Credit Material » How to make a deal with debt collectors

How to make a deal with debt collectors

Posted on September 25, 2009

By closing eyes from paying your pending bills cant be the solution, ignorance to that cant help you out soon your best friend a debt collector will be knocking at your door. As matter of fact as described by the credit experts that mostly consumers dodge opportunities to resolve their money issues with debt collectors when they should work them out.

A credit reporting agency, Equifax’s spokeswoman Robin Holland says that if you lost your job and don’t have money to pay your creditors then don’t be reactive be proactive.

But most of people don’t know how to make a deal with a debt collector. Here are some answers to some possible questions that can help.

Is that true or false that an account sent to collection still can be deleted from your credit report?

That is true its deletion is possible but that haven’t mean that all creditors will agree to it even if a collection agency agrees to a deletion that will only be a limited value.

A spokeswoman for credit reporting agency Experian, Maxine Sweet describe that if there is a deletion letter from collection agency that means only collection account will be removed. The original credit of account from the creditor will remain on the report

She said that both original account and the collection account can be removed when its instructed by the original creditor verifying that original debt was an error and should not have gone for collection.

According to Jamison creditor deletion gets rid of the account completely and in it helps the credit score because it makes wipes out all past records as it never happened like as you paid a collection means you were not creditworthy in the past. He advised that if a consumer got a deletion having a faxed letter stating like “ I, XYZ Collection, agree to delete Sarah’s collection account with the account number 2897312 in return for Sarah’s paying X dollars.” And that is necessary to look that it’s signed by someone at the company.

The consumer cant get deletion without reason as warned by Pamela Baird, a collection attorney for Lacy Katzen, a law firm in Rochester, N.Y. Baird said that if its disputed and by investigating they found the debt had been reported in error or haves any inaccuracy then its deleted by them and tells to credit reporting agency they want that trade line taken off the consumer’s credit report.

Some creditors rarely provide deletions because it can mislead that’s described by Craig Watts, the public affairs manager at consulting firm and credit scorer Fair Isaac. The main reasons lenders do business with credit bureaus is that lenders want better view of risk involved in extending credit to any individual. He said that deleting of collection account from a person’s history is not positive for the lender because that information is important to a fair assessment of the person’s credit risk.

Is it true or false that Paid in full collections are better than settled?

Well that depends to whom you are asking. Jamison suggests settling if it not possible to get an account removed from your report. This move can prevent the resale of your debt, prevent a lawsuit and lessen the damage to your credit report and credit score.

Jill Jensen the director of Omnium Worldwide, a collection agency says that collection agencies plays a middlemen role during the deal, their clients which includes banks, credit card companies and phone companies define the parameters for settling. She added that client will be having payment criteria such as on when the account can be paid under different terms that will be offered and under what conditions the agency can offer the settlement.

Jensen says that for example if a client tell the debt collector that the options they had are payment in full or no more than three payments spread over 90 days. According to her then client will expect Omnium to collect sufficient information about the consumer to decide how much to deviate from the preferred payment in full.

In case if the customer’s financial conditions are not according to the terms then agency will act as the conduit to the client and will try to get permission to set the payment terms of settlement outside of that area.

Jamison cautions that if you choose to settle then settle it as little as possible.

He said that its better to save half of dollar and losing off couple of points from credit score by having a settlement as opposed to paid in full because the collection and the charge-off notation is what’s hurting the account.

Fair Isaac’s explains it like this if the FICO credit risk score goes, the paid in full status is going to have little, if any, effect on the person’s score.

Is that true or false that you can be sued after the statute of limitations period ends?

According to Baird that’s technically true if you reaffirm the debt.

Basically the statute of limitations is the quantity of time the debt collector can take legal action. The action can be a taking you before law court or deducting from your wages. The time period is set by the states where you belong.

A trade association of third party debt collection businesses ACA International describes it that statute of limitations looks longest by viewing the notarized documents while it is shortest for actions on open or revolving accounts such as credit card debts.

According to ACA the countdown begins on an account’s last activity, which can restart by partial payment or giving a written statement to repay according to state law that reaffirms the debt.

It’s kept in operated if the consumer is send to prison or leaves the state. Anyhow the statute won’t restrict the collector from going after the debt it only hinder the collector from taking any legal action like filing lawsuit or garnishing wages.

Jamison, of the Jamison Law Group says, “ You probably will not want to settle if anytime the statute of limitation is passed.” He believes that if you choose to settle beyond the statute of limitations the company most probably will agree to delete the account with payment because the company knows it cant use the lawsuit threat.

Omnium’s Jensen says that their company won’t sue most of their debtors they deals with because the legal process takes time and most of accounts which they get they don’t have time to sue, that’s occasionally to file suit against somebody only if that person haves ability to pay but refuses to pay.

Jensen says that the agency can determine the person’s ability to pay by checking if he or she is employed and also it review the finances buy looking person’s credit report. Jamison cautions that never agree orally with the collector on phone or send in a payment even for a dollar because the statute of limitations will start all over again.

Is it true or false that credit card charge-offs can’t be deleted from your credit score?

That’s false though its possible but its not necessary that will happen. According to Jamison if you are dealing with big bank its unlikely to be deleted and probably you won’t be given deletion letter by bank. For that Jamison tells the reason that the companies are too big and they have too much red tape that you have to find a way round to be able to get somebody that can make a judgment call to give you a deletion with payment.

A law firm Lacy Katzen’s Baird disagrees and says if the creditor is having genuine reason to delete a reported debt then they are going to delete and its not correct that creditors are not deleting because it is not efficient.

Is it true or false if you are having a debt in collections over $2,000, you wont be sued?

Its false as Jamison cautions that if the collection get over $2,000 then the collection agency will more likely to sue before the statute of limitation expire because there is lot of money at stake.

Baird agrees to this and says that most of creditors look at the dollar amount to determine whether they will sue. They look at whether the person is working or not, whether they own a home or not, the cost of commencing a lawsuit and state specific avenues for collection related lawsuits and collection.

Jamison emphasis on the $2,000 amount because the extra money needed to pay the debt in full probably wont give much benefit to consumer in return.

He suggests that if a person can afford then paying in full in return for a deletion for accounts that are $5,000.

Jamison explains that if the account is for a credit card then the settlement will depend on how much the person intended on using the card in future. Id credit card is used a lot by the consumer then he advises the consumer to pay a higher amount for deletion. That’s if the deletion can be negotiated.

About collections less than $2,000 Jamison says in that case getting a deletion is better than getting a deal. He believes that asking the collection agency to settle for 50 cents on the dollar wont work because the agency will not agree to a deletion with payment. He suggests paying full balance in return for a deletion letter particularly in case when the consumer is concerned about his or her credit report and credit score.

Baird cautions that paying full for an account may be charged off, the creditor is not bound legally to delete the account. Anyhow the creditor must report about the full paying.