Break up with bill collectors

A hand holding a phone

Missing one or more consecutive payments on a debt could result in having your account sent to a third-party collections agency. Once this happens, the outstanding debt is listed on your credit report as a collection account. So, here are three tips that may help you better manage your account in collections and reduce the impact on your credit score.

Confirm you owe the debt

If you owe money, the bill collection phone calls seem to start as soon as your evening commute ends. On top of that, the all-too-frequent letters requesting payment are piling up on your kitchen table. Consider this a bad relationship that you need to get out of sooner rather than later. Make sure the amount the agency is trying to collect is accurate. It’s common for fees and penalties to be added to the amount of the original debt. So, if the amount seems high, get a break down of the amount that is being reported.

Agree on terms of separation

You may be tempted to ignore debt collectors. Don’t. Talk to creditors at least once to try to resolve the issue — even if you don’t think you owe the debt, can’t repay it immediately, or think the collector is contacting you by mistake. If after talking to them you establish a working relationship, be prepared to negotiate. Suggest a repayment plan based on what you can afford. Or, depending on the amount of the bill, offer to pay one lump sum; the creditor might be willing to accept a reduced amount.

Learn how you’re protected

If the phone calls and letters become a nuisance, know that you have consumer rights against debt collectors. Creditors may not:

  • Harass you, use profanity or threaten you with violence.
  • Contact you by postcard.
  • Threaten to have you arrested if you don’t pay your debt.
  • Pretend to be attorneys or government representatives.
  • Tell your employer or other people about your debt.
  • Cash a post-dated check early.
  • Give false information about you to a credit reporting company.
  • Pretend they are contacting you for reasons other than debt collection.
  • Contact you before 8 a.m. or after 9 p.m., without your permission.

If you think you’re being harassed, contact the NC Attorney General’s Office for help.

Break the engagement sooner rather than later

If you’ve agreed upon a repayment plan, don’t just add another bill to your life. Take steps to reduce your spending and boost your savings to repay the debt faster. After all, you want to get out of this relationship as soon as possible.

To reduce your debt quickly, look for ways to pay more than the minimum monthly amount required. You might be able to lower your debt by selling unwanted items at a weekend flea market, at a consignment store or online using free ads. Add your earnings to the next month’s payment. This way you’re also likely to pay less interest overall.

Build a healthier relationship with money

Getting hit with a forgotten debt can throw a wrench into your budget. When that happens, step back and re-evaluate your financial relationship status. If you’re feeling overwhelmed by debt, contact the Credit Union. As a member, you can receive no-cost Financial Counseling to help you create a budget and identify cash flow to help pay down your debt faster.

The advice provided is for informational purposes only. Contact a financial advisor for additional guidance.

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