Great, funny story that I just got from a client a few minutes ago that not only needs to be shared but also to educate consumers to debt collector scare tactics. She called to tell me she got a call from a process serving company asking for her ex-husband’s name (not hers) and said she wanted to know if she would be home to receive the paper serving. She stated do I sound like a man? The answer was no of course so she asked so why would you ask if I would be home to get served papers for someone else that I have no affiliation with for the last 5 years. The lady replied that’s not my job I just make these calls and ask.
She gets a call later in the day from a man who says he is recording the call and has a bit of an attitude with her on a debt that she said the last time she paid on it was in mid-2009. He states the date of last payment was sometime early 2010. Of course the original fee (turns out the card was hers) was approx. $500 but they were trying to collect approx. $1,300.
During her conversation with him he put her on hold 6 times… this is a delay tactic that crappy debt collectors do to make it seem that they are more important than you and make you wait thus making it seem “more official”.
I trained/educated her like I do all my clients to ask what was the charge off date. He kept repeating that he is recording the call for legal purposes to bring to court all of her false responses and then when she mentioned she had an advisor (me) he quickly got very snippy and said well I hope he is an attorney and you can just tell it to the judge this week and then hung up on her.
I told her that is the telltale sign of a BS debt collector. I advised her to contact the original creditor and talk to their collection department (for true peace of mind) and ask them what was the date of charge off and if they sold the account when did they sell it?
Turns out the account was sold in February 2010 to a collection company and while technically she does owe the debt the threats of a lawsuit were illegal and unable to occur as in Texas as in many other states (but different times for different states) is four years. So the debt collector who was the new owner of the account failed to take advantage of the legal remedy they had thus resorted to this type of tactic.
While the statement is obvious that you should always pay your bills, very rarely does anyone ever get credit of some sort with the intention of not paying them. However life happens and if creditors take advantage of every law out there for them, should consumers not do the same?
While there are some polite and honest debt collection companies doing their job, just know they are the extreme minority. So let’s have some education about what they can or cannot do as they operate mostly under intimidation, manipulation and fear.
Once your account goes to an outside collection agency the account is usually “charged off” which means 180 days of nonpayment has gone by and federal law requires the debt be written off their books. The coding of this account on your credit report cannot get any worse.
This charge off date is what is measured for the seven years the account can stay on your credit report. So the negative account will stay on your credit file for seven years. The OTHER issue to be very concerned about is the legal statute of limitations. This is the timeline you have for the creditor to file a lawsuit against you which will turn into a judgment and if that happens no bank will lend you money with a judgment against you, even with a 810 credit score.
Each state has their own timeline for how long a creditor can sue you. Most states including Texas and California are four years. But some states like Illinois and West Virginia are ten years (never going to move there!). The best way to confirm the date for your state or to ensure the timelines have not been changed is to go to the Secretary of your state’s website to confirm these dates.
So once you have confirmed this information and a debt collector calls you and threatens to sue you understand it is a civil matter only. The sheriff or constable is not coming to your house to arrest you. And if the debt is old enough so you know they can’t sue you once you tell the debt collector that and that they broke the law by saying that knowing they can’t they typically get off the phone with you rather quickly since they now know you are an informed consumer.
Also… debt collectors buy debt from creditors for pennies on the dollar so NEVER pay more than 50% of the debt if you choose to pay the debt. In the past I have gotten collectors to go down as far as 30% for debts only a few years old.
But UNDERSTAND that if the debt is 5-6 years old and you do pay it make sure in the paperwork you get BEFORE you make any type of payment that it says the debt is settled in full. And the account WILL stay on your credit report for another seven years even though it will show a zero balance. It DOES NOT get removed unless you are able to negotiate that as part of the agreement but most debt collectors will not remove it but it can happen.
Understanding Credit & Credit Scores
One thing people need to realize that credit is a fluid concept. It is a mathematical equation where creditors and possibly collection agencies are reporting information on your personal consumer credit file. Taking that into account and the possible amount of information that is changing slightly or greatly the results of this will equate to the changing of your credit score, typically on a monthly basis however as new information is added or removed that score can change just like a math equation.
What also confuses people is how it seems every place they go to pull their credit they get a different credit score so which is the real one? The answer is actually a very simple one.
Different lenders place different point values on the same bits of information thus while you will never see the exact same credit score from a car and mortgage lender they typically are not very far off, typical variations range from 10-30 points.
The above does not factor in if the score is from the Vantage score model as that is a topic for another time.
About Wayne the Credit Guy:
With nearly a decade of experience working in the credit industry, Wayne Sanford has personally reviewed more than 11,000 consumer credit files. Sanford is a regular credit advisor for television and radio news programs and frequently contributes to several of the more renowned financial websites on the internet today. Sanford is a licensed and bonded credit company and is Fair Credit Reporting Act certified by the Consumer Data Industry Association.