Reading a credit report
Chapter 6
From which credit bureau is the report taken?
What year was the person born?
What is the highest (recent) account balance?
What accounts have a zero balance?
Are there any collections or delinquencies on the report? If yes, list them.
Look to see if this person has any of the following:
-Automobile loan
-Mortgage
-Bankruptcies
Where does this person work?
Are there any inquiries (or requests for credit history) on this report? If yes, list them.
Are there any closed accounts? If yes, list them.
What kind of credit does this person have, based on what you see (opinion question)?
Answers
Answer:
When an account becomes seriously past due, the creditor may decide to turn the account over to an internal collection department or to sell the debt to a collection agency. Once an account is sold to a collection agency, the collection account can then be reported as a separate account on your credit report. Collection accounts have a significant negative impact on your credit scores.
Collections can appear from unsecured accounts, such as credit cards and personal loans. In contrast, secured loans such as mortgages or auto loans that default would involve foreclosure and repossession, respectively. Auto loans can end up in collections also, even if they are repossessed. The amount they are sold for at auction may be less than the full amount owed, and the remaining amount can still be sent to collections.
Collections can be removed from credit reports in only two ways:
If the collection information is valid, you must wait 7 years from the original delinquency date for the information to cycle off your credit reports. The original delinquency date is the date the account first became delinquent and after which it was never again brought current.
If collection information is inaccurate, you can file a dispute on the collection information in your credit report. Depending on what the inaccuracy is, the collection account may be updated rather than removed. Learn more on how to dispute credit report information.
What "Going into Collections" Means
Depending on the type of debt owed, collections can affect you in different ways. If your debt is unsecured, such as credit card debt, and you default on your payments with that debt sent to collections, the credit card company would stop trying to collect the debt from you. Instead, the collections company that your debt was sent to, would pursue the debt and try to collect money from you. If your debt was secured, such as an auto loan and you default, then the lender might repossess your car, sell it at auction, and sell the remainder of debt you owe to a collections company. Lenders can collect money from debt in the following ways:
Contact you on their own and ask for payment using their internal collection department.
Hire a collection agency to try and collect.
For revolving debt, such as credit card debt, the credit card company could sell your debt to a collection agency, which would then try to get the money from you.
For installment loan debt, such as an auto loan, the lender may repossess the car, sell it auction, and then sell the remaining debt to a collection agency.