DON’T PAY FOR COLLECTIONS AND CHARGE-OFF
Before we dive in, YOU need to understand the difference between collections and charge-offs. Understanding this knowledge is crucial for only to save money, but for you to save yourself from legal binding.
“Charge Off VS Collection”
A charge Off is the debt the creditor has given up after you’ve missed multiples of payments and after 180 days of not making the minimum payment. These include credit cards, mortgages, auto insurance payments you’ve lost. The charge off can remain in your credit report for seven years. Ultimately, you’re still responsible for the debt you owe.
A collection is straightforward to understand. When you own the credit or debt, and they have failed to collect money from you, the creditor will sell your debt to a collection agency for pennies on the dollar. Now collection agencies are responsible for managing the debt from you.
Let’s put this as an example: We’re going to use Comcast. Say you owe the CosmCast company $1,000, and it’s been 180 days since you’ve not paid them. Comcast will most likely sell your account to the collection agencies. Comcast finds the highest bidder that will take your debt that has the highest bid for the average 4 cents for the total amount of debt.
Here’s the REASON WHY YOU SHOULDN’T PAY OFF COLLECTIONS ACCOUNTS
QUICK TIP: All debt have Statue of Limitations: A creditor and debt collector have a limited amount of time window to sue debtors for nonpayments. After the status is limitations is expired, they have no longer legal right to sue debtors. Here is the link to every state’s Statute of Limitations
QUICK TIP: The dollar amount of your collection account is IRRELEVANT to your credit score. Regardless of how much you owe in a collection account, it will drop your credit score the same. Hence, the reason why you shouldn’t settle for a collection account.
Scenario 1: Let’s say Jake hasn’t paid off his chase credit card account for the past seven years, and his status of limitations has expired. In his case six years in Colorado, debtors have no legal rights to collect debts from Jake. However, if Jake makes a payment to his collection account, then he RESETS THE STATUE OF LIMITATIONS TIME. DON’T MAKE THIS MISTAKE.
Scenario 2: Let’s say it’s been six years since Jake hasn’t paid off his collection account, and his credit has built up over time. If Jake goes on a settlement with a debtor, then his credit score will drop exponentially because now, again, he is RESETTING the collection account in his credit profile. DON’T MAKE THIS MISTAKE.
WHAT YOU NEED TO KNOW:
Know your legal right about charge off status. and this will save you for a long time. Say Comcast has sold your debt to a “Song’s collection agency.” Song collection agency will try their best to collect money from you. Charge offs and Collections accounts have the same fashion of affecting your credit score. It can drop your credit score anywhere from 50 to 100 points.
Credit Collection agencies are trained to ask you two questions and have you admit to your fault.
DONT DO THIS:
- Give your full name
- Admit your address
Ultimately, collection agencies have no legal right to collect money from you until you give them what they need, again, your name and full address.
- If a collection agency calls you, hang up the phone.
- Do NOT give them any information.
- If they send you a letter, DO NOT RESPOND
- Never repay your collection account. You will reset the time of Statue of limitations
- Never settle a collection account
If you’re in a situation right now where you’re slowing paying off collection accounts, allow me to take some pressure off from your shoulders. I can work with you and resolve your issues with our advance disputing process.
Find out more here.