An introduction to debt collection – What you can do and what you cannot?

When you make a payment through a credit card, it is essential to know that you have a specific time to repay the loan. Delay or failure to do so will have repercussions. The creditors always allow six months of the repayment of certain loans but, if you fail beyond that, then the possibility of going into the debt collection process is high. Let’s understand in detail to have more information on debt collection. 

What is debt collection, what is the process, how does it affect your credit ratings, and if you are under scam – these are some tricky yet imperative questions for which you may need a professional attorney’s help. For a brief sneak, read on and get a view before you hire a legal expert.

What is the debt collection process?

When you take any loans, you have a specific repayment period, but failing to do so will result in forced debt collection from the agencies. Debt collection is a proper process, and the debt collection agency will not approach you till the 180 days of delay in repayment. Delinquent payment also affects your credit scores, and it can only improve on making the repayment with the penalty. Always ensure that credible debt collectors are only approaching you as there are scams also prevailing these days. 

• You shall receive a notice from your debt collector when you miss the loan repayment and pass the due date. 
• Your creditor will deem your account status as “charge off” when you pass the 180 days of extra time beyond the repayment date. If the loan amount was on a credit card, then you shall no longer be able to use the card for any transactions. There will also be a negative remark on your credit report for seven years.
• Your debt amount and pertaining details will go to the debt collector. There might be a trade between the original debt company and the debt collection agency. This means you shall no longer owe the debt to the loan company but will become liable to a debt collection agency for repayments.
• The debt collector contacts you for further details and verification. This correspondence may happen over the phone or online. Cross verification from your friends and family is also possible.
• You receive a written notice that gives the details of all the debt amounts. This document will also provide the details of the original creditor and the process.
• You can expect to receive phone calls and other types of communications from the agency until you pay off.

Credit scores drop badly

When you fail to repay the debts, the credit scoredrops and affect the ratings for seven years. It is also important to know that your previous and current scores are all part of the current defaulter list. The most common credit-scoring model is FICO 9, which deprioritizes collection based on payments. You can always bring back the positive rating by not having any further defaults in payments. 

FDCPA – Fair Debt Collection Practices Act 

It is the federal body that protects the rights of consumers. If you have any quires related to the legality of debt collectors or suspect the process, then seek help immediately.