How to Find Out If You Have Debt in Collections
If you are behind on your bills or have an error on your credit reports, you might have a debt in collections. Having debt in collections can cause major damage to your credit scores and even create costly legal issues. If you think you might have a debt in collections and aren't sure what to do, here's what you need to know.
What Is a Collection?
A collection results from a debt not being paid on time. Usually, the debt is significantly delinquent -- more than 180 days late. A debt collector is the person or company that collects debts owed as part of their business. When a debt goes into collections, the original creditor assigns or sells the debt to a collection agency or debt collector. The debt collector then tries to collect the debt from the consumer.
How Can I Find Out if I Have Debt in Collections?
The easiest way to find out if you have a debt in collections is to pull a copy of your annual free credit report. Most collection agencies report to at least one of the three major credit bureaus (Experian, Equifax (EFX) and TransUnion), but it's a good idea to check all three of your reports -- the collection agency might only report to one of the credit bureaus and you want to cover all your bases. Any account that is in collections will be marked with a "collection" status.
Which Collection Agency Has My Debt?
Once you know you have debt in collections, you need to find out which collection agency you owe. There are a few different ways to do this:
- Wait for them to contact you. Debt collectors are notorious for aggressively hunting people down and it's likely they've already tried to contact you. Check your voice mail and mailbox to see if you have any messages or letters. If you have any missed calls from unknown numbers, search the number online to see if it came from a credit agency. If your contact information is out-of-date or inaccurate, keep reading.
- Look on your credit report. Your credit report might contain the name and contact information of the agency that is trying to collect on your debt. Check all three of the reports in case there is conflicting or missing information on any of your credit reports.
- Ask the original creditor. If you know your debt has been sent to a collection agency, but aren't sure which one, you can find out the contact information of that agency by calling the initial creditor (the business you originally had the account with). The original creditor might not be able to take any payments once the debt goes into collections or have any information on the status of the debt, which means you'll have to deal with the debt collector directly.
If you have a debt in collections, the first thing you should do is contact the debt collector. Ask for a written "validation notice" of the debt. By law, that notice must be sent within five days of the request and needs to include: the name of the creditor, the amount owed, and how you can dispute the debt or seek verification of the debt. Once you have received the validation notice and verified the debt and amount owed, you will need to resolve the matter. Here are some options:
- Pay the debt in full. Some consumers choose to pay the debt in full or make monthly payments on the debt. The more a consumer pays, the more the debt collector makes, so the collector will always push hard for this option -- it might even try to use intimidation practices or outright lie to you, which is illegal. You can save a lot of money and even have the item removed from your credit reports by negotiating the debt.
- Negotiate the debt. Debt collectors purchase debts at a discount and then attempt to make a profit by collecting the full amount owed; conversely, some are contracted to collect on the debt and make a commission on how much money they collect. In some cases, the original creditor restricts the collection agency from taking no less than 100 percent of the debt, but usually you can negotiate the amount owed.
You can also try to negotiate a "pay for delete" deal -- an agreement to pay all or a percentage of the amount owed if the debt collector agrees to remove the entry from your credit report (this is important -- you want the entry removed, not just marked as "collection paid").
It might take several rounds of negotiation to reach a settlement with a debt collector, but once you have come to an agreement, ask for the details in writing before you make any payments. All correspondence with the debt collector should be done in writing and sent via certified mail with a return receipt request. Once you have paid the collection, check your credit reports to make sure the collector has held up its end of the deal.
- Dispute the debt. If you believe the collections account reported on your credit reports is false or outdated, you can file a dispute with the credit bureaus. For example, if the debt in collections is over seven years old from the date of delinquency, the debt must be removed from your credit report. The FTC has a helpful checklist on how to dispute a debt with a debt collector.
- Know your rights. Debt collectors are restricted from engaging in certain behaviors and they must follow very strict guidelines. Here is a list of which practices are off limits, as well as what to do if your debt collector has broken any laws. Know your consumer rights so you can protect yourself.