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What Credit Score Is Needed For Care Credit?

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What Credit Score Is Needed For Care Credit

When a person has high out-of-pocket medical expenses, figuring out what to do can be a challenge. Fortunately, there are potential solutions. In some cases, Care Credit may give you a simple way to handle the costs, settling your balance with your provider right away. Plus, Care Credit often runs promotional programs that may allow you to avoid interest while you pay off what you owe. As a result, many people wonder, “What credit score is needed for Care Credit?” If you’re among them, here’s what you need to know.

What Is Care Credit?

Care Credit is a specialized financing option that focuses specifically on health and wellness-related costs. Essentially, it’s a healthcare credit card that is only accepted by participating providers, limiting its use to healthcare or wellness-related costs.

A wide array of providers accepts Care Credit. Some examples of the types of services you may be able to pay for using Care Credit include:

  • Dentistry
  • Dermatology
  • Eye Care
  • Hearing
  • And More

Often, Care Credit is usable if you’re getting elective or cosmetic procedures, suggesting you’re using a participating provider. You can also use Care Credit to cover veterinary costs for household pets.

How Care Credit Works

Care Credit works similarly to a store credit card, as borrowers can only use it at participating provider locations. Those interested in opening a Care Credit account can do so at a participating borrower. After providing details, they can learn if they are approved in mere minutes in most cases.

However, borrowers can also apply for Care Credit online if they prefer. This approach may be ideal if a borrower knows that they’re going to have an eligible purchase at a participating provider in the near future, as it allows them to ensure they’re approved first.

Once the account is open, borrowers can use it like a store card when paying for eligible services. They can simply inform the employee that they’re using Care Credit and swipe the card or provide the account number during checkout to cover the costs.

Additionally, Care Credit commonly offers short-term, no-interest financing options for paying off balances in full within a specific time period. Outside of the no-interest financing options, borrowers may be able to use promotional interest rates for larger purchases if they require more time to pay off the balance.

For instance, purchases that are at least $1,000 can get a reduced interest rate depending on the amount of time the borrower requests for the payoff. For 24 months, the APR is 14.9 percent; for 48 months, it’s 16.9 percent.

Beyond anything promotional, Care Credit has a high-interest rate. Its regular APR for new accounts is 26.99 percent (as of August 2022). While borrowers can avoid that rate if they pay off balances during the promotional period, it’s a steep penalty to pay if you fail to handle the purchases within those timeframes.

What Credit Score Is Needed for Care Credit?

Care Credit doesn’t advertise a specific minimum credit score to qualify for an account. While general advice usually recommends having a credit score of at least 620 or 640, some people anecdotally report being able to open a Care Credit account with scores closer to 600.

Generally, Care Credit is less stringent when it comes to credit scores than many other lenders. Instead, it uses an approach that’s similar to retail credit cards, which usually means lower requirements in regard to credit scores.

If you’re concerned that your credit score isn’t high enough to open a Care Credit account, you can go through the prequalification process online. The Care Credit website allows potential borrowers to enter specific details and get an initial decision in just seconds, all without impacting their credit score.

Once the prequalification process is complete, aspiring borrowers that are invited to go through the formal application process typically have solid odds of approval. As a result, the odds of your credit score being high enough are relatively good. However, a prequalification doesn’t guarantee approval.

Additionally, moving forward will result in a hard inquiry on your credit report. This can temporarily impact your credit score after the fact.

For those who don’t get an offer to apply after prequalification, that usually means you didn’t meet all of the minimum criteria to open an account on your own. However, you may be able to apply with a cosigner and get approved, so keep that in mind if getting a Care Credit account is legitimately important.

How to Apply for Care Credit

Applying for a Care Credit account is relatively simple. There are also several ways to go about it, giving you some flexibility about when you open an account.

First, you can apply during a visit with a participating provider. This option allows borrowers to cover unexpected healthcare costs at the time of treatment, which can be convenient if the total is higher than you initially expected.

Second, you can contact Care Credit by phone at 1-800-677-0718. If you want to speak with a live representative, you’ll have to call Monday through Friday between 9:00 am and 9:00 pm Eastern. Otherwise, you can use an automated system at any time.

Finally, you can apply online at the Care Credit website. For many, this is the simplest option. Just enter in the details on your own time and receive a quick decision. Plus, it allows you to apply at any time, day or night, and even handle the application before an upcoming appointment.

