What you need to know about a collection affecting your credit score

Most people understand that their credit score is one of the most important aspects of their financial health. However, what happens when a collection pops up on your report? This can be extremely concerning due to its effect on the rest of your finances. Collections are not something to take lightly, and it’s essential to know how they can affect you and the steps you need to take if this issue comes into play in your life. Continue reading for a complete breakdown of collections and their effects on credit scores so that you can make sure taking care of them accordingly is always at the top of your priority list.

What is a collection?

A collection is a form of organizing and preserving objects that are meaningful to you. It can be anything from trading cards, stamps, paintings, books or even antiques. Collecting allows you to show appreciation for the items that you own by showcasing them in a unique way and building your collection with care. Having a collection also provides an opportunity for creativity as you decide how to store, organize and display each item. There is something captivating and special about collecting something that appeals to you and sharing it with others. Whatever collection you choose, it's sure to be an interesting hobby and provide lasting memories.

How does it affect your credit score?

Your credit score is one of the most important numbers associated with your personal and financial life. When you make major decisions, such as taking out a loan, renting an apartment, or opening a credit card, lenders look at your credit score for clues about whether or not you’ll be responsible with their money. Therefore, it’s essential to understand how your actions affect your credit score. Any time you take out a loan or open a line of credit, that will affect your score. Making payments on time as well as keeping debt under control also factor into the equation when it comes to your overall score. Knowing how to positively affect your score will lead to gaining access to more credit opportunities in the future.

What are the different types of collections?

Collections are virtually everywhere and there are several different types to be aware of. Most people are familiar with credit collections - these can range from a single missed credit card payment to major overdue financial obligations that have gone unpaid for months or years. Other forms of collections include medical collections, utility collections, and student loan collections, all of which could have a serious impact on your credit score if left unresolved. Some businesses may use third-party debt collection services when consumers fail to pay their bills - in these cases, it is important to understand your rights when it comes to dealing with debt collectors and how best to resolve the issue at hand.

What should you do if you have a collection on your credit report?

If you have a collection on your credit report, it is important to take immediate steps toward resolving the collection. At the very least, you should ensure you are familiar with the collection and that it is accurate. You may also want to negotiate with collection agencies, if possible, as settling for less than the full balance can help remove the collection from your credit report sooner than paying off the entire amount. Additionally, there are several solutions available to help manage collections when necessary, such as making simple payments or using a debt consolidation program. Regardless of what route you choose, staying proactive toward clearing your collection will help ensure your credit score isn't negatively impacted in the long run.

How can you remove a collection from your credit report?

Removing a collection from your credit report can be a difficult task, but it is not impossible. You will need to contact the creditor or collection agency in writing to dispute the debt, and request that they remove it. If you have documentation, such as proof of payment, billing records, or letters between you and the creditor that are relevant to the debt, be sure to include it with your letter. An important factor in this process is timing; disputes with creditors must be filed within a certain amount of time in order for them to investigate. Additionally, if your dispute is unsuccessful or denied you can file a complaint with the Consumer Financial Protection Bureau (CFPB). This could result in changes being made to your credit report. Ultimately, removing a collection from your credit report is possible, but requires dedication and attention to detail.

Conclusion

A collections account can do serious damage to your credit score, but there are steps you can take to mitigate the fallout. If a collections agency is trying to collect on an unpaid debt, make sure you understand your rights and — if possible — try to negotiate a payment plan that works for both of you. And if you have any other questions about how a collection might affect your credit score or what else you can do to improve your credit health, reach out to one of our experts for help.

If you need help assessing or understanding your current credit score and improving it, reach out to us at (888) 803-7889. We are here and ready to assist you in navigating the complexities associated with collections and their effects on your credit score.