how debt affects you

If you have neglected paying your bills, or a creditor's records mistakenly indicate that you have, you may have accounts in collections. It is important to know how this affects your credit and what you can do about it, since having an account in collections can be devastating to your score.

While it is best to avoid them, if you already have collections reported on your credit report, there are a few things you should know.

What is a collection?

A collection can result from a debt that has not been paid on time. If you become significantlydelinquent on a debt, such as a medical bill or credit card bill, the original company owed will often write off this debt as a loss and sell it to a collection agency. The collection agency will then attempt to recover the money owed.

While different creditors and lenders have different policies, many credit card accounts are sent to a collection agency after 180 days of non-payment. Either the original creditor or the collection agency may report the account in collections to a credit bureau, resulting in the account being marked on your report with a "collection" status. You will not necessarily be notified by the original creditor that your account is being sent to collections.