Regardless of the option you choose, the process isn’t unlike applying for any other credit card. You’ll provide specific details – including contact information, personal details, income data, and housing information – and undergo a credit check. After your account is reviewed, Care Credit makes a lending decision. If you’re approved, you can get a copy of your account number immediately. Thus, allowing you to use the account to handle qualifying costs right away.

Should You Use Care Credit?

Whether Care Credit is a solid option for you depends on several factors. First, can you pay off the balance owed before any promotional periods expire?

While no-interest repayment periods with Care Credit can be a boon, if you don’t tackle the balance within that time, the regular interest rate that then applies to the balance is incredibly high. In many cases, that APR is above what you’d find with a normal credit card, which can make Care Credit a bad deal for anyone who can’t pay off what’s owed before the promotional periods expire.

Second, can you support a new debt? It’s important to remember that not everyone qualifies for Care Credit. Additionally, applying for Care Credit has the same impact on your credit report and score as applying for any other credit card.

Depending on your current score, age of your accounts, credit utilization ratio, and other factors, you could see some notable changes to your score after the hard inquiry, even if you don’t open the account. If you do open an account, then you may see more dramatic shifts. If you are planning to secure other types of financing in the near future, you’ll need to make sure the impact of the Care Credit application doesn’t alter your long-term plan before proceeding.

Are There Alternatives?

Finally, are their alternatives better meet your needs? While Care Credit is helpful, it isn’t the only option for covering medical costs.

Depending on your current medical insurance, you may be able to take advantage of a health savings account (HSA) or flexible spending account (FSA) instead. With those, you’re contributing to a tax-advantaged plan that you can use to cover qualifying healthcare expenses, which may be better than paying interest on a debt.

You may want to explore alternatives like personal loans. Particularly if you’re concerned about handling the debt before a promotional period ends. Personal loans have a fixed interest rate and a defined repayment plan. Thus, allowing you to know exactly what you’ll owe and when you’ll have the debt fully paid off.

Are you surprised about the credit score needed for Care Credit? Do you think Care Credit’s overall accessibility is a positive or negative? Have you used Care Credit in the past and want to tell others about your experience? Share your thoughts in the comments below.

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Tips to Start Building Credit

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Like many people, you may wonder how to start building credit for the first time. It can seem tricky, especially if you don’t know where to start. Credit is a financial status that denotes a person’s or company’s ability to pay their debts.

 

In the most basic sense, building your credit comes down to knowing how to make smart financial decisions to attain financial power. If you’re just starting out in life, it’s important to start building your credit as early as possible. 

[Read more…]

5 Things to Do Before Applying for a Mortgage

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Paying extra on your mortgage at The Free Financial Advisor

Buying a home of your own is a huge milestone. Many people work towards buying a home for years, renting while they save up money for a downpayment. However, with home prices rising and a nationwide debt crisis, qualifying for the mortgage you need is only getting harder.

Before you go out looking for your dream home, you should try getting preapproved for a mortgage. This will help you determine whether you will be able to get a mortgage and what you will be able to afford.

There are steps you should take before applying for preapproval. Do the following 5 things before applying for a mortgage.

1. Check your credit score

Checking your credit score is the most significant step to take when you want to apply for a mortgage. Your credit score essentially provides an overview of your credit history. If you have struggled to pay back debt in the past or have outstanding debts, your credit score will be low. If you have never had credit before, you will not have a credit score. But if you have had credit, whether credit cards or loans, and paid it back without trouble, you will have a high credit score.

This is definitely a flawed way of looking at someone’s reliability. But it is the biggest factor that banks and other mortgage providers look at when determining whether to give you a mortgage. If your credit score is below 580, you are unlikely to get a mortgage from any provider and will have to work on improving it.

Checking your own credit score before applying is ideal, as hard credit checks carried out by financial institutions can lower your credit score. If your credit score is already low, you can avoid making it worse this way.

What do you do if your credit score is poor? The next step will help you begin to improve it.

2. Pay outstanding debts

Unfortunately, your credit score is not going to improve if you still have not paid the debts that caused it to drop in the first place. As such, you will need to pay for each debt that is on your credit record. If you don’t have the funds to do so, you will need to save up before beginning to rebuild your credit score.

