An Introduction to Debt Collections

Katie McBeth  | 

What’s more annoying than mosquitoes? More persistent than a car salesman?

If there is one thing in life that every American can agree to hate, it’s collection calls. If you’ve gotten debt collection calls in the past, you might understand how frustrating and constant they are. Cold calls throughout the day, or countless letters in the mail: once your account has gone to collections, you might never be free of the nuisance.

Collection calls are the stuff of nightmares. They happen incessantly, and the only way to get them to stop is to pay them in full.

What can you expect from a typical call? Or if you’ve had a few already, what can you do to make sure they don’t keep happening? Additionally, what effect do collection agencies have on your credit score? This introduction will help you navigate collection calls, as well as emphasize the importance of getting delinquent debts taken care of, and beginning to repair your credit as soon as possible.

How Do Collections Work?

Past due notices might be common, but a constant fear is that those past due accounts will quickly be sent to a collection agency. Dealing with past due notices might be easy, but collection calls are frighteningly hard to manage. How does the whole process work?

According to the Federal Trade Commission (FTC), debt collectors are a variety of groups or agencies (including lawyers) that will either try to recapture debts owed to their clients, or groups that will buy delinquent accounts and will call to collect on those accounts to make a profit on the purchase of debt.

Every time you miss a payment on any sort of bill — whether it’s your electrical bill or a medical bill — that company or creditor will only wait a certain amount of time before they send the account to a collection agency. Typically, accounts won’t go to collections until after a grace period of 30 or more days has passed. It is when an account becomes seriously past due or delinquent, and they’ve sent you multiple notices, that they will finally resort to a collection agency for help or to settle your account.

The company or group that you originally owed money to is only interested in making that money back, and they don’t care if it’s you or someone else buying your account. Thus it is that some companies have internal debt collection divisions, while others will sell their delinquent accounts, make up for most of the money you owe them, and will leave the cold-calling and investigation to the new collection agency that now owns your debt.

Sometimes these collections can even be sold to multiple agencies, meaning you have to deal with multiple collection companies who are all fighting over portions of the same bill. Worse yet, each of these accounts in collections can be reported in your credit history, effectively turning one delinquency into a multitude of negative items that ruin your credit score.

Once the collection agency has control of your bill, they will try to contact you as soon and as much as possible. Luckily, certain consumer rights have been defined by the federal government, and collection agencies are not allowed to threaten, harass, or intimidate debtors, and are only allowed to call during certain times of the day.

However, if the debt has not been paid within their allotted time frame, they may seek legal recourse. Debt collectors are allowed to sue you for the amount you owe, as well as for any additional cost due to interest on the original payment (if the contract or state law allows it) or to cover the legal processes.

How Do Collections Affect Your Credit Score?

Collections can have major effects on your credit score. Since 35 percent of your credit score is determined by on-time payments on existing debts, having a collection account show up on your credit report can be especially detrimental. The credit bureaus will see that collection notice as a bad sign, and your score will start to drop as a result.

Experian notes that you should pay off your debts as soon as possible. The credit bureau explains: “Past due collection accounts should be paid off, because you are responsible for your debt and because a paid collection account may be viewed more favorably by potential lenders than an unpaid account. Paying off collection accounts also shows that you have made good on your debts.”

Additionally, collection notices will stay on your credit report for up to seven years, but other reports — such as the new VantageScore 4.0 — might not include a collection notice at all or will consider collection notices as less severe.

The way debts and accounts in default get sold between lenders and collections agencies, it is not unusual to have a single debt show up under multiple names on your credit report. This can quickly make a bad situation worse, as credit reporting companies may end up counting each account in collections separately, greatly exaggerating the amount of defaults you actually have. Even if you’ve paid off the debt, the duplicate accounts on your record may continue to show as outstanding if the collections agencies or the credit reporting companies don’t receive updated information or a dispute from you or a credit repair service working on your behalf. Learn more about your credit score, and what else can affect it, at our credit score resource and learning center.

How Should You Handle Collection Calls?

The most dreaded aspect of collections isn’t always the amount owed, but the calls that will haunt you for weeks after your debt has been passed off to a collection agency.

Luckily, you have certain rights under the federal government that can protect you from harassment. This is known as the Fair Debt Collection Practices Act (FDCPA), and it “prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you,” according to the FTC. This includes threats to your family, threats of arrest, using obscene language, and calling simply to annoy the debtor.

