Handling Collections Account

Canadian Banker Association

Do you have unpaid debt existing on your credit card? Has it been quite a while since you’ve paid your last bill? Are you getting phone calls from unknown numbers? If your answer is yes to any of these questions, chances are you’re at risk of dealing with a collection agency.

After six months of not paying off your phone bill or a credit card, a creditor can close your account and pass it to a collection agency. Once it’s sold, a collections account opens up on your credit report – forcing you to deal with the original debt plus added fees and interest rates. This can show on your report for up to seven years, and it can damage your score by 20-50 points.

If you see a number “9” next to one of the lines on your credit report, this represents that an account has been closed, and you need to take immediate action. Your first step to handling this scenario is to ask yourself one question: should you pay off the collection or should you dispute it?

Option 1: Pay The Collection In Full

If you are aware that the closed account is legitimate because you haven’t been paying your debts, work with the original creditor to strike a deal. If you set up an agreement with them where you make partial payments, you’ll bypass having to deal with a credit bureau and might get that pesky 9 removed from your report. If you can negotiate a deal, it’s crucial that you pay back the collector and work on rebuilding your credit. However, if the original creditor refuses to make a deal, you can make an attempt to dispute the situation to the credit bureau who will review and investigate the situation. It is crucial to have all compromises in writing – debt collecting is a money hungry business, and because of this it’s a great idea to keep a physical copy of any agreements made.

Option 2: Dispute

One in four credit reports have errors on them, and it’s your prerogative to question anything that you think is false. If you know that you don’t owe any money but you see that one of your accounts has been closed, call the credit bureau and ask them to validate the debt. The credit bureau has 30 days to examine your information with the creditors involved. In many cases the credit bureau will fail to prove you wrong, either because you did in fact pay off your debt or they don’t have time to pursue your case. Regardless of the result, be firm with the updates on your status – your credit report isn’t something to be played with.

If you find yourself trapped in this financial chaos make sure you do these two things: assess your options and take full control of the situation. Not only does having a collections account hurt your credit score, often times it means that you’ll be unable to apply for loans in the future. In order to avoid this from happening, prioritize paying back debt that’s in danger of being sold to collections.

If you have been through dealing with collections and it has impacted your credit negatively, consider rebuilding credit with a car loan. Visit Canada Auto Experts or call 1-855-550-5565 to talk to a credit specialist today!

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