There are options such as debt consolidation, which is when you take out a single new loan to pay off old loans. However, do your research before agreeing to a debt consolidation loan. If you do find a loan with a reasonable interest rate and you have no other way of paying your debts, it may give you a fresh start which helps you rebuild your credit score.

3. Don’t apply for credit for a full year

Once you have taken care of your outstanding debts, you will need to be very careful with your credit. In order to get your credit score to a better place, you should avoid applying for any credit for at least a year. This may be difficult if you are finding money tight, but it is necessary if you want to qualify for a mortgage.

Taking this time also gives you the opportunity to save more towards a downpayment. The bigger your downpayment is, the better rates and terms you will get on a mortgage.

4. Compare mortgage lenders

Once you have the credit score necessary to get a mortgage, you should compare the different lenders. These may include banks and private lenders, each of which provide various options. The most common mortgage is a thirty-year term, and that is what you will most likely be approved for.

Choose the 3 options with the best reviews and which will accept your credit score.

5. Apply for preapproval

Now it is time to apply to be preapproved for a mortgage. Applying to too many mortgage providers is not a good idea as it can have an impact on your credit score. However, you should get more quotes than just the one. Apply to your 3 top providers and wait for their quotes.

They will each offer you a specific amount with a specific annual percentage rate (APR). If one is lower than the others, use their offer to negotiate. Many banks and providers will lower their rates to get your business. It is important that you have a good idea of the current average rate for 30-year mortgages, so that you know what you are aiming for.

Getting preapproved for a mortgage is a big step towards owning your new home. The next step is looking within your price range and going to see different homes to choose the perfect one for you and your family.

Applying for a Mortgage

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There’s always talk about home-buying and mortgages, but with interest rates being at all-time lows over the past few years, I feel like the talk about those things have picked up. Not only that, interest rates are likely going up this year so people are trying to get in before it’s too late. In this post, I want to talk about mortgages, how they work, and what happens when applying for a mortgage.

What’s a mortgage?

A mortgage is a loan you get from the bank or another lender to buy a house. When you submit an offer to buy a house, you’ll apply for a mortgage, and it’s a very involved process. More on that later.

In a mortgage, you’ll have options for what your term is. Your typical options are 15-year, 20-year, and 30-year.

You’ll also have to make a down payment. Current trends show that a lower down payment is pretty common. Depending on the type of loan, you can put down 3+%. And how much you put down matters. If you put down less than 20%, you’ll have to pay Primary Mortgage Insurance (PMI).

Here are the pieces of your typical mortgage payment – principal, interest, taxes and insurance, and PMI (if applicable). Taxes and insurance are commonly put in an escrow account and paid when they’re due by the lender.

Mortgage application process

From application to closing, it’s about 45-60 days. During that period, you’ll go through underwriting. In underwriting, they’ll have you submit documentation to confirm your credit report, annual income, current assets and liabilities, employment information, prior tax returns, among other things.

After you’ve cleared underwriting and they’ve confirmed everything, you’ll head to closing. At closing, you’ll sign a lot of papers. You’ll likely need to bring your checkbook with you as well.

There are closing costs associated with your mortgage. Some of these can be added to your total mortgage and some of them need to be paid. Closing costs are normally 3%-6% of the total mortgage and can include real estate commissions, taxes, insurance premiums, title fees, and record filing fees.

And if you’re buying, you’ll also need to write a check for the down payment.

Who gets a mortgage?

There is a slough of factors you need to meet when applying for a mortgage. Credit score matters. Usually, you’ll need at least a 620 credit score (all else being equal) to get a mortgage. Though the better the credit score, the better interest rate you’ll get.

The debt to income ratio needs to be under 50%. The lower the debt to income ratio (all else being equal) the more you can afford. If you have a 45% debt to income ratio and can afford a $250,000 mortgage, you’d probably be able to afford a $300,000 if your debt to income ratio is 25% (this is just an example, I didn’t do the math on this).

Condition of the home. With an FHA mortgage, they are a little pickier on the condition of your home. Usually, it’s just the outside of the home they’re picky with. Chipped paint is a typical thing they take issue with, so just be aware of that.

Applying for a mortgage is necessary for most people so it’s important you understand how they work.

Related reading:

Understanding 15-Year vs. 30-Year Mortgages in the USA

What to do when you’re one month behind on your mortgage

Why Financial Literacy is Important

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

How to Prep your Finances Before you Quit your Job

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prep-your-finances

There are a lot of jobs open right now. Maybe you’re not particularly happy in your current role so you’re looking for other opportunities. Before you leave, you need to make sure you have your affairs in order. Here’s how to prep your finances before you quit your job.