However, it is important for you to follow certain etiquette when dealing with collection calls. As NOLO explains, knowing how to handle collection calls can not only ease some of the anxiety, but can also save you from potential legal or financial trouble. Here is a list of things you should do and should not do when handling collection calls:


  • Should Do
    • Make a log of all the collection calls. This can help you straighten out what you owe and to whom you owe the money. It can also help you document inconsistencies if they happen, making it easier to rebuild your credit later on.
    • Write to the agency to ask them to stop contacting you. You legally have the right to ask any collection agency to not contact you (with some exceptions), and they must respect your request. Additionally, it has to be in writing.
    • Tell the collector if you think you don’t owe that debt. You should inform the collection agency if you feel there has been a mistake or the debt isn’t legitimate. As NOLO explains: “Often, collectors aren’t even aware that your debt may be uncollectable. Many times, if your reason is valid, collectors will voluntarily cease collection on the debt, as their resources are better used on consumers who don’t have a valid objection to paying the money.”
    • Tell the collector that you can’t afford to pay the debt (be honest). Collection agencies are concerned about one thing only: collecting money. If you are honest with them, and give them a brief explanation of your circumstances, they may be more inclined to move on to other customers and let your collection go to the wayside, or to work out a payment plan.
    • Give your collector your current address. As much as you may want to hide, collectors will contact anyone and everyone you may know to find out where you are currently living. This includes known associates and employers, and anyone with your previous address or phone number.
    • Know what the collector can and cannot do. It’s important to brush up on the laws around collectors, so be sure to review the Fair Debt Collection Practices Act if you’re currently being contacted by collectors.
  • Should NOT Do
    • Do not give them your personal financial information. They should not have access to your social security number or your bank account (unless you are making a payment), and you should never share that information over the phone. Additionally, do not discuss the value of your property or assets with the collection agency. This information may be used against you if the collection goes to trial.
    • Do not make a “good faith” payment. Sometimes debtors feel that a small payment may make them more favorable to collection agencies, and may help avoiding a lawsuit with the company. However, as NOLO explains: “But what this small payment can do is  extend the statute of limitations  (the time limit that a debt collector can sue you for the debt). This is because in most states, the statute of limitations clock starts ticking from the date you made the last payment. Every new payment, no matter how small, restarts the statute of limitation clock.”
    • Do not make promises or admit that the debt is valid. You can explain why you cannot pay, but any affirmative statements about the debt could be used against you in a lawsuit.
    • Do not lose your temper. Your calls are often recorded, and using profanity or getting hostile with the caller will only hurt you in the case of a lawsuit. Keep a level head, and write to the company if you no longer want them to call you.

What Does a Collection Call Scam Look Like?

One of the biggest fears with unknown collection calls is that they are not legitimate. It’s a clever way to try to steal money — by telling the debtor that they had an old account go to collections and now owe them money. But there are some obvious red flags to look out for when collection call scammers contact you.

For one, many scammers will be over-the-top aggressive with you on the phone. Real collection agencies know that they cannot act this way, and scammers will use all the threats in the book to try to get you to pay up. They will also demand payment today, instead of offering you a way to pay over time or in the future.

As for the form of payment, scammers will often be very particular. They will only allow credit card payments, while real collectors don’t mind how you pay them (as long as they are paid). Real collectors will take snail-mail payment, checks, credit or debit cards. Scammers will insist that those methods will not work.

Additionally the scammer will not give you a physical address or name of the collection agency they are employed with. They will likely refer you back to the original company you owe money to instead of giving you a detailed report of your collection, which is something a real collector would easily be able to give you.

If you think a collection caller is a scam, try Google searching the number that is contacting you. Sometimes online searches will reveal if a phone number is really a scammer or not. If you are positive it’s a scammer, then simply ignore the calls. They are trying to scam as many people as possible to get money, so they will most likely move on quickly when they realize you have not been fooled.

Collections Don’t Have to be Scary…

Collection calls can certainly be intimidating, but you don’t have the be scared of them. The best tool to have on your belt when dealing with collection agencies is knowledge, and knowing how to deal with the calls can make a world of a difference.

Don’t let these calls keep you up at night. Remember to pay off your debts, and settle up with these companies as soon as possible. Once you do, you’ll feel less stressed and be able to enjoy the freedom of paying off your past debts, and focus on rebuilding your credit. If a debt showed up on your credit report but it’s not your debt, learn how to dispute it at our credit repair and collections letter template resource center.

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Katie McBeth is a researcher and writer out of Boise, ID, with experience in marketing for small businesses and management. Her favorite subject of study is millennials, and she has been featured on Fortune Magazine and the Quiet Revolution. She researches SEO strategies during the day, and freelances at night. You can follow her writing adventures on Instagram or Twitter: @ktmcbeth

This post was updated February 28, 2019. It was originally published August 3, 2017.