If you're a consumer who believes there is an inconsistency on your credit report, or if you are contacted by a third-party collection agency, you have the right to have your debt validated. Validation of a debt can remove incorrect information from your credit report, resulting in a higher credit score.
How Collections Work
If you don't pay your loans or credit cards on time, your creditor will charge off your debt after a certain period of time -- usually a few months. Once the debt has been charged off, the creditor will most likely assign your debt to an in-house or third-party collection agency. Collection agencies often buy debt for pennies on the dollar, then bill you for the full amount due plus collection costs and legal fees.
Credit Collection Agencies
if you are contacted by a credit collection agency, you have the legal right to validate the debt. In some cases, you may not have to pay an outstanding amount reported to you if the agency doesn't have the legal right to collect the money. Validation of debt will inform you whether the collection agency has the right to collect from you. The law that controls the debt-validation procedure for third-party credit collection agencies is the Fair Debt Collection Practices Act (FDCPA).
FDCPA and Debt Validation
The FDCPA states that if you notify the debt collection agency in writing of your intent to dispute the debt, the debt collector must stop collection activities until it has validated the debt. The agency must provide you with proof that it owns the debt. Sufficient proof that the credit collection agency owns the debt includes a copy of a judgment or a copy of a signed contract between the agency and the original creditor.
Credit Reports
If you find information on your credit report that is incorrect, you have the right to ask the credit reporting agency to validate your debt. Validation of the debt is a multi-step process. Write to the credit reporting agency and dispute the debt. The credit reporting agency will usually investigate your claim within 30 days; then the agency will notify you in writing of the result of the investigation. Additionally, you should notify the original creditor of your dispute.
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