How does being referred to a debt collector affect my credit?

I just got a letter from a debt collection agency, giving me a certain amount of time to pay a bill. Will this negatively affect my credit score?

How does being referred to a debt collector affect my credit?
Good question.





If you have received a letter from a debt collection agency, it already has affected your credit.





Your choices are:


-- make it worse.


-- make it better.





If you want to make it worse, just ignore it. As a consequence, it will be years before you get (or get at a reasonable rate) a car loan, a credit card, an apartment, decent auto insurance.





If that doesn%26#039;t sound appealing, you%26#039;ve goto to deal with it.





No. 1: Assess the damage. Go to www.annualcreditreport.com to get your free annual credit report that the 3 major credit bureaus must, by law, provide you each year. Is the debt correctly reported? If not, dispute it. If it%26#039;s accurate negative information, get used to the idea that it will stick with you for the next 7 years.





No. 2: Read up on your rights under the Fair Debt Collection Practices Act. There are lots of collection agencies that try to harrass you into payment, but they have rules they have to follow. Be familiar with them so you don%26#039;t put up with any illegal tactics. Yes, if you owe the bill, you%26#039;re legally and morally obliged to pay, but that doesn%26#039;t mean you have to suffer. Go to the Federal Trade Commission%26#039;s page http://www.ftc.gov/bcp/conline/pubs/cred... to get an introduction.





3. Call the debtor and negotiate a payment plan -- one you can REALLY live with. Make sure you get, in writing, a guarantee that the agency will report your on-time payments to the credit bureaus.





4. Follow through. Pay your payments on time. Watch your credit score heal.
Reply:You will probably be reported as %26quot;in collections%26quot; to the credit bureau(s). It will certainly reduce your credit score - for years to come.


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Reply:yes unfortunately it will
Reply:First thing, you have 30 days to dispute the validity of the debt. If it%26#039;s yours, pay it. If not, dispute it IN WRITING.





Most collection agencies are not credit reporting agencies. They%26#039;ll run an inquiry on you, pull your report, but that%26#039;s about it (some report, but not all). However the fact that your original creditor reported it to an agency will drop your score.





Get it taken care of quick. If you can settle, do it (you%26#039;ll pay more up front, but they won%26#039;t bug you). Payments are ok, but don%26#039;t miss one or bounce a check, otherwise your agreement is void, and they%26#039;ll go after the whole balance.





If anything, send a letter to validate the debt certified mail first before you do anything. Also tell them you want no telephone contact at your home, or job (include spouse if necessary), and deal with you by mail. If it%26#039;s under dispute, they CAN%26#039;T proceed until it%26#039;s valid, nor can they force you to pay any amount under dispute, only what you say is in fact yours.





Good luck.

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