The collection industry is far from perfect. Collection accounts are bought and sold. Errors proliferate. Sellers should cease reporting, but rarely do, leaving a trail of duplicate accounts. Many debts are past the reporting period limits for the credit bureaus. And a surprising number of collection letters are sent to the wrong people altogether.
Evaluate the Issue
Don’t jump to conclusions. Is the debt yours? Is the amount correct? You have more power than you think. Many people unnecessarily pay collectors for debt that is beyond the statute of limitations, and even beyond the time limit for reporting to the credit bureaus. Don’t waste your money.
Understanding the Statute of Limitation
The statute of limitation for collecting through the courts is often misunderstood. Statutes of limitation are state and debt type specific and are generally far less than the seven year reporting period limit for credit reporting. State statutes of limitation for credit card debt, for example, range from 3 years to 6 years.
Figuring Out Your Statute of Limitation
The statute of limitation clock starts with the original default date – not the charge-off date or the date a collector reports the debt. The original default date was the date you missed the first payment in the sequence that resulted in the collection. If the debt was entered into in a different state from where you live, please check both states’ statutes as collectors may apply the more favorable (longer) limit.
Time Limits and Credit Repair Success
How does this affect your credit repair effort? If a collection is past the statute of limitation the collector cannot get a judgment. The collector may report the debt to the credit bureaus for the duration of the reporting period, but nothing more. Here is a great credit repair tip. If you tell a collector that you know the statute of limitation they should be willing to negotiate a far smaller payment. Or, if you don’t wish to pay, you can wait it out without fear.
Now it’s time to send a letter to the collector requesting validation of the debt; this is smart even if you recognize the debt as legitimate. A collector must provide proof of their right to collect and an objective accounting of the amount owed. An objective accounting should come from the original creditor. If the collector cannot provide proof they must stop collection efforts and cannot report to the credit bureaus.
Dealing with Aggressive Collectors
If you are bothered by a collector there are a variety of credit repair tools you can use to stop the hassle. If the debt is within the statute of limitation the use of a cease communication letter is would be a strategic credit repair error, as the collector may opt to sue in response. But if the debt is beyond the statute of limitation send a letter to the collector demanding they cease all communication. You will not hear from them again.