What Are Collection Accounts?
When you cannot pay your monthly credit obligations with your creditor, the creditor will try to contact you and see if they can collect the amount you owe them in house. The creditor may try to set up a payment plan or give you some time with a partial monthly payment arrangements until you can get caught up. Many debtors do not intentionally intend in not making their monthly payments on their credit cards, auto loans, installment loans, utility bills, or other monthly debt. There are cases where there are extenuating circumstances happen such as unemployment, a business loss, or medical reasons where your income stream come to a halt. If you do not make any payment arrangements with the creditor or do not make a payment to your creditor for more than 90 days, two things can happen: Your account can be charged off where the creditor will just take your account as a loss and forgive the debt or the creditor may subcontract your account to a third party collection agency to see if they can collect whatever they can and pay the collection agency a commission on the amount they collect. Another thing that may happen is that the creditor may sell your account to third party collection agencies for pennies on the dollar.
Can Collection Accounts Drop My Credit Scores?
If you are more than 30 days late on any monthly payment obligations, it will drop your credit scores. If your late account goes into collections, it will definitely drop your credit scores by at least 80 or more points. However, you need to realize that the sudden massive drop in your credit scores is just temporary. Your credit scores will improve as your collection account ages.
Should I Contact An Older Collection Account Creditor?
If you have no activity on an older collection account and they are leaving you alone, do not contact the collection agency nor do not make any payments. If you make a payment on an aged collection account, it will drop your credit scores because it will re-activate the date of last activity and the credit bureaus will treat it like a brand new collection account. Never pay off an older collection account unless the collection agency will do a pay-for-delete where they agree to delete the collection account off your credit report in lieu of you paying them the collection account.
How Long Will Collection Accounts Stay On My Credit Report?
Collection accounts will remain on your credit report for seven years from the date of last activity. The date of last activity is the date you made your last payment to your creditor. Your collection account will be deleted in 7 year after the date of last activity.
Can I Remove Collection Accounts Off My Credit Report Prior To The 7 Years?
A solid reputable credit repair company can remove any derogatory items off your credit report, which includes collection accounts. There are credit repair consultants who can remove bankruptcies, foreclosures, deed in lieu of foreclosures, short sales, charge offs, collection accounts, tax liens, and other derogatory items off your credit report. Please check for references when hiring a credit repair company and do your due diligence.
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