New card application may renew debt collection
Dear Opening Credits,
I lost my job a couple of years back and all my accounts went into collection and were charged off, but I never filed bankruptcy. Now that I have a new job, will my new updated information be able to be seen by old creditors if I apply for credit? – Michael
In other words, will your credit card applications prompt a debt collector to call and if so, will they then start to press you for payment? The answer, according to David Tommer director of national collections for the law firm Weltman, Weinberg & Reis is yes.
Consumer credit reports house data that is provided to the credit reporting agencies (TransUnion, Experian and Equifax) by information furnishers, such as credit card issuers. “This information may be reviewed by any of your current or past creditors or their agents who have a permissible purpose for reviewing that information,” says Tommer. “Many professional collection organizations subscribe to monitoring products that ‘trigger’ a notification based on multiple types of criteria, including new job information when they are entered into your file.” When you apply for a new credit card, the employer you list on an application is often provided to the credit bureaus by the issuer, according to Experian. When a third-party collector sees you’re working and in the market for a new credit card, they will probably call or write you to ask for the money you owe.
For this reason, I recommend you satisfy your collection agency accounts before applying for new accounts.
Try not to fear communicating with them. As Tommer says, “Collection agencies and collection law firms really are looking for the opportunity to interact with you to facilitate solutions that are fair and reasonable, taking your individual circumstances into consideration.” Essentially, it’s in their interest to craft a payment plan that works for you.
Another problem with lingering collection accounts, though, is that the company might be able to sue you for the amount owed. You’d be in danger of this happening if the sums are large and your state’s statute of limitations for collections hasn’t run out. In some states, such as Kansas, that would be three years, and others, like Iowa, it would be 10 years. So be careful. Don’t contact a creditor unless you plan on paying.
While the dings are getting a little old, they are still being negatively factored into your credit scores, too. It’s wise to hike them up, because instead of just reading over credit reports, most credit issuers evaluate credit scores. With them they can instantly determine their risk level in offering you an account. If your numbers are too low, you may only be eligible for the most basic of unsecured credit cards or those that are secured with a cash deposit. These are both fine options, but if you can do better, why not?
I strongly suggest you get your credit scores now to see where you stand. With them, you can know how to proceed with credit card applications. Both the FICO and VantageScores are commonly used by lenders, but you can choose either. The numeral scale is the same – 300 to 850 – and higher numbers indicate lower lending risk. Anything above 750 is ideal. Anything below 600 is problematic. You can get your free VantageScore from mycreditcards.com or a free FICO score from Discover.
You can improve your credit scores quickly by paying off the balances in collections. That’s because the latest version of the FICO and VantageScores ignore satisfied collection agency debts. Consequently, the sooner you clear up the bad debts, the faster your credit scores will spike. Mind that the accounts will remain listed on your reports until a total of seven years has passed, but the older the activity becomes, the less it tends to matter even to observers.
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Published: July 6, 2016
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