Some things to make note of first.

Plan Ahead

If you want to quit, but don’t have anything lined up yet, get that process started ASAP. There may be a plethora of jobs available right now, but that doesn’t mean you’re going to get one right away.

Ideally, you’ll have an accepted job offer before you quit your current job, but that won’t apply to everyone.

You could be leaving a hostile work environment, you could have a bad work/life balance, or you’d like to explore different opportunities.

That’s why you must do your best to always be prepared because you never know what is going to happen. You can’t predict the future.

Before you quit your job, here’s what you have to do.

Have Money Saved

Make sure you have money saved. You truly don’t know how long it’s going to take to find another job. That’s why I say you should have one lined up before you quit your current job. That’s also why the common advice is to have 3-6 months of living expenses saved in case you lose your job.

It’s also important to see what’s out there. As I mentioned in the beginning, there are a lot of jobs available, but that doesn’t mean you’re going to find a better one. Do your research.

Prep Your Finances

If you want to be able to have less liquid money available, work on your expenses. Cut down where you can. If you’re servicing debt, get it paid off so you don’t have that liability sitting out there. If you don’t have any liabilities, you remove the chance that you’ll miss a payment (which is bad for your credit score). Your credit score is important in today’s economy, especially when looking for a job.

Back-Up Plan

Whether you are exploring a different field entirely or looking for a better role in your current industry, it’s a good idea to have something to fall back on. Even with a record number of job offerings, the job market is still unpredictable. Make sure you have a contingency job picked out that matches your skillset and expertise just in case the role you’re pursuing doesn’t work out.

Make Money in the Meantime

Learn how to make money…quickly. If the job hunt is taking longer than you expected, find a way to supplement the income you lost. There are several ways to hustle your way into a wage nowadays. Uber, Lyft, Instacart, UpWork, Fiverr, and more. There are plenty of companies that’ll hire you as a contractor. If you’re making money, that could enable you to be very picky on the job you take.

Health Insurance

Last thing. Don’t forget about healthcare costs. If you get benefits from your current job, figure out how/if you’re going to get health insurance while you are out of work. Short-term plans might meet a need if you’re just looking for disaster coverage, but if you’re someone that requires ongoing medical care, there’s probably something else that’ll meet your needs better.

Prep your finances BEFORE you make a move.

Related reading:

Can an Employer Charge you Fees to Turn Over your 401(k) After you Quit your Job?

Why Financial Literacy is Important

Everything you Need to Know to Set Up Your Emergency Fund

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Here Is What To Do If You Have Debt In Arrears

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This article is a response to a reader’s question about paying off debt on an irregular income. They write:

Can you advise me how to manage to settle my absa loan & credit card because they are in arrears

At my work I earn with commission , sometimes I didn’t earn.

Here is my answer:

Being in debt is a challenge. It takes away money you could use for more productive things. It’s even more difficult when you’ve missed payments and your debt is now in collections. If that’s you, here are some tips to help you settle your debt that’s in arrears.

Pay down debt

Utilize some debt repayment strategies.

Debt snowball – pay your smallest balance first while making minimum payments to your other debts. When you pay off your smallest balance, move on to the next smallest balance. As you get rid of debts, you’ll be able to make larger payments to the following debt.

Debt avalanche – pay your highest interest rate first. Similar strategy as the “snowball”. Once your highest interest rate debt is eliminated, pay as much as you can towards the debt with the next highest interest rate.

Use retirement funds to pay off your debt. You’ll likely, depending on your age, pay a 10% tax penalty, however (if you’re under 59 1/2). Do you have any cash accumulated in a whole life insurance policy? Use that cash value to pay off your debts

Negotiate

How much, in terms of dollars, can you pay to your creditors as a settlement? Figure out what that number is before you start contacting creditors.

It may take a couple of phone calls, so don’t get discouraged. If you don’t like what you’re hearing from the representative you’re talking to, try and get a hold of a different one. Remember the dollar amount you can pay and don’t go over that amount. If you can pay 50% of what you owe, start with an offer to pay 30%. The creditor will counteroffer and hopefully, the agreed amount is 50% or lower.

