Hello everyone my name is Kevin Carlson, I'm a mortgage broker here in Canada. Thank you
so much for joining me on my YouTube channel to learn a little bit more about mortgage financing.
Today we're talking about collection agencies and dealing with them.
In my research on looking at what other people have talked about and dealing with collection
agencies online and through YouTube, I found literally dozens of other YouTube videos, advising
people to never pay your collections. Now, granted a lot of these are probably down in the states and
I don't know what the laws are like there, but here in Canada not paying your collections isn't
necessarily a great idea. So I thought I'd do this video and just go over dealing with collection
agencies here in Canada and just to help people address these things in a proper manner.
So the first question is, do you actually have to pay off your collections? The answer is no.
If you never want to have a loan or a credit card or anything like that, then you don't have to pay
your collections. If you don't mind some harassing phone calls and letters and that sort of thing,
yeah, don't worry about it. You don't have to pay your collections. For the most part collections
and any other bad deaths often fall off your credit report automatically after about five
six and maybe seven years. So besides not being able to get credit cards and loans and that sort
of thing if you have collections on your credit, there is a few other side effects that can happen
if you have those things lingered just sitting on your credit report. Some of those things are,
being able to rent a house or an apartment, some landlords will ask to check your credit to see
if you've got a decent credit history to see if you're worth the credit risk. Sometimes if
you're looking to get into a cell phone contract and you've got a device that's worth a thousand
maybe even fifteen hundred dollars, then you're often financing that into the cell phone contract
and sometimes they'll have a look at your credit that way and see if you're a good credit risk.
There are quite a few jobs in finance and especially in government
that you might be prevented from getting if you've got a little bit of spotty credit history.
I as a mortgage broker I must maintain good credit history, I don't necessarily have to provide the
fact that I have good credit, I don't have to send them my credit report, but I have to attest that
I've never been through bankruptcy or a consumer proposal, if I do consider doing that it's pretty
much catastrophic for my career. I would have to let them know the agency that licenses me here in
the province and who knows what their what their tactics would be if I went through bankruptcy.
I'm advising people on a daily basis as to their debt and if I trip and fall credit wise for myself
that doesn't look real good either. So I have to keep a pretty clean credit history myself.
And of course the main thing that you can't get if you've got collections sitting in your credit
report is a mortgage. It doesn't matter what sort of a collection it's for or how much it's for.
If you've got something sitting on your credit and it needs to be addressed, even if you've disputed
the debt itself, like you don't think that you owe it, it's going to have to be paid. Okay so what if
you do want to pay off those collections and get them off your credit report and help your credit
score come back up again, well let's talk about that but, I'm going to ask you to watch this video
all the way to the end, because there are some key bits of information all the way through this video
that will help you address these credit items that cannot be missed, you have to follow through all
the way through the steps in this process to be able to get this stuff looked after properly.
So if you found out about a collection that you have on your credit, there's really only two ways
that that typically happens. The first is that you received a letter from the collection agency
themselves outlining that you have a collection. The second is the one that I experienced the most
is that is when I pull people's credit reports and I see the collection just sitting on there,
so if you apply for credit through your bank for a credit card or a loan or you apply for financing
elsewhere or you try to rent an apartment or a house you may find out there might be a collection
sitting in your credit report. So the first step in the process is to get copies of both of your
credit reports in the mail on their way to you by both credit reporting agencies TransUnion
and Equifax. This is the best way to see if there's any other collections or any other bad
credit sitting on your credit report to be sure that you can look after those at the same time.
The next step in the process is to verify that this collection actually belongs to you.
If you have a very common name, sometimes the collective agency will just find the first Bob
Jones near where you live and maybe register that collection against that person. Now,
this doesn't happen very often but it is something that I have seen in the past, so
make sure that that collection actually belongs to you so we'll go over that.
So if you just found out through your bank or through somebody like myself as your mortgage
broker about this collection, very often all that we can give you is just the name of the collection
agency, sometimes a phone number and their reference number often shows up on their credit
report for the collection as well. So normally what I do is I instruct the client to call that
collection agency and have a pen and paper in front of them so that they can take some notes.
Once you get on the phone with the collection agency you're going to want to get some
information about them to start with. If you have their name, make sure you've got the full
name of the company that you're dealing with and the address as to where their office is located.
Make sure you take down the full name of the person that you're speaking to
and the phone number or the extension for that person if you can get it from them.
Then you're going to want to get some information about the actual collection itself.
So I'm going to be talking about the different collections from what's called credit grantors,
so a credit grantor is whoever gave you credit. So whoever your collection is from,
that is the credit grantor, so that could be your bank, a credit card company, cell phone companies,
stuff like that, so when I say credit grantor that could be from pretty much anything so we'll just
use that term. So when you're on the phone with the collection agency you're going to want to find
out some information about the credit grantor and the credit item that you had. So find out
who the collection is from, so the credit grantor itself and when the collection was sent to them,
the reference number for the collection like for the account that you had with that credit grantor
and the amount of the collection how much they're requesting that you pay.
The next step is to contact the credit grantor and verify that this is the collection agency
that you're supposed to pay and the one that they actually sent your collection to. Quite
often people ask me if they can just pay the original credit grantor like whatever
there was a cell phone or through a credit card. If this happened immediately,
pretty much right away, then they may still have that account sitting on their system, but for the
most part if it's happened a few months ago or a year ago or more, then this account's been written
off and it might not even be on their system any longer for you to be able to pay them. However,
keep in mind, the collection on your credit report was put there by the collection agency,
not by the original credit grantor. So you want to make sure that if you're going to pay the
original credit grantor, that you can prove to the collection agency that you paid the account.
