Debt Collection Agencies | How To Deal With Them To Increase Your Credit Score In 2021



When dealing with debt collection agencies in Canada, there is a specific step by step process to successfully improve your credit and make your score skyrocket. Mortgage broker Kevin Carlson from Regina Saskatchewan explains this process in detail.

You normally find out one about collections on your credit report one of two ways. By a letter from the collection agency or when applying for additional credit.

Do you need to pay off the collection? NO, as long as you don’t need to apply for any sort of credit in the future you can just let it sit there. As long as harassing letters and phone calls don’t bother you, there is little that a collection agency in Canada will do beyond that. Very few collection accounts result in any legal action in the courts unless the amount owed is significant.

Some things that unpaid collections on your credit report could impact are, getting a credit card or loan, rent an apartment or house, get a cell phone contract where your device is financed, some employment positions within finance or government and certainly a mortgage.

Steps to Paying Collections

Then, verify that the collection is actually yours. Contact the collection agency.
When you are on the phone with them you will want to get the address of the collection agency, the name & extension of the person you are speaking to as well as the collection agencies reference number. Then you will need to get the name of credit grantor that the collection is for the original account number the balance owing.

Now you need to contact the original company that sent the account to collections and verify that they did in fact send it to that collection agency. More than likely your account was written off and you can no longer pay the original credit grantor and you will need to deal with the collection agency. However, ask them if you can still pay them directly. If you can, please pay careful attention to the following. It is the collection agency that put the collection on your credit report and they are NOT obligated to update the collection on your report once you have paid it.

IT IS UP TO YOU TO UPDATE YOUR OWN CREDIT REPORT TO SHOW THAT YOU PAID THE COLLECTION.

Get a paper letter or statement showing the full details of the original debt owed including the original account number; the collection agency reference number and amount requested to be paid. If you have negotiated a reduction in the amount that you need to pay, make sure that the statement or letter states that the amount that you are about to pay is for “Full & Final Payment” of the account.

You will be given instructions on how to make the payment. Most often you can do this at your bank and have the funds transferred out of your account. This is the best way.
Take 1 of the statements to your bank and go to the teller inside the branch. Have them process the payment as per the instructions. Have the teller stamp the letter that the payment was made on that date at your bank. The teller will give you a receipt showing the amount of the funds transfer. You now have the 2 documents that you need to update both your credit reports.

Before I go over that, this next part is crucial.
YOU NEED TO KEEP THESE 2 DOCUMENTS IN A SAFE PLACE FOR AT LEAST 10 YEARS.
Here is why. Sometimes, credit grantors will send your debt to multiple collection agencies.
So once you have paid this collection, the same debt could come up as a new collection on your credit report again from a different collection agency months or years down the road. The financial industry has a not so cute name for this. ZOMBIE DEBT.

You need to send these 2 documents to both Equifax and Trans Union to get them to update your reports to show the collections are now either paid or if you negotiated a lower amount it will say settled. It will take anywhere from a few days to a month or two for the collection account to reflect the paid or settle status.

Government of Canada website on dealing with debt collectors:
https://www.canada.ca/en/financial-consumer-agency/services/debt/collection-agency.html

Equifax credit report update:
https://www.consumer.equifax.ca/personal/help/faq/dispute-incorrect-information-credit-report/
https://www.consumer.equifax.ca/personal/dispute-credit-report-form/

Trans Union credit report update:
https://www.transunion.ca/customer-support/main
https://www.transunion.ca/assistance/credit-report-disputes

#mortgagebroker #debtcollections #badcredit #saskatchewan

Connect with me on:
Website: https://www.KevinCarlson.ca
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Kevin Carlson – Mortgage Broker – FCAA Lic. 315902
DLC – TMF – FCAA Lic. 316454

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