The definition of a collection account is an account with late payments that have been forwarded to a bill collection company, generally when the debt has fallen ninety to one hundred and twenty days late. Creditors will either attempt to collect their debts themselves, or more often send unpaid accounts to third party collection agencies to remove them from their accounts receivables. Then they will write off the debt in full that is owed as a loss.

From doing this, the creditors reap two benefits: first, they can write the debt off as a loss on their taxes, and second, the cash that does get collected is then recorded as a profit. Time is the enemy in the collections industry, and when an account gets to old enough, it might be sold from the original creditor to a third party collection agency for a fraction of the original amount.

The third party agency becomes the creditor after this, the original creditor benefits from the purchase, and any money that the third party collection agency collects after the original purchase goes straight to them.

After receiving mail correspondence from a debt collection agency, it is always a good idea to verify that the company that is contacting you has the legal right to collect the debt on your delinquent account. By law you have five days after the agency contacts you to request verification of the debt, and you must do this in writing. Get the fax number of the debt collection agency for this purpose.

Keep in mind that a debt collection company might hold on to a collection account for only a few months, and if they cannot collect the debt that is owed, the account may be forwarded to another debt collection agency. This process continues until the account is paid, or the statute of limitations (typically seven years but depends by state) on the debt runs out.

Rapid Recovery Solution is a commercial collection agency that composes stories about commercial debt collections. Free reprint avaialable from: What Is A Collections Account? Debt Collection Basics Part One.

Welcome back to debt collection 101, your beginner’s guide to debt collection. In the last article I wrote about two types of debt collectors, third party collection agents and in house debt collectors. I spoke about what skip tracing was and how a skilled debt collector will use it to find new information on a debtor that is difficult to locate.

When the debt collectors do find their debtors they will contact them and inform them of their overdue accounts. If it is necessary, they will go over terms of sale or the credit contracts, and then they will ask for payment. When a debt collector calls, they may probe you for information, or a skilled one may simply use their listening skills to try to determine why the account went delinquent and if you have the means to pay it back.

Usually, a bill collector will have the authority to offer a repayment plan or some other way to make it possible for the debtor to pay their bill. At times, they are capable of finding solutions to debtor’s financial problems that the debtors were not able to think of themselves. As experts in the field of finance, they may even be able to refer debtors in trouble to a good debt counselor or offer some useful advice.

If a debtor agrees to pay, then the job of the debt collector is almost complete. At this point the collections agent will record this commitment and will make a point of checking up on this later to ensure that the payment was made.

If a debtor refuses to pay, the collection agent will then make up a statement about their delinquency for the credit department of whoever they work for. In extreme cases, generally when there is a lot of money being discussed, collection agents may disconnect service, call for repossession, or even hand over the account to the company attorney. To Be Continued In Parts 3,4, 5, and 6.

Mallory Megan works for Rapid Recovery Solution and writes articles on credit collection agencies. Unique version for reprint here: Debt Collectors For Beginners: When A Debt Collector Is On The Phone.

Your credit score, and your criminal record. Both depend on your past, both can make you or break you, and both follow you around for a really long period of time. But, only you, and maybe your attorney, know the details of your criminal record. Your credit score is a whole different story. It can be pulled when you apply for a new credit card, go for that new job, try to get a new car, or even try to move in to a new place.

For those who are just starting out, here is a short summary and explanation. Your credit score is founded on a number system that ranks between 300 and 850. A magical, secret formula (OK, OK a mathematical algorithm that you can look up on the FICA website) will ultimately determine what your score, and your financial fate, will be. Both experts and creditors alike will inform you that they feel like your score will be a very accurate prediction of how good a job you are going to do when it comes to paying your bills.

Even if you aren’t trying to land that new job, or get your hands on a new car, or credit card, your credit score is still crucial. That is due to the fact that if you already have a credit card, your creditor will glance over your credit score to decide whether it’s a good idea to decrease your credit limit and make you pay less, or give you a higher interest rate and make you pay more. Those financially savvy chosen ones with the highest scores will obtain the lowest rates.

However, don’t despair just yet if you have a crummy credit score. The money gods say you can redeem yourself. A few basic rules of thumb: try to pay your bills on time. Paying a bill late, or even worse, letting one of your accounts go delinquent and into collection will have a negative impact on your credit score. That being said, it logically follows that the longer and more consistently you pay your bills on time, the better your credit score will be.

If you owe debt now, just try to pay it off rather than moving it around. The experts know when you are attempting to pull a fast one. It might seem like a good idea to close credit cards you’ve had for a while but haven’t used- less temptation right? But don’t! For credit scores, it looks good to have a lot of credit available for you to use, and for you to use only a little of this credit. Also, that old card leads me to my final tip: maintain longevity. Try your hardest to keep your oldest accounts active, because that’s what looks the best. My final word of advice for people looking to improve their credit score is: for the love of God, don’t open any new accounts. They will lower your average account age, and reduce your account longevity (we just talked about that) and racking up bills and not paying them was what got you into trouble in the first place! Happy Spending, and Good Luck!

Mallory Megan works for Rapid Recovery Solution and writes articles on credit collection agencies. Also published at The Credit Report Basics.