Debt collection is a frustrating exercise, and it results to a negative credit score on your part. This article will introduce you to the things you should about debt collections and collection agencies.
1. A collection agency is a company that is hired to collect debt on behalf of the owner of the debt. Usually, the owner has 180 days to claim the loan, if this fails, the owner then has the right to write off the debt and in which case, a collection agency takes over on his behalf.
2. The collection agency either negotiates to be paid a percentage of the outstanding debt, or buys the debt at a lower balance than what was originally owed. The collection agency then recovers the debt, often by reducing the debt amount. If a collection agency reduces a debt amount for a debtor, it does so with care not to lose the money it paid for the debt.
3. The most common type of debt collection agencies deal with is the medical debt. This is due to the fact that it takes a lesser amount of time to be qualified to be written off. After 60 days of unsuccessful debt collection, hospitals have the opportunity to include a collection agency.
4. Not just the rental or medical debt can end up with a collection agency, any kind of debt can end up with them. If you owe money to your utility company, phone provider, a contractor you hired for a repair, or anyone else, the debt can be passed on to a collection agency.
5. Handing a debt over to a collection agency has a negative impact on your credit score. This is one of the reasons landlords should do thorough screening to prevent tenants who have a potential of defaulting. A debt passed on to a collection agency shows up in your credit reports as a “collection account”. It goes on as a debt that has not been paid. The collection agency could remove the item from your credit reports, and usually it becomes a pay-to-delete deal.