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Debt Collection Enquiry Could Affect Credit Score

April 17, 2012 | Comments: 0 | Views: 175

Once a debt is taken over by a debt collection company, it is understood that the debtor has been delinquent in his payments. If the original creditor sees that one is paying his debts in a timely manner, it would certainly deem it unnecessary to have the debt sold to a collection agency. However, if it is experiencing problems with collections, it would rather sell the debt to a collection agency and unburden itself of the task of making the collection itself. On the part of the debtor, this may seem to be a harmless transaction between the original creditor and the debt collection agency.

However, the transfer of debt to a collection company does have an adverse effect on the debtor. Because of the fact that a collection company is dealing with him, the debtor's credit score could be affected in a negative manner. It is only expected that the credit rating would be reduced. As mentioned already, when a debt is dealt with by collection agency, this could only mean that the debtor has been delinquent. Of course, a delinquent debtor should not expect any positive impact on his credit score. Instead, what he may already have would still drop by a few points.

The problem here is that unlike lending firms and banks, the debt collection agencies may not immediately fix their records to show that your credit score deserves to be raised. For example, one may have already finished paying his debts and the collection agency may have acknowledged this in their records. However, there may be no means for credit score to be adjusted by the entity that does the rating. The reason for this is that the said entity may not have any means of getting the information automatically from the debt collection agency. The debt collection agency, for its part, may not also inform the credit score entity.

Having a low credit rate could be such a problem for any individual. This could discourage other creditors from approving loan requests made by him. In these times when paying in cash is not only impractical but also impossible sometimes this would really be a huge limitation. As much as possible, one should really keep his credit score high in order to enjoy certain parks. One of this is in connection with the amount of loans that could be obtained. One with a very low credit scoring would never be allowed to make bigger loans.

This is the reason why an individual who has completed repaying his debts through the debt collection agency should actually make sure that his credit score remains high or, at least, at an average. This could be done by actually asking the debt collection agency to fix their files and update these so that your actual credit status would be the one reflected. If you have repaid all your debts, this information should be found in such files. In making the credit rank, the bases would actually come from this information.

Jim Oneil is a writer with a special interest in debt issues and personal finance. He has written for small local newspapers in the past and now devotes part of his time writing about debt consolidation and management and other UK based financial products.

Source: EzineArticles
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