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7 Ways to Fix Your Credit (part 6)

6. Debt Collections

If you’re dealing with bill collectors or simply experiencing the pain of collections on credit report files, you can remedy this situation. Your consumer rights are laid out in the Fair Debt Collections Practices Act (FDCPA).

This legislation is what’s suppose to regulate the collection industry and yet the FTC fines companies millions of dollars every year for violating consumer rights and the FDCPA. These regulations are intended to give you a modicum of respect and dignity.

The sneakiest debt collection tactic is to re-age consumer accounts. This way they can continue to report bad credit on your credit report and jack up your credit score. You see for most types of consumer debt you’re only legally responsible for repayment for seven years.

After this time expires then the debt is forgiven, this is called the statute of limitations. It doesn’t apply to every type of debt, but most. Please, investigate your local listings for the exact amount of time because it’ll vary from state to state.

If you’re currently dealing with harassing phone calls and threatening letters, the most powerful consumer weapon is to request account validation. This needs to be done in writing and if the collection agency neglects to validate your account, then you’re no longer legally responsible for payment.

Moreover if they’re following regulations they’re suppose to contact all three of the credit bureaus to have them go about removing collections from credit report files, regarding this account. If you’re account is validated then you’ll want to negotiate a settlement payment.

You can always negotiate to pay less than the total balance. Typically you can settle your debt for just 10% up to 40% of the total. For instance with a $500 debt, you may be able to settle the account for just 25% or $125.

However you must get the collection agency to agree to stop reporting your account information to all three credit bureaus, in exchange for your payment. Otherwise the only thing that will change is the status of the collection on your credit report, and it’ll change to a paid collection.

This is not a positive credit building listing and it’ll damage your credit score. With the agreement to stop reporting your account information, after you make payment you’ll next want to file a credit report dispute.

When the credit bureaus investigate they’ll contact the collection agency for verification of your account, and as per your settlement agreement it won’t be verified. Thus the credit bureaus will have to remove collections from credit report files.

Don’t just ignore debt collections or believe they’re sitting around waiting for the statute of limitations to expire. Most often folks are horrified to discover a judgement on credit report files, because they were sued for an alleged debt. This will obliterate your credit worthiness and can lead to your wages being garnished, your assets seized, and even liens placed against you or your property.