No one likes receiving bills, let alone collection calls or letters. Having past due bills is emotionally and financially stressful, and it is natural to want to toss the notice in a drawer and hope it goes away. Unfortunately, this can lead to the debt impacting your credit report for years to come, which can create further problems for you if you go to borrow money or establish credit in the future.
While paying off past debts can be difficult, for many consumers, it is worth it. We’ve put together a list of the benefits of closing collections accounts and working with a collection agency.
Stop Collections Calls
Paying your debts is the easiest way to stop collection notices and calls! Once your outstanding debts are resolved, there is no reason for a collection agency to contact you.
Reduce Stress & Anxiety
Financial worries are incredibly stressful and can make anyone anxious. One of the biggest misconceptions about collection agencies is their agents are only interested in the needs of businesses. A good collection agent will not only help their client collect payments, but they can also help you determine the best course of repayment.
Remaining open and honest throughout the collections process can not only help you lessen your stress, it helps the debt collector develop a plan with you to help you pay your outstanding balances and move forward with your life.
Rebuild Your Credit Score
The longer a balance is past due, the more it could affect your credit score. While collection accounts are removed from your credit report after seven years (even if you never pay them) accounts less than seven years old could still impact your credit rating.
Paying off debts can help you rebuild your credit and over time it should help increase your credit score — as long as you maintain healthy financial habits. The best thing you can do to help your credit rating is to pay off the full, original debt, versus a negotiated lower payoff.
Get Approved for Credit Cards & Loans
If you are planning on buying a home, car, or taking out a personal loan in the future, your current collection accounts could hinder your progress. Many credit card companies will not issue new credit to customers with outstanding collection accounts. This makes paying off current debts essential for ensuring you can obtain lines of credit in the future.
Eliminate the Risk of Being Sued
It may seem like a waste of time for a debt collector to sue over a small collection, but as long as an outstanding balance is within the statute of limitations, and it makes good business sense to sue, there could be grounds for legal action. If there is a judgment awarded against you, it may tarnish your credit report and your wages may be garnished.
Tips for Dealing With Debt Collectors
The more you know about the debt collection process, the easier dealing with a collection agency will be. If you are ready to pay off your outstanding balances, here are some tips for dealing with a collection agency:
- Don’t ignore calls or mailed notices.
- Know your rights
- If you are unsure of what the debt is for, request verification of the debt
- Avoid giving too much information but it is important that you confirm that you are the person the agency is looking for. This can be done by verifying your date of birth or last 4 of a social security number.
- Try to negotiate. See if the agency will take less to settle the debt and if not, make a payment arrangement that you can afford.
- Consider other ways to pay. Maybe defer a car payment or borrow money from a 401K.
- Watch out for scams. The agency is required to send you a validation notice within 5 days of contact that is not already sent.
Have Questions About The Collections Process?
Kinum, Inc. has answers. It is our goal to offer our clients a smarter way to collect. We focus on maintaining positive relationships between businesses and consumers. To learn more about our services and how we can help you, please contact us today at (888) 471-0280. (make click to call)