How Does a Collection Notice Affect Credit Scores?
Credit scores (also known as FICO scores) are based on several factors contained in credit reports, which help creditors and lenders determine the risk of extending credit to prospective borrowers. When unpaid amounts become delinquent, creditors tend to pass these bills to collection agencies (who earn a percentage of the amount recovered). Until the debt has been recovered, these collection notices are reflected negatively in a credit report, thus resulting in a low credit score. What Can A Low Credit Score Do?
A person that has a low credit score:
Indicates they are a high risk of default to creditors May pay a higher interest rate for loans May have a tougher time getting a credit approval
What Can I Do to Raise My Credit Score if I Have a Collection Notice? To control debt and improve credit scores, you should try to settle the amounts owed to collection agencies. Because the agencies earn a percentage of monies collected, negotiating payment(s) benefits both parties. A lawyer is extremely helpful in negotiating with agencies to work out a payment that you can afford, and the agency can collect an amount, as compared to not collecting any at all. After negotiating a settlement, your lawyer can request documentation from the collection agency to submit to the 3 credit bureaus, and request that these reporting agencies remove the negative items from your credit report. |
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