Collections are one of the most onerous credit repair issues, more prone to reporting errors than any other type of account. And there is a good reason for this. Unlike most other types of accounts collections change hands, in some cases often and repeatedly. This fact alone increases the probability of error and the necessity for credit repair.
The Evolution of a Collection
Collections begin their life sometime after default occurs on an obligation. Defaulted credit cards, for example, are typically turned over to a collector 180 days after the original default date. The collector will attempt to collect for a period of time, and if they do not receive payment they may sell the account to another collector, who will then try his luck. This cycle may continue for many years spawning repeated collection efforts.
Credit Repair is Needed
Collectors are expected to make collection efforts and to report their accounts to the credit bureaus. The credit repair problem does not arise from the reporting process, but from the collector failing to withdraw their reporting. When a collector sells a debt to another collector they are required to cease reporting the account. This often does not happen. The end result is that multiple collections report for the same debt. Hence, credit repair is needed.
Old Account Removal
One of the essential first steps in any credit repair effort is the identification of these wayward collection accounts. This is not a difficult task, but it does require some attention to detail. The telltale signs of redundancy may include identical account numbers, original creditor name, if provided, and the dollar amount of the collection. Keep in mind, as you continue your credit repair project that any of these may change. This is true of the amount of the collection, as interest and fees may be added.
Reporting Period Limits
Given the potential for collections to change hands repeatedly, it is not uncommon for these errant accounts to report well beyond the reporting period limit. An understanding of reporting limits is the key to successful credit repair. Generally, derogatory information can report for seven years, but the Fair Credit Reporting Act provides a more precise way to calculate the limit on charged off accounts which may report for seven years plus 180 days from the date of original default.
Learning to Count
Also indispensable to your credit repair project is the understanding that reporting period limits are to be counted from the date of original default. This date is the first time that you missed a scheduled payment in the progression that led to the charge off or collection status. Collectors cannot reset the reporting period limit by buying or selling the debt. It is possible to reset the clock by entering into a repayment arrangement with a collector, which effectively creates a new contract.
Statute of Limitation
There is one other date that has bearing on your credit repair project, and which may guide the approach that you take when dealing with collectors. This is the statute of limitation (SOL). The SOL has nothing to do with the reporting period limits and is almost always considerably shorter. The SOL is the length of time that a collection can be enforced through the court system. Research the SOL as part of your credit repair effort. If the collector cannot sue you they should be more eager to negotiate should you decide to eliminate a debt by paying it. Good luck!
Author Resource:-
Ian Webber is a financial consultant and expert in consumer law and credit repair. Ian is a graduate of the London School of Economics and The University of Chicago. Ian consults with one of the leading online credit repair services. For more info see http://www.skybluecredit.com
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