One of the unethical and highly deceptive tactics that collection companies/debt collectors use is to purchase debt that has passed the “statute of limitations” for pennies on the dollar and then try to use scare tactics to collect the debt from unsuspecting people who have no idea that this debt is no longer collectible.
So what should you do if a collection company contacts you stating you owe them on a debt?
- Request a validation notice. Do not take any ownership of the debt yet. A debt collector is required to send you a validation notice within five days that explains how much you owe and to whom you owe the debt. If you threw it away or don’t have any backup documentation, you should request another copy of the validation. Document when you make this request and when you received it. If the collection agency cannot validate the debt then they probably don’t have a legal right to collect the debt. Dispute the debt immediately with all three credit bureaus requesting them to verify the debt.
- Once you have the validation notice, make sure that this is truly your debt. Sometimes, debts are created in your name such as in cases of identity theft. You’ll want to check your credit report. Your credit report should include evidence of the debt. You can get your FREE credit reports at www.AnnualCreditReport.com. Make sure to check all three bureaus.
- Check to see that the collection company is reporting on the credit and the original creditor should be listed there too with a zero balance and documented as a charge off unless it was not a credit card or installment loan originally. Compare the three bureaus information on the debt. Dispute directly with the credit bureaus any inaccurate information.
- If the debt is verified, offer to pay, if they will delete the debt. Just paying the debt and not getting it deleted could have zero effect on your FICO score. You will see the VantageScore increase on Credit Karma and on other sites where VantageScore is used but not the FICO scores used to obtain a mortgage.
- DO NOT set up a payment plan because one $5 payment could extend the statute of limitations or time frame they have to try and collect or file a judgement against you. Your score will not change on a payment plan because nothing is updated on the credit report until paid to zero and once it is paid off, it could actually drop the score by updating a bad account and bringing it back into the last 25 months of your credit history. Play hard ball and only pay if they are willing to delete the account and give you something in writing.
- If you are served with a judgement, GO TO COURT. DO not skip it. Just showing up could get the debt waived due to many companies expecting you to not show up in court and not being properly prepared with witnesses. If you don’t show up, the company suing will automatically win by default and could garnish wages.
As always, feel free to reach out with your specific scenario!