There are hundreds of myths involving credit reports, scores, and collection agencies. Here are some of the most common myths we’ve run across:
Common Debt Collection Myths
“If I don’t pay the debt(s), I will go to jail
Ok, maybe if we lived over 100 years ago! This is one of the most ridiculous myths out there by far, and the worst thing about this myth? Collections Agencies use this as a terror tactic to get debtors to pay. Now, you will hear about people in the news who have gone to jail stemming from debts owed, but if you look at the case closely, it’s not that they didn’t pay their debts that landed them in jail, it’s that they defied a judge’s order to pay said debts.
“The person I talked to said they were a lawyer and therefore wasn’t governed by the FDCPA/FCRA”
No wonder lawyers get a bad rap, they make it themselves! This is FALSE. The FDCPA states that ANY person/lawyer or firm that is hired to collect on a debt, is considered a debt collector and thus falls under the rules of the FDCPA.
“Talking to a collection agency resets the statute of limitations/collection clock”
This is incorrect. Simply talking to them does NOT reset the SOL/collection clock. However it’s what you SAY that can make a difference. If you make a partial payment, verify the debt as yours, or infer that you CAN make a partial/full payment, THAT resets the SOL/collection clock.
“The creditor charged-off the amount owed, so now I don’t owe the debt!”
A charge-off doesn’t mean the debt isn’t owed, or that it goes away, it just simply means the creditor has given up on collecting. . Any CA can purchase the debt and attempt collections. An additional ramification to this is that you may get a 1099 from the OC for the amount charged off. The IRS deems this as income, so you may owe taxes on it!
“I have a debt incurred in another state across the country. Recently I received a call from a CA, in the current state I’m in, regarding the debt I owe in the other state. They said the SOL regarding the debt “travels” with the debtor, thus I have to go by the SOL in the state I currently reside in”
This is a common ruse used by CAs. They know the majority of debtors don’t know the rules and their rights afforded them. This is false. The SOL on a debt is taken from the state the debt was incurred in. If you have a debt in OR, and moved to TX, where TX has a longer SOL on certain debts, the SOL doesn’t “travel”/”update” to the state you reside in, but stays with the state the debt was incurred in.
“If I pay a debt owed in collections, it will be removed from my credit report”
Paying a debt owed on your CR does NOT remove the negative mark. It stays on there! The only thing that will change is that the debt will be updated to say “paid in full” or something similar. The DOLA will also change to the date you paid the debt.
“If I pay a debt owed in collections, my credit score will increase”
Again, no. A paid debt in collections is no better than a debt owed simply because the damage is already done by the negative item showing on your report. The ONLY way to increase your score is to remove the negative item by doing a “pay for delete”. However if you’re going to be making a large purchase, like a house, the lending institution/bank may want to see the debt paid before they will lend monies. Thus a paid debt on your report would be beneficial. Again, the DOLA would be updated, BUT your score would not increase.
“When I applied for credit, the bank said I had a zero(0) credit score, and therefore was denied”
This is impossible. You either have a credit score or you don’t have a credit score. If you don’t have a credit score, it’s because there isn’t enough information in your credit file to determine a score. However, lending institutions may have their OWN method of calculating a credit score, or they rely on another credit scoring system(other than FICO) to generate a number for you.
“It’s been 10 years since I’ve last heard from a collection agency on a debt. Today I get a call from a different collection agency saying I owe the debt”
Nothing prohibits a collector from calling about it, nor do they have to cease attempting to collect on a debt. In most states, the amount is still owed, but the collections agency is simply not allowed to sue. Reference the FTC guidelines on time-barred debts.
“If I pay a debt owed in collections, and it has been removed from my report, I will never see/hear about the debt again.”
This is one of the most contentious myths out there that confuses a lot of people. Sure, in a perfect world, you paid a debt and it SHOULD NOT come back on your report. However a month, two months, a year or maybe even longer, you get your report and there is that damn debt again! How can this be? You paid the debt, but it’s still there! The problem is that there is NO database that CAs keep or follow that shows which debts are paid and which debts are owed. So your debt can literally be sold over and over and over, which means it will show it’s ugly face again and again and again on your report. It is than up to YOU, as the debtor, to provide the necessary documentation that the debt was paid, or that it is past the SOL. The good news is that if you can prove the debt has been paid, or past the SOL, the negative item can be quickly removed.
“I missed a payment than brought my account current for several months, than missed another payment and have not made a payment since. What is the date of first delinquency, the first time I missed a payment, or the last time a payment was made?”
The DOFD is the last time a payment was made and the account was never brought current. So if you missed Jan 1 payment, that would be the DOFD. However, if you brought the account current Feb1 and made several on-time payments but missed the May 1 payment and never made another payment, May 1 would be the new DOFD.
“I’ve disputed an error on my report and have proved the information is wrong, yet the CRA hasn’t removed the negative item. Oh well, I guess it will stay there”
Part of the FCRA is that you have a legal right to dispute incorrect information on your reports, and if the information contained in it is incorrect, you have the right to request it be removed. The FCRA also states that the CRAs are required to fix any incorrect information or face legal action. In many cases, the CRAs are understaffed and move like molasses. Hiring a lawyer may be the best option, plus if you can prove you suffered damages, you can sue.
“I requested a ‘pay for delete’ from a CA and they refused, insisting I pay the full amount. Aren’t they legally required to accept a ‘pay for delete’?”
No. A pay for delete is an option a debtor has, however the CAs are NOT REQUIRED to accept it. In fact, they may not be allowed to accept it if the debt they are collecting on is assigned debt and the OC wants the full amount. More on that in the “Pay for Delete” heading below.
“I received a call from a CA for an amount owed to the OC, but they’re adding “X” amount to the original debt as interest and fees, can they do this?”
Typically, NO. Not unless your original contract with the OC allows for this, or your state law allows for this. Otherwise, they cannot add on any interest, fees, or other charges.