Finance & Loans

Understanding what a collection is

Collection often results from a debt you have not paid on time. Usually, when you get behind on your payments, the agency issued you a line of credit decides that you stop making payments on your debt obligation and they take certain action to cut their losses. They not only write down the amount you owe to them and lump similar delinquent debt obligations into a package and sell it to a debt collection agency. They also report the delinquency to credit reporting bureaus which will put you into a “collection” category results in a devastating impact on your credit. Debt collectors get your debt not only at a discount they try to collect the entire amount you owe, interest plus the any cost they incurred.

Not all lenders follow a same set of policies. Some consider your debt is delinquent after 180 days of missing payments. They may not even tell you that until you start to receive collection calls. If you are unable to make payment on a debt you owe, talk to them to see whether you can make arrangements to get some relief. It is important to keep an eye on your credit report. You can get a free credit report once a year from each of the three credit bureaus.