If you are significantly behind on payments to a creditor, they may send your debt to collections. It is important not to ignore the issue.
1. Demand Verification of the Debt
When a collection agency first contacts you, they should have included basic details about your debt. By law, you have the right to receive a complete record of your debt if you send a debt verification letter within 30 days. You should look online for letter templates to ensure that you ask for everything you need.
Any time that you mail a letter to a collection agency, you should send it via certified mail with a return receipt. This will provide you with proof that the collector received your letter.
2. Dispute Inaccuracies
If you are sure that you do not owe the debt, or if you think the amount is incorrect, you are within your rights to challenge it. You can also dispute a debt if it has been more than seven years since it appeared on your credit report. You can send a letter to the collection agency explaining that you do not owe the debt, and then contact the three credit reporting agencies about challenging the debt.
Using a service like Credit Karma can help you see your reports for free and easily file a dispute. Chargeback protection for merchants from companies like Ethoca can help guard vendors against false fraud cases. Be absolutely sure that you do not owe the debt before disputing.
3. Work Out a Payment Plan
If you do owe the debt and the collection agency sent the evidence that you requested, it is time to negotiate with the collector. You have a few options. First, you can pay the debt in full. This is the best option if you have the money and want to see a fast boost in your credit score.
What if you do not have the money to pay? Most debt collectors are willing to offer a payment plan or settlement amount. Do not offer the agency more than you know you can pay at the moment, even if they pressure you to do so. Sometimes a debt collector will accept a settlement as low as one-third of the original amount owed, but they will usually expect at least half.
If you cannot afford that, some agencies will let you enter into a payment plan. Explain what you can afford, and make sure that you get any agreement in writing.