Debt Consolidation Credit Counseling In Phoenix

The collection agency industry is a billion dollar industry. According to Rapid Recovery Solution, Inc. income from late fees and over-the-limit fees accounted for $14.8 billion dollars in the year 2004.

A collection account is defined as a delinquent account that has been forwarded to a debt collection agency, usually when it has become 90 to 120 days late. Creditors send accounts to collection agencies to remove them from their accounts receivables, then write-off the full debt owed as a loss. Creditors benefit in two ways: first, for writing off the debt as a loss on their taxes, and second, when the money is collected which can be recorded as a profit or accounts receivable. Many collection accounts are purchased from the original creditor for a fraction of the original amount owed but not always.

When you receive a letter from a collection agency, verify that the company contacting you has a legal right to collect money on your account. A collection agency holds a collection account for a few months, and if they are unsuccessful in collecting on the debt owed, the account is forwarded to another collection agency. This process continues until the account is paid or legal action is taken against you.

Debt Collection Agencies obtain the following information to develop a strategy to collect money owed: name, address, credit report, credit application, correspondence with the consumer, amount owed by the consumer and date of last payment. Many debt collection agencies also use illegal tactics to scare consumers such as: pretending they are one of your creditors asking to verify information, pretending they are an old friend or neighbor to catch you off guard, sending persistent follow-up calls or letters, sending threatening letters or leaving threatening voice mail messages, preying on your emotions, canceling credit card privileges, making the threat of litigation or pursuing litigation, and continuing to charge late and over-the-limit fees. Many of these tactics violate the Fair Credit Reporting Act (FCRA) and Fair Debt Collection Practices Act (FDCPA).

A collection agency's goal is to get the money owed paid as soon as possible. They will ask why you can't make payment arrangements today. Another tactic that may be used is to transfer you to their supervisor, which by this time you may be angry or frustrated and could possibly agree to anything just to get off the phone with them. Don't do it. Remain calm throughout the conversation. Don't let the collection agency change your mind about what you can afford or scare you into doing something you don't want to do. Be firm and stick to the terms agreed upon. Confirm your agreement in writing and send certified mail with a return receipt to ensure delivery and proof of delivery.

Debt Collection Agencies are slow to report that an account has been paid or transferred to another company, so it is critical that you obtain proof of payment. If you have missed one or two payments, contact the original creditor immediately to set up a payment plan. Stick to your payment arrangement to sustain your relationship with the creditor and retain your credit rating.

It is important to improve or protect your credit scores. To do this you have to have some knowledge of where this number comes from. It is a complex system that is used to determine a persons credit scores. But it is helpful to try to understand it.

How Credit Scores are Composed

Many factors go into to composing your credit score. Credit companies review your entire financial history, looking at what debts you have had and your record of payment. They look at the amount of debt you have. Having a lot of debt will bring your credit scores down. They also look at how much credit history you actually have. If you are just beginning to build your credit you will have a lower score until they have more information to evaluate.

Other Factors That Affect Your Score

Credit companies also want to see how much credit you are applying for. If you have filled out a number of credit card applications this will reflect poorly on your credit report. Also having a lot of outstanding debt with large balances and/or high rates of interests will bring your credit scores down.

What Is a Great Score?

Any score that is 700 or above is considered a great score. If you have a score with 700 or above, you will have no problem getting credit at a great interest rate. A score of 650 and below defiantly has room for improvement. A score between 650 and 450 needs to be worked on. You will probably have a harder time getting a loan or any type credit without securing it. This means that any loan that you apply for will need to have some kind of collateral in place to secure it. If you have a score of 450 or below, then you desperately need to get some help with your credit. It is likely that you will not get any type of credit or loan unless you receive some form of counseling to improve your score.

Getting the Help That You Need

There is help available for you when you are looking to improve your score. There are places that will offer free credit counseling. They will show you ways to get your score increased and help you be more responsible in your financial decisions. Getting the help now with your score will get you on track faster.