A Clearer Understanding of Collections/Charge-offs


Being over extended with high total debt, having numerous credit cards, high balances, late payments, collections and charge offs all can have a significant adverse impact on your credit score. Specifically, when it comes to collection agencies and charge-offs, these can be the most deleterious to your credit. A collection agency is a separate company than your creditor. They are hired by the creditors and are hired based on an individual’s history of not paying their debt. Typically, the time line that they might get involved when the account is delinquent between ninety and a hundred and eighty days. The credit agency’s job is to work the account and collect from the consumer as much as a hundred percent or less. In exchange for their effort, they are paid by the creditor the percentage of what they collect. For this reason, your credit report will often have two adverse entries, one being the creditor and the other being the collection agencies who are now pursuing you.

The collection agency will be given a certain amount of time for the creditor to perform. The creditor may have the option to award the collection account to another agency which starts the whole process all over again. In some cases, The collection agency will sell the account even after a year when you thought it was off your credit. This process will start new as if you are back at the beginning. These events have serious consequences to your credit score and credit worthiness. In some cases, credit can lose up to 75 points because of these events.

The second thing that occurs in this process is called a charge-off. A charge-off is when the original creditor makes a determination that an account is noncollectable and moves the balance into a bad debt category for the company. This often occurs at one hundred and eighty days and is a critical date for the collection agencies to try to collect before a charge-off occurs. In the event that the collection agency is not successful and it does go to charge-off, the account is typically closed for that agency and it is sold or transferred to a different collection agency.

All of this activity, including the charge-off aspect, is recorded on your credit report and is very negative to one’s financial situation. As mentioned, this can go through a loop and continue through years. When it comes to credit repair and collections, it takes significant amount time and knowledge to manage these parts. Many choose to work with credit repair companies based on the fact that they are experts in working with creditors. They are focused one hundred percent on the problem and they certainly know the rules.

When dealing with creditors or collection agencies, they are not your friends. A credit repair company is typically compensated by you and thus, is on your team. Whether you consolidate your debt or settle your debt, it is critical that you eliminate adverse records of the debt. You cannot do this unless you have resolution with each of your creditors ultimately. Even if you settle for less than what you owed, the fact that there was an agreement with the creditor to pay the debt on mutual terms can be very positive for your credit or at least the beginning of creating a viable financial future when it comes to credit.

There are a few common things one should know to help themselves along this path.

1)Know what is on your credit report. Run your reports and know that running your own report does not effect your score however, third parties running it will.
2) Eliminate any mistakes on your credit card score by contacting the credit card company or having our credit repair company use their high advanced negotiation skills to have you paying less than 30 percent of what your really owe.
3) Hiring debt repair experts company who has dedicated their lives and efforts to assist you in this matter by applying successful strategies and techniques that have worked for millions in your same situation.
4) Let the credit repair agency educate you in the process. They will will work with you to establish a manageable plan which may include debt consolidation or debt settlement, depending on your need and ability.Being on top of your debts for you instead of having numerous creditors contacting you and causing you nothing but stress in your difficult times is one of the first benefits of our credit repair company. This process is not easy but well worth it. Realize that you did not get a mess overnight and it will take time to mend.