Collection Activities

by Debbie Vasen | More from this Blogger

29 Jul 2007 10:25 PM

Along with our discussion of your credit report, another critical problem involves collection activities. These are quite different than our previous article on delinquencies; these actions are ones you should be well aware of. Lenders are required to notify you in writing involving any collection related situation or charge-off.

Going into collection triggers a collection activity report. Basically a lender has turned your account over to a collections department or agency. A charge-off is a slightly worse situation. With a charge-off the lender has given up completely on your debts and is writing the amount off. While this may sound good, it is horrible for your credit rankings. In some cases, a charge-off can be even worse for your credit score than a bankruptcy.

Like most other negative marks on your credit report, collection activities and charge-offs remain on your report for seven years, even if you pay the amount off in full. Although, it is still important to attempt to pay off debt sent to collection or even charged-off, as it looks better to have the negative mark adjacent to the positive paid-in-full mark on your report.

If you are ever faced with problems making payments, it is always best to address it immediately. Credit bureaus look for patterns when creating a credit score. An occasional late payment or even charge-off looks better than multiple ones or years of problems. Like all bad news, the initial response is to often ignore it and hope it goes away. In the case of your credit, this decision could mean financial disaster.

If you do receive a notice that your account has gone to collections, get on the phone to your lender immediately. Also, start a file with a paper trail. Document all discussions and save copies of all paperwork. If you come to an agreement regarding payback, get it in writing. Be sure to also ask lenders to report the good news quickly to your credit reports. Often the good marks are "misplaced" on their way to the bureau, so always watch your own back as well.

Related Articles:

**Reviewing Your Credit Report

*Reestablishing Credit

*Fixing Errors on Your Credit Report

Learn more about Debbie Vasen

Debbie Vasen is a published web content editor and writer, as well as a freelance writer for various print publications. In addition to blogging at Families.

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