Who holds your delinquent debt now? Check your credit reports

Opening Credits columnist Eric Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question for the CreditCards.com expert

Dear Opening Credits,
I had a credit card at the age of 18 in 2007, and I was wondering how to find out the company that has it now. Can I still contact them and get a settlement? I reside in California, if that helps with anything. -- CNA

Answer for the CreditCards.com expert

Dear CNA,
I can imagine what happened about three years ago. There you were, fresh-faced and eager during your first week of college. Scattered across campus were tables set out by financial institutions, featuring cheerful banners advertising student credit cards. The bank would even give you a little whatnot for completing the paperwork. "My own credit card and a free pen?" you ask excitedly. "Sign me up!"

You applied to one and then meandered off to class with your terrific new writing instrument. Within a week or two, a little piece of plastic with your name on it arrived in the mail.

And so your credit problems began. You charged, and you most likely covered the first few bills just fine. But it wasn't long before you overspent and the balance became burdensome. Eventually, you missed a cycle, then two. Then you just threw in the towel because the amount you owed was really ridiculous by that point -- far more than you had actually spent -- and even the minimum was unpayable. The credit card company called and wrote, and they might have even asked if they could help, but you avoided them.

Many months went by. The creditor gave up and sold the balance to a collection agency for a percentage of the liability. That company then tried to locate you to squeeze out some cash. However, like many young adults, you moved around or sofa-surfed, so they couldn't find you and failed as well.

So now where is the debt? Well, either that initial collection agency still owns it or they resold it to another collector for even less money than the account is worth. You won't know for sure until you do one thing: pull your credit reports.

And really, CNA, the credit reports will  answer your question. All creditors who subscribe to these credit reporting agencies (TransUnion, Equifax and Experian) regularly submit information about your borrowing and repaying activity. The credit reporting agencies compile that data and create files that lenders and other companies use to make objective business decisions.

Whoever is in possession of your debt is probably reporting it to at least one of the three major agencies -- also known as credit bureaus -- so obtain copies of all of your reports and check them to see who has that bill. You can get the credit reports once a year for free at AnnualCreditReport.com. Once you identify the owner, you can deal with the arrearage.

As the balance is almost certainly with a collection agency, prepare for some rather gruff interactions. These are not folks who earn a living being nice. This is not to say they can't be charming, but unlike the credit card company you initially dealt with, they have no reason to keep their customers happy.

Before contact, know what you want to do and what you're capable of. In many cases, a settlement is possible. Remember, the collection agency bought the balance at a discount. For example, if you owe $1,000, but they purchased the account for $200, you may be able to send $300 and be done with it. They make a small profit, and you get a bargain. Mind, though, that collectors generally don't accept installment payments, so have the money ready to go. Also know that a balance paid in full looks far better on a credit report than a settled sum, so weigh the savings against the less-than-perfect effect.

Finally, tread carefully when dealing with collection agencies. In the state of California, the statute of limitations for lawsuits on delinquent debts is four years. Contacting a collector before the statute has run can trigger legal action, especially if they believe you might disappear again. Read up on the Fair Debt Collection Practices Act to learn your rights and responsibilities, too. You may have been naive once, but it's time to get smart about credit.

See related: 5 key federal laws that protect cardholders, Tips for dealing with collection agencies, Free credit reports: Pull the ones that are actually free, 8 things you must know about credit card debt

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Updated: 01-19-2019