DEBT VULTURES
The debt collection industry has gone high tech. They are one segment of the credit industry that has learned to use the power of the credit reporting world in new and powerful ways. Their relationship with the Credit Reporting Agencies (CRA’s) starts with their reports. One of the first and most effective collection tools is to report the debt (called a tradeline) to the CRAs. That way other creditors may help them collect their debt.
For instance, if you apply for a mortgage loan, the mortgage underwriter will look at your credit report. The underwriter may require you to resolve bad debts on your credit report even if the debts are disputed or if the debt is old and barred by limitations. If the debt is small enough, most borrowers are so committed to the loan process that they succumb to the demand and pay off the old debt, usually with little or no negotiation. This is why it is a good reason to review your credit report regularly and resolve outstanding problems BEFORE you apply for that loan. If done properly, you should enhance your credit score and should be able to save money by not bargaining from desperation.
Many creditors also regularly review your credit report. These show up on your credit report as AR or account review. An AR is less than a full report and probably does not involve any review by a human. Instead, it is a computer review to see if you meet certain criteria such as a credit score below a certain level, new debt or recent delinquencies. For instance, if this happens with a credit card company you may notice that the rate on your card has been raised from that low initial rate. Your rate may now be in the teens or may even have moved up to the twenties. If so, you may be able to thank your credit report for that change.
But the process has recently become even more sophisticated. CRA’s now offer a service called “Collection Triggers.” This service identifies persons in their files who have or are trying to rebuild their credit. These persons are ripe for collection activity. It probably involves the debt collector forwarding a list of social security numbers to be reviewed by the CRA. Each of those persons who meet certain criteria are then returned to the debt collector, which will then focus its efforts on these debtors.
While this process probably involves some element of a credit score, it may also generate a list of persons who have recently applied for a home mortgage, who have changed income levels, moved to a higher income zip code, or paid old debt. When this happens it seems as if ALL of the debt collectors are notified and initiate contact at the same time, just like vultures circling around a dying animal. This is why it is best to consult with an attorney before you pay off an old debt or negotiate with a creditor. Dealing with one creditor may only lead to the appearance of several more. There are ways you can minimize notice to the Debt Vultures. Please contact me to learn more.
