The harassing phone calls. The endless emails. The frustration of being bothered day after day. All because you are simply not in a position to pay the money that you owe. Many of us understand that feeling, and end up with the same question – “how do I get out of this collections mess?”
Unfortunately, collections are a frustrating reality for many. While the situation can cause stress and anxiety, there are things that can be done to remove the debt and put ourselves in a better position moving forward.
In this 4 part series about Collections, we will look at the following:
- What You Need to Know
- How It Affects Your Credit
- Your Rights
- Negotiating a Settlement
The Cause of Collections
Collections occurs when a recipient of credit, whether it be a credit card, loan, cell phone, etc., stops making payments on the amount owing. Often this occurs due to financial hardship or an emergency. Things like a loss of job, temporary lay off can throw our budget into disarray. Typically you’re given a grace period, but 3 consecutive months without payment will raise a red flag. At this time the business you owe will often send the outstanding balance to a collections agency or department.
At that point, the collections agency will begin contacting you to arrange payment of your outstanding balance. And the truth is, they have every right to do so.
This is when repeated phone calls and emails begin. Often at a frequency that starts to feel like you’re being harassed. The agency’s goal is collect the amount you owe, in full. However, they will often offer a reduced balance to be paid back, but to be paid immediately. Or they will require a few monthly payments that are likely higher than what you can afford.
So What Do You Do?
What most consumers don’t know is that being sent to collections will affect your credit score. It will also affect your ability to gain additional credit moving forward. In part two of this series we will discuss how collections will negatively impact your credit standing.
The main thing to remember is, although the phone calls and emails can feel like harassment, they have the right to collect the money you owe. And while you may not appreciate their tactics, you are obligated to pay outstanding credit amounts.
