Collection Accounts are some of the most troublesome of all negative items on credit reports.
If you actually pay the collection agency off, they may or may not report the account as paid. If you pay them a settlement amount, they will usually report the account as "legally paid for less than full balance", that is if they report it as paid at all.
If you do not pay the account off, the agency that has the account today will sell it to another agency in few months or maybe a couple of years, and the new collection agency will raise the balance due, an re-report it to the credit bureaus. And, no, the original collection account will not automatically fall off of your credit report. It will take 7 years from the date of last activity for it to be automatically be removed.
Wow! What does that do to a credit score? You would be amazed at what a simple collection can do to drop your credit score! We have seen clients take an 80 point drop in their scores due to a fresh reporting of a little $72 medical collection.. a real disaster when it happens 2 weeks before closing on a house, as it did in this case!
Many people believe that, for example a Sprint phone bill is still a Sprint collection account, whether Credit Collections, Portfolio Acquisition, Kansas Counselors, Credit Adjustment, NCO Financial, or any other collection agency that attempts to collect the account. Actually, in this example, Sprint has sold the account to the first collection agency for pennies on the dollar.. that is why you can no longer pay Sprint once the bill hits collection status. Sprint writes off the difference between what you owed them, and what the collection agency paid them as a business loss on their taxes.
Now the debt is the property of a big bad collection agency, and they attempt to collect the new, higher amount from you. If they collect, great.. they can buy more bad debts. If not, they re-sell the account to another collection agency for pennies on the dollar, and write off the difference on their taxes as a business loss. This is primarily why the amount of the debt increases as it goes from bill collector to bill collector, as the debt ages, it is worth a lower percentage of the face value to each agency that purchases it, so they raise the face value (amount of the debt) to recover the cost that it actually took to purchase the debt.
And it continues from one collection agency to another until the debt eventually becomes worthless, or is paid, and reported as paid, or the old accounts are removed from your credit reports, leaving the new collection agency in doubt as to the validity of the account they purchased with your name on it. Let's say Collection Agency A buys a pile of accounts from Collection Agency B. Agency B runs inquiries on the accounts to verify your contact information, and the account from Collection Agency A is not on your report.. makes B wonder if they bought a bogus account, so it either goes back to A, or B ignores the account totally. We have seen it happen thousands of times, and we just might be able to do it for you, too.
At CrediClear Financial Group, our business is clearing the negative marks from your credit reports, and in doing so, raising your credit score. But our business is also education, and now you know far more about collection agencies than you knew before. So the next time a big, bad bill collector calls threatening you with foreclosing on your mothers house because you didn't pay your Visa bill, or threatening to sell your children to a brothel in Thailand, you will be better informed.
There are things that a collection agency can and cannot do, above are two that they cannot do. For a list of more of the rules they have to operate under, see more guidelines at our main website www.4higherscores.com.
By now you realize that CrediClear Financial Group is different in the world of credit repair organizations out there. No smoke and mirrors, no empty promises of cast of a thousand paralegals working on your case non-stop night and day. No lies about an overnight fix for a credit report that has seen better days. Just the facts: CCFG has cleared the negative items from the credit reports of thousands of individuals, raising their credit scores so their past mistakes no longer holds back their futures... we can probably do it for you, too!
