Debt Collectors

• Debt collectors, also known as collection agencies or bill collectors, specialize in persuading people to pay their debts. They do this by calling and mailing debtors as well as placing negative information on debtor's credit reports. In some cases, a debt collector works on behalf of the original creditor, taking a percentage of any money collected. Other debt collectors are actually debt buyers who buy up debts at a fraction of their value, then attempt to collect them. Both types of collection agencies must adhere to the regulations in the federal Fair Debt Collections Practices Act (FDCPA) as well as any applicable state debt collection laws.
  
  

Credit Reporting

• Creditors, including debt collectors, can document your repayment history and report it to credit bureaus. Credit bureaus then add this information to your credit report. Creditors, landlords, insurance companies and employers often use credit reports in making decisions about extending credit, hiring, offering housing or issuing an insurance policy. According to the federal Fair Credit Reporting Act (FCRA), creditors and credit bureaus are responsible for only reporting accurate information about your credit history. If you discover inaccurate information on your credit report, you can demand that the credit bureau investigate the inaccuracy and delete unverifiable information.
  
  

Payment Plans

• Many collection agencies will set up a repayment plan if you cannot pay your debt all at once. Be sure to get the details of your payment plan in writing before sending the debt collector any money. While your debt is in a repayment plan, the collection agency can still report your debt to credit bureaus, but it should report your balance as it continues to decline. Once your account is paid off, the debt collector should report it as "paid" to the credit bureaus.
  
  

Negotiations

• When you negotiate a payment plan with a collection agency, ask it to delete your collection account from your credit report in exchange for repayment. If the collection agency agrees, get their agreement in writing before sending them a payment.
  
  

Checking Your Credit

• It is a good idea to periodically check your credit reports while you work with a debt collector. Check to make sure that your reported balance reflects the payments that you've made. When you complete your repayment plan, make sure that your balance is zero and that the debt collector reports it as paid. If your credit reports are not updated properly, send a dispute letter to the credit bureaus requesting an update to your information. You are entitled to one free copy of your credit report during a 12-month period from each of the three major credit bureaus. You can order your free credit report by visiting AnnualCreditReport.com.