How Debt Gets to Collectors
Hello, this is Lev Selecter founder of 101creditrepair.com, and the topic of today’s video is how the debts get to collection agencies and what are the legal consequences. Imagine a situation when you miss a payment on one of the credit cards and maybe then miss the second one, the third one, what will happen is that, the, your credit card company will call you, or send a letter to remind you, trying to collect money from you. They will also report this incident to the credit report agencies and what then will happen other, if you have accounts with some other credit card companies or some other lenders, they will receive this information as well. Now, usually, in the small print in all the contracts, there is a clause stating that the lender can increase the rates if you become high risk and what will happen typically in this situation when you miss payment on one credit card account, suddenly, on all other credit card accounts, you will lose all the privileges, all, like zero interests privileges, suddenly, they will start calculating high interest in your balances and you will hit with higher bills which will be even more difficult to pay. You think it’s unfair, but unfortunately, there are provisions in contracts that allow them to do this. And even more, they can go retractably back in time. And they charge you with high penalties, fees, and your balance grows very rapidly. And again I think it’s unfair, but this is a major profit center for credit card companies, they want you to not being able to pay your balance in full. They want to charge you interests and penalties, and they receive more than 4 billion dollars in those late fees and penalties annually. So what happens if you continue not paying the account, after 180 days the account will be charged off and send to collections. And then you will have to deal with collection agency, and collection agency can try to collect money from you for years. In fact they can sue you and the statute of limitations in different states is anywhere from 4 to 6 years, calculated from the date of the charge of. So let’s be careful here, the date of the charge of is a very important date, two things are calculated starting from this date. One is the statute of limitations, which is for how long the lender and the collection agency can go after you and sue you and if you get the judgment, they get the judgment against you, then they can take money from your bank account, they can put lien on your properties and so on. But there’s another thing which is how long the record can stay on the credit report. And it’s 7 years from the date of the charge of, so the schedule is, you miss a payment then after 180 days, there is a charge of date, and then after this date, there is 7 years. The statute of limitation period of 4 to 6 years or the 7 years in the credit report, these are two completely unrelated things. The statute of limitation may already expire but the negative record on the credit report can still stay. You have to have a document proving this very important date, the charge off date, people also call it the date of last activity. And this date cannot be change, updated, amended, sometimes collection agencies want to prove otherwise. They say that the date you pay them make the partial payment to them or accepted guilt or something, this should be considered as the last activity date and they send corresponding record to the credit reporting agencies. This is illegal, this is wrong, and in fact, you can sue them and some collection agencies were shut down because of this practice. You have to know your rights, for each account they may only be one charge off date. And you have to have a record for your file to protect your interest here, how you get the record? You can get it from the original creditor, you can get it from the collection agency, or you can just run a credit report which will show this date. After this happened, keep it on your file. Okay, this is it for this video, it was Lev Selecter with 101creditrepair.com. I recommend to visit our website where you’ll find more videos like that and our guide and a lot of information to help you increase your credit score. Thank you.