How Pilling Of Debts Affect Credit Rating?
Debt management is very important because leaving it piling up can definitely impact your credit
rating. Missed bills, credit report errors and other financial issues can cause negative marks on
your credit report as well. And while everyone knows that the best thing to do is avoid them, for
some people, it is just inevitable and their debts are just continuing to pile up.
For people who have become delinquent, or have been missing several payments continuously,
the company they have borrowed money from will write it off their debt as a loss and they would
sell it to a collection agency. The agent who collected it will then attempt to collect the
repayment from you. And while each lender differs from one another, a lot of credit cards
accounts are sent to an agency 180 days of non-payment. The original creditor and the collector
will be able to update the credit report with a collection status and they’re not required to tell you
that the account
Take note that if your account goes into collections, you credit rating will drop a substantial
amount. The way a collection hurts your credit rating is related with how high your credit score is
when the collection agency reports your debt. To make things simpler, the higher your score is,
the more points you will lose. It is also determined with how much you owe. But now, there are
some scoring models that can differentiate between consumers who are having debt problems
and for people who really have minor accounts in collections. The instant drop of your credit
score will impact your future financial plans because you may get denied for every application
you would go for including loans, especially if the collection is still fresh and is unpaid.
Here’s what you can do if you have an account in collections.
Accounts in collections can stay in your credit history for up to seven years even if you
finished paying off your debt already. Make sure you keep everything up to date; this
includes your debts and some other accounts.
Paying all of your bills on time will give you credit score a boost from the damages that a
collection has done.
Paying off your debts and negotiating with the collection agency to mark it “paid in full”
will also help in putting together your credit score as whole.
Dispute erroneous accounts in collections and don’t leave it to linger any longer. It will
definitely affect or even ruin your credit history, and even other transactions in the future.
Just make sure that you keep track of your credit regularly. Get your free credit reports every
year from the three agencies and make sure you get your 3 credit scores from the different
credit agencies as well. And again, as much as possible, try to avoid debts or try on finishing
them off as fast as possible.
Before you purchase a car don’t forget to fill out a free quote and try to negotiate while
purchasing. Apart from this, check your credit report before taking any big financial decision.