What to Know About Collections

December 8th, 2020 by

Photo by: Karolina Grabowska / Pexels

Have you ever been late with a payment on your loan or credit card account? If this is a consistent issue, your debt may be sent to collections, according to MyFICO, the consumer division of FICO, the company that invented the FICO score.

How do debt collections work?

A collections department or agency is a company collecting funds that are owed from the person who took out the loan. This can be from the financial company you borrowed from, a third party they have contracted to act on their behalf, or a collection agency they have sold your debt to. 

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For debt collections to occur, you will need to have missed several payments on your account. 

If the debt is sold to a collection agency to recoup the monies owed, this may further impact your credit negatively and may harm potential future borrowing. 

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