Make sure you’re clearly communicating the financial hardship you’re experiencing that put you behind on your debts. Getting sympathy from a representative could help you! Get any settlement or repayment plan in writing as soon as possible.

Make sure you’re speaking to your creditors, not collections agencies. Collections agencies will take a settlement amount and sell whatever is left to another agency. Before you’ll know it, they’ll be after you again. Speak to the creditor you initially owed. Also, be prepared to pay taxes on the forgiven amount.

Bankruptcy

Nobody likes to think about it and it would be a very difficult decision, but it might be one to strongly consider if you want to settle your debt.

If you don’t have luck with negotiations, you might have to consider bankruptcy. There are generally two options – Chapter 7 and Chapter 13. Chapter 7 clears all of your debts. Chapter 13 is more of a reorganization.

Check credit reports

Clarify with the credit reporting agencies how things were settled. Clean up the report and it could help your score a little. Late payments and charge-offs stay on your credit report for 7 years. Debts in collections stay on your credit report for 180 days.

Debt settlement is about commitment. There are penalties if you miss ONE payment of your agreed-upon settlement, so don’t miss!

One more thing. Know your rights. There are several things collectors can’t do:

  • They can’t threaten you
  • They can’t shame you
  • They can’t force you to repay your debt
  • They can’t falsify their identity to trick you
  • They can’t harass you

It’s a tough road, but getting out of debt is paramount for your psyche and your financial success. Utilize strategies to pay down debt. Speak with your creditors about negotiating. If negotiation doesn’t work, consider bankruptcy. Once you settle your debt, review your credit report and dispute errors.

Related reading:

What you need to know about bankruptcy

Diving deep into debt

How to improve your finances on a low income

What to do about debt collectors

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Are Medical Collections Still Relevant to Your Credit Score?

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do medical collections still affect your credit score

Staying healthy can be surprisingly expensive. As a result, many households end up with large medical bills. At times, the bills pile up so high that paying them seems (or legitimately becomes) impossible, causing the household to default on the debt. When that happens, the account can end up in medical collections. If you’re wondering do medical collections still affect your credit score, here’s what you need to know.

How Medical Debt Impacts Your Credit

Medical debt doesn’t usually have an impact on your credit score as long as you are paying the bill on time every month. When that happens, most healthcare facilities don’t bother reporting the account to the major credit bureaus, so neither the amount you owe nor your payment history ends up in your file.

In some cases, even a late or missed payment or two doesn’t cause an issue. Typically, it’s only when you default on the debt and end up in medical collections that you put your credit at risk.

What Are Medical Collections?

Medical collections are a recovery process designed to help healthcare facilities secure payments on past-due medical debt. In some cases, the standard procedure involves selling the debts to a traditional collections agency. However, larger healthcare facilities may have internal collections departments that essentially serve the same function.

It’s important to note that internal collections teams can differ from the healthcare facility’s regular billing department. However, some may use a blended approach.

Do Medical Collections Still Affect Your Credit Score

Once a medical debt ends up in collections – either internally at the healthcare facility or by being sold to a debt collection agency – the default can end up on your credit report. Once it does, it has a similar impact to any other debt that is past due, including a negative impact on your credit score.

However, unlike traditional debts, medical collections don’t appear on your report right away. All three major credit bureaus have a grace period of 180 days, giving you time to resolve the debt before it ends up on your credit report and impacts your score.

Once the grace period passes, the account appears on your report. At that time, you’ll see a negative impact on your score, including potentially a drop of 100 points or more.

How to Avoid Medical Collections

Usually, the simplest way to avoid medical collections is to make payment arrangements. Many healthcare facilities offer payment plans, particularly for large balances. At some facilities, extended payment arrangements can be set up for free and may not involve any interest.

If you can pay most, but not all, of what you owe, the healthcare facility may be open to considering your account paid-in-full in exchange for that lump sum. This is particularly true if you can pay in cash, as some clinics and hospitals do offer discounts for that.

If you’re a low-income household, you may qualify for financial assistance through the healthcare facility as well. Many larger hospitals and clinic systems do have financial assistance programs available, though you typically have to ask about them directly. Request information about eligibility and, if you may qualify, see what you need to do to apply. With that, your balance may end up fully paid or significantly reduced, making it more manageable.

What to Do If Your Account Is in Medical Collections

If your debt is already in medical collections and is legitimately yours, paying it off is usually your best bet. For internal collections, contact the healthcare facility to see if you can work out payment arrangements. If the debt has been sent to an external collections agency, then you’ll need to work with them.