This can trip people up a little bit because the collection agency, it's not really in their best
interest to say that yeah we'll remove this from your credit report, because you paid somebody
else. Well that's just a waste of time to them, they're not going to get anything out of it,
so keep that in mind, the collection agency is only there to get the money from you directly.
And here's another little known thing. Once you've paid the collection agent,
it is not their responsibility to update your credit report to make their collection shows
paid. I know it sounds ridiculous, but they're really quick and fast about putting the collection
on your credit report, but they're not obligated, they don't have to go in and make any corrections.
Once they've got your money, the account is closed. They don't care what happens to your
file or your credit, it is your job to fix your credit on your own and we'll go through that.
Now let's go over the following steps if you've agreed to pay the collection agency,
as to how you need to go about it. It's not just sending them money,
there is a process in order to make your credit look a lot better after this is done.
Step number 1. Get a paper statement from the collection agency or from the credit grantor,
if that's who you're going to be paying, in the mail. You're going to have to get this
as a letter or a statement directly from them, outlining how much you're going to be paying them,
the account number, the reference number for the collection and how are you to make that payment.
If they offer to send you an email, tell them no, you need an actual paper statement mailed to you.
Emails are too easy to fake and when you go to fix your credit later on,
you're going to want that paper statement. If you have negotiated a reduced amount to be paid,
make sure that you have them outlined that they will be accepting the lowered amount
as full and final payment of the collection. I have had multiple clients negotiate a settlement
with a collection agency and then they make the payment and the collection agency just took that
as partial payment on the account and then the rest was still owing after. So make sure that
you have it say, "full and final payment" on the settlement letter, so that you know exactly
how much you're going to be paying and that they'll accept it as full and final payment.
Once you receive this letter, make two copies and put one of them away where you can find it years
down the road. This might seem a bit excessive, but you're going to see why here in a few minutes.
Step 2. Pay the collection. For the most part they'll give you a few options in order to make
the payment on the collection, and the best one is to actually go to your bank
and make it right inside the branch with a teller. So bring that letter with you and go to the teller
and make the payment, make the payment in full and have the teller stamp the letter
that you paid it, and it will say the name of the bank and the date that you paid.
The teller will also give you a receipt showing the amount that you paid on that date.
These two documents are what you need in order to get the collections removed from both Equifax and
TransUnion. You need to hang on to both of these documents for at least 10 years. Put them in a
very safe place and hang on to them, and there's a really good reason why. Some credit grantors will
send your collection account to multiple collection agencies. So once you've paid
a collection agency and you've done all this work to get it taken off your credit report, it might
show up again from another collection agency, and the only way that you can prove to Equifax
and TransUnion that you've already paid that collection, is if you have these two documents.
The finance and credit industry even has a cutesy term for these secondary collections coming up.
it's called "Zombie Debt", because it comes back to life. Step 3. Updating your credit report. Now
since the collection agency is not about to do it, you're going to have to update your credit report
yourself to make sure that those collections read as a zero balance or settled and paid. I'll
put links in the description below how you can contact both Equifax and TransUnion and get in
touch with them to make sure that they can get copies of these two documents so that they can
update your credit report. Once they've received those two documents and there might be some other
supporting documentation you have to send along, maybe a local utility bill for your address where
you live, and once you've done that it can take anywhere from a week or so to maybe a few weeks
or a month or two for them to update your credit report and change that collection from a balance
owing to being paid or settled. One thing I haven't touched on is a credit dispute,
so a credit dispute is something that you don't feel like it's your collection or your bad debt
and you're in dispute with the credit grantor, well that can be a bit of a problematic process.
If it's for thousands of dollars well it could be worthwhile to fight it. What you need to do,
is to contact the original credit grantor and work things out with them and prove the fact that
that debt was not yours and get them to either reverse the collection or cancel the collection.
Once they've done that you will need some documentation showing that they have
either forgiven or cancelled the collection and you'll have to send those into the credit
reporting agencies just like the other ones, just to get those removed off your credit.
As you might guess, that is a little bit of a long and arduous process, but
if you're not in any hurry to get these things looked after,
there's certainly nothing wrong with going through the motions to try to get those things rectified.
That's about all we have for dealing with collection agencies. It's not a very fun
process and keep in mind that these people are professional harassers, that's their job,
is to get money out of people, so it's not a real fun job doing it
every day, I don't think people who work in the these call centers or the collection agencies
last very long, and if you do, I don't know, you've got a little more of a hard soul than I do,
so make sure that you try to act professional when you're dealing with these folks, but keep
in mind that they can be nasty to deal with and if that's the case, you can lodge complaints
and I'll put links to the federal government, they've actually got some guidelines as to
collection agencies and what they can do. If the collection agency is contacting your employer or
friends or family members, that's absolutely not proper, it can't be done, so you can absolutely
launch an investigation or a complaint against that collection agency because that's not right.
If you have any questions about collection agencies or dealing with them,
certainly put them in the comments below, if you've had a bad experience with a collection
agent, maybe tell your story, tell what some of the nasty things that some of these collection
agencies have done, it would be interesting and entertaining to read about maybe some stories that
people might have about that. Once again thank you for joining me on my YouTube channel and learning
a little bit more about collection agencies and dealing with them. Have yourself a great day.