New card application may renew debt collection

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

Ask a question.

Question 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


Dear 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 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.

See related: 10 tips for dealing with debt collectors, collection, Do you have what it takes for a DIY debt settlement?

Meet's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday,'s Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.

Updated: 01-19-2018