While paying off the debt won’t remove the account from your credit report, the account details will be updated to show that you ultimately ended up handling it. This can benefit your credit score.

If paying it genuinely isn’t feasible, then you need to do some research. Learn more about the statute of limitations on debt collection efforts based on where you live, as the rules can vary from one state to the next. Additionally, find out what kinds of actions reset the clock, as a seemingly innocuous statement on your end can potentially give a collections agency more time to pursue you.

It’s also important to note that, even when a collections agency can no longer attempt to collect the debt, it doesn’t disappear from your credit report right away. Instead, it can show up for up to seven years from the date the account originally became delinquent, causing long-term harm to your score.

How to Dispute Medical Debt That Isn’t Yours

Sometimes, a medical collections account appears on a credit report even though the debt doesn’t belong to that person. This is normally identity theft or administrative errors relating to the account.

If the medical debt isn’t yours, then you do have the ability to dispute it. Usually, the first step you’ll need to take is to contact the collections agency or healthcare facility. Do this by sending a certified letter and tell them you want them to validate that the debt is yours. Also say that, if they can’t provide validation within 30 days (or whatever is allowed by state law in your area), you want the account removed from your credit report.

You can also go another route. All three major credit bureaus have dispute procedures in place. Through those, you can provide information showing that the debt doesn’t belong to you and request it be removed from your report. However, this approach usually only yields results if you have proof of an error.  Which isn’t always easy to find.

While disputing a medical debt can be a lengthy process, it can be worth pursuing. That way, you can get the illegitimate account off your report. Thus, restoring your credit score along the way.

Do medical collections still affect your credit score to this day? Has there been an impact in your financial life in other ways due to a medical bill going to collections? Share your thoughts in the comments below.

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What Happens if Debt Is Sold to a Collection Agency?

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When debt is sold to a collection agency, it’s incredibly common to get upset and/or worried. Odds are, you’ll start getting calls, emails, and text messages about you paying what’s owed.

In today’s post, we’ll discuss what leads to debt going to collections, what to do, what the collections agency can do, and what happens to your credit.

Why does debt go to collections?

Debt goes into collections when you’re behind a certain period of time (usually 30+ days) on your payment.

The lender will either use their own debt collectors or hire a third party to collect. What might also happen is your debt is sold to a collection agency, where they buy the debt from the lender (at a reduced amount than what you actually owe) and then attempt to collect on that amount.

Mortgages

With regard to mortgages, there are certain time periods to keep in mind:

  • 1 – 15 days – Typical grace period. Your payment must be paid in this period.
  • 16 30 days – You’ll start getting reminders, and you’ll likely pay a small late fee. No damage to your credit.
  • 31 – 59 days – Reminder calls and letters will increase. Your credit will reflect your current late status and your credit score will fall.
  • 60 – 90 days – The reminder calls and letters will stop. Someone from your lender will come to your house.

Read more on this subject, here.

What to do when your debt is sold to a collection agency

Don’t ignore it. The best thing you can do is get ahead of it. Gather information about the debt in question. Have them send it to you in writing.

Contact the creditor. Dispute it if you believe there are inaccuracies, or if it’s just not your debt. If it is your debt and everything is accurate, try to negotiate with the lender – they prefer to receive some of what you owe!

If the collection agency is harassing you, submit a request in writing for them to stop.

What if you’re at your wit’s end and don’t know what to do? Hire an attorney. All correspondence, going forward, has to go through them. If anything, get a consultation from an attorney (which is often offered for free) and see what they recommend.

What can they do?

When it comes to collections and the law, there are a few things they can do and several things they can’t do. If you want to know more about that, click here.

Your credit

There are two important things to know when it comes to collections and your credit report.

  1. A collection (or a charge off) hurts your credit score. Not only that, but your payment history (number one factor when calculating your score) will no longer be 100%, and that’s damaging as well.
  2. A collection will stay on your credit report for 7 years. You can implement strategies to improve your score, but you’ll only be able to do so much while that collection is on there.

Having a debt sold to a collection agency isn’t the end of the world. There are several things you can do to rectify it, dispute, or recover from it.

Related reading:

What You Need To Know About Bankruptcy

Deep Dive Into Credit Cards

What Affects Your Credit Score