credit card company to collect unpaid debts. 

If you are being sued and think the debt is invalid, you should seek an attorney experienced with the Fair Debt Collections Act.  

How can I get back on track with my credit score?

The short answer is to pay off your unpaid debts in collections and to stay current on any new bills. These actions will have a big impact on raising your credit score. However, depending on the amount owed, that may not be very easy. 

What if my debts are too large? Is bankruptcy an option I should consider?

If you owe a large amount of money, you probably have a lot of questions and concerns. We’ve collected some of our most frequently asked questions about bankruptcy and answered them for your convenience as you research your options. Find our Frequently Asked Questions About Bankruptcy here. 

If you are drowning in debt, we can help get your life back on track. Schedule a call today. We are happy to answer your questions and help determine the right track for you.