Collections Agency Credit Report

Incurring debts you can’t handle will eventually catch up to you. By not satisfying debt obligations and making timely payments, your credit score will begin to suffer, making it harder to stay on financial track down the road.  

Credit reports are affected by a number of things in your financial life but what a collection agency is reporting to the credit bureaus each month could be detrimental to your financial future. When you have debts that enter into collections, the reporting of these actions can have a big impact. 

Collection agencies have long been branded as being difficult to work with to settle debts. While not all agencies act inappropriately, there are many that mislead people into thinking immediate action is required and can spare their credit reports and score. However, sometimes when you are in debt, trying to rectify outstanding accounts can do more harm than good.  

Collection agencies want to get their money, which normally stems from the total amount they are able to collect from a debtor. The more money they get from you, the more profit they make so many will work to ‘make a deal’ that ultimately can hurt your credit score.  

Here is a list of ways paying debts in collection can hurt a credit report: 

• If you make a deal with a collection agency to settle an account for less money that you originally owned the creditor, your score can drop.

   

• Collection agents ‘promise’  to report back to the credit bureaus a better status than you actually have in exchange for an immediate payment. However, many take the money and do no such reporting.

   

• Those that do report to the credit bureaus after receiving payment can do the opposite of their promise and provide information that is not accurate, further hurting your score.

   

• If you contact a creditor or a collection agent about an old debts in attempts to improve your credit score, you can re-trigger the statute of limitations debt, making it legal to pursue you for the amount due and leaving yourself open to being sued for an old debt.

   

• If you offer to make a payment on an old debt, again you can create a situation where you may be sued, or at least harassed for the remaining total of money due.

   

A debt in collections can wreak havoc on your FICO score but keep in mind that it comes down to what the original creditor reports back to the credit bureaus. If you are looking to boost your score, you may find that negotiating with the original creditor to pay off the balance owed if they would agree to report back a balance of zero on the debt rather than a charge off.  A debt collection agency may not have the power to or be as willing to work with you, since they are working towards a commission based on the total amount collected.  

Cleaning up your credit score is a great financial move but one that should be made carefully, especially when dealing with old debts and aggressive collection agents.  

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