Credit And Collection

The agency then compiles this information into a credit report, which is the ultimate gatekeeper to your credit rating. Negative marks on your credit rating will stay there for 7 years, preventing you from getting most kinds of loans. When you begin to lapse in payments to a creditor, whether it be loan payments or credit card or financing payments, the creditor will go though various steps in an attempt to receive payment. After a (usually long) serious of warnings, the creditor will eventually sell your debt to a collections company. When a creditor does this, they are effectively "writing the loan off" as they generally sell the debt to a collection agent at a heavy discount. Basically, the creditor has decided that their chances of recovering the loan are small enough that they are willing to lose as much as half of its value in order to stop pursuing it. When this happens the creditor will inform the credit reporting agency, and you will be left with the lowest possible mark on your credit report, which will affect your rating for up to 7 years. A crucial step to credit repair is take steps to avoid this "writing off" of your debt. You should act as soon as possible after being contacted by a collection agent. The first thing you should do is contact your creditor - not the collections company - and see if you can arrange to clear the debt with them. In many cases, if you agree to repay the debt immediately to the creditor, they will remove the "gone to collection" mark from your credit rating - essential to quick credit repair. If your creditor is unwilling to do this, you're stuck with the collection agency. In terms of credit repair, keep in mind that the mark on your credit rating can't get any worse at this point - the debt is already gone to collection - so take time to consider all of your options. Usually, the collection agent will contact you in an aggressive manner demanding immediate and full payment of the debt, and imply that they will take you to court if this doesn't happen. It is to your advantage in this situation to understand that the collection company has likely bought your debt at something close to half its value, so any payment higher than that will result in a profit for them. Try and offer to pay less than the full value of your debt immediately. In most cases the collection agent will be motivated to close your file as soon as possible to avoid the process getting dragged out.

A Collection Guide for Creditors

you should be aware of some basic principals:
1. Granting credit carries an unavoidable element of risk. You will have some losses regardless of how closely you screen applicants.
2. There are some fundamental procedures that can help in your collection efforts. While no collection procedures will completely cover all your needs, there are some general ideas that can assist you, regardless of the goods or services you provide.
3. A clear understanding by both parties of the terms of the credit transactions when it is initiated.
4. A systematic and diligent follow up of every account.
5. A periodic age analysis of every outstanding account.

Identifying Bad Debt

You can keep bad debts to a minimum and have more success recovering them if you identify them early. Your actions at this point of your credit-collection procedures are vital. Your reaction can mean the difference between recovery or loss. When you identify a potential bad debt, you need to act promptly and decisively. Usually the more time that passes, the less consumers pay.
Accounts that are carried indefinitely usually originate with creditors who do a limited amount of business, have the highest credit losses or the lowest debt recovery. Most national associations keep track of averages of delinquency for their industry.

Working with a Collection Agency

List collection agency accounts on special listing forms. Accurate information about the account will improve collections. In all cases, the minimum information should include:
1.The correct name, address & telephone number of the debtor
2. Name of debtors spouse
3. Whether mail has been returned
4. Debtors occupation or last known occupation & phone number
5. Names of relatives, friends, and references
6.Summary of any disputes
7. Date of last transaction
8.Cellular phone, fax, pager numbers
9. Nick names or aliases, maiden name
Cooperate with your collection service. Rely on the experience, diligence and judgment of your collection service for the best and quickest results and promptly refer any developments on the assigned accounts to the collector. Do not place an account with more than one collection service. Make sure that if you change collection agencies, the account is only being worked on by one service

Types of Collection Agencies

Financial Credit Collection : Commercial credit collection agencies provide services to the financial sector like banks and financial institutions. The types of debts range from auto loans to credit cards to mortgage payments. These credit collection agencies buy bad debts at discounts from banks, retailers, and auto financiers and then engage in the debt recovery process.
Health Care Credit Collection : The prime motive of a health care provider is to ensure that a patient receives quality and timely medical attention. An additional responsibility to collect debts may dilute the focus of the health care provider and also affect the financial strength of the organization. Hence a health care provider can agree to partner with a credit collection agency for any legal debt recovery. The methods employed for debt recovery are determined by agreement between the healthcare provider and the collection company, in line with the parameters allowed by law.
Retailers : Credit collection agencies also offer their services to retail business operations. Debt collection for these creditors includes debts like unpaid health club memberships and telephone bills.
Bad Check Recovery Bad checks/NSF can be detrimental to the cash flow of a business and the collection of bad debts arising due to fraud can become an unwieldy task for a business. Collection agencies are equipped with the necessary know-how and resources to tackle such cases involving bad checks. Such collection agencies would pay the receiver an up front sum of a certain percentage of the face value of the check.

Common Collection Terms

BANKRUPT: insolvent, gone belly up, ruined, wiped out, broke, busted, penniless, in the red.
COLLECT: Accumulate or assemble, gather, harvest, reap, amass, hoard, save, round up, pile up, squirrel away, compile, congregate, flock, group, muster, convene, meet, cluster.
COLLECTION: Accumulation, mass, group, assortment, assembly, pile, gathering, stockpile, store, hoard, cluster, congregation, aggregation, compilation, anthology, hodgepodge.
CREDIT: Belief, trust, faith, honesty, credibility, praise, attribute, notice, commendation, debt on account, deferred payment, charge, time, installment plan.
DEBT: Obligation, liability, bill, debit, arrears, deficit, pledge, due, burden, red ink.
DEFAULT: Shirk, welsh, fail, stiff, skip out, run out on, dodge.

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