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Your
credit rating is determined by your credit report. If you obtain
a loan from a bank, credit card company, or other loan establishment,
your ability to make your payments on time is reported to a
credit reporting agency. Credit reporting agencies then compile
this financial information into a personalized credit report,
the key to a positive – or negative – credit rating.
Any negative notations within your credit history will haunt
you for up to seven years, and could prevent you from getting
another loan.
If you begin to fall behind
with your payments to a creditor, the creditor will attempt
to receive payment in a variety of ways. After a long series
of “warnings,” your debt will eventually be sold
to a collection company. The creditor basically "writes
off” the loan, and allows the collection company to buy
it at a drastic discount. The creditor has pretty much decided
that they won’t recover the loan from you and will sell
the debt for sometimes half of its original value just to end
up with something. The creditor then informs the credit reporting
agency, and you are stuck with a black mark on your credit report
which stay there for the next seven years.
One extremely important step
to credit repair involves taking steps to ensure that the creditor
doesn’t "write off" of your debt. As soon as
a collection agent contacts you, it is time to act. Don’t
contact the collection agency – contact your creditor
and try to make arrangements with them. Many times, if you can
offer to repay the amount immediately, they can delete the “collection”
flag from your credit history. This is the quickest method of
credit repair.
If you can’t pay the debt all at once,
or for some reason your creditor won’t accept immediate
payment in full, you'll have to deal directly with the collection
agency. At this point, remember that that black mark on your
credit score can't get any blacker since the debt is in collections
already, so be sure to consider your options before acting.
Collection agents are usually aggressive and demanding, implying
that will end up in court if payment is not immediately received,
and it can be tempting to do whatever they say to get them off
your back.
But remember this: that collection company
probably bought that debt at about half of the original value,
so if you pay a higher amount than that, you are providing them
with a profit. Offer to pay less than the full immediately.
Many times, the collection agent will accept and want to wrap
the situation up as quickly as possible so they can move on
the next debt.
You want to achieve successful credit repair
quickly, so try to pay your creditor directly and have your
“collections” negative mark removed. If your creditor
refuses and you must work with the collection agency, try offering
them less than the full debt amount. Usually anything above
half constitutes profit to a collection agent, so make a full
payment your last resort.
This
website contains free information on using a collection agent.
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