How To Deal with Collection Agencies on Your Credit Report
By: Marc Newman
A collection, also known as a charge-off, is a debt that originated with a first-party creditor. For example, almost any contract can convert to a collection including credit cards, cell phones, auto loan deficiencies, etc.
The original creditor has given up trying to collect which usually happens after about 6 months of non-payment by the debtor. Once your debt becomes a “charge-off” it is written off by the creditor. They get a tax break and it becomes a collection item. A third-party buys the debt for a few pennies on the dollar. Collection agencies like Midland Credit Management buys the debt because they have highly trained specialists who are experts at getting reluctant debtors to pay the debt.
Collection agencies are hired because they are experts at getting you to part with your money no matter what it may mean for your credit history.
Read More about Charge Offs
How Will a Collection Damage my Credit Score?
By: Marc Newman
Once a debt has been sold, the way it is reported on your credit record changes from bad (late bill) to terrible (collection). Collections may appear in various forms on your credit report including: “unpaid collection,” “paid collection,” or “collection – paid or settled for less.”
Collections are one of the biggest reasons banks reject your credit application. Just one collection on your credit history could stand in the way of getting approved for a credit card or auto laon!
A collection like a Midland Credit Management item – even if paid – is very damaging to your credit history. This surpises people because they believe a paid collection is OK.
Wrong! A paid or settled collection is just as damaging as those that are not paid!