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Credit Reporting & The FDCPA – What You Need To Know

Credit reporting is a powerful collection tool but not every debtor can be credit reported. Here’s what you need to know…

What is a Credit Report?

A credit report is like a report card on how you manage your finances, or how your debtor manages his finances.   A credit report is created or updated when a credit purchase is made.  Lenders, credit cards companies, other financial companies and some debt collectors report their credit experience, or your credit experience with a borrower to the credit bureaus who then take that information and determine the borrowers credit score.  Your credit score determines whether or not you’ll be able to borrow in the future and at what rate.  

Why Credit Report?

Credit reporting has an immediate negative impact on the credit score of the person being reported.  Even one negative item on a credit report can drop a credit score by 40 to 60 points overnight.  When you want a debtor to talk to you, credit reporting will often compel them to call.  However, not every debt and not every debtor can be credit reported.  The Fair Debt Collection Practices Act regulates credit reporting.  It says you can’t credit report someone because you think they owe you money.  You have to be able to prove it, i.e. you need documentation. 

Who Can You Report?

The Fair Debt Collection Practices Act is a federal law designed to protect the consumer from unfair credit reporting.  It limits the behavior and actions of third-party debt collectors, like us, who are attempting to collect debts on behalf of another person or entity, like you.  It is limited to consumer debt.  If a business owes you money you won’t be able to report the business owner unless he signed a personal guarantee for the money he owes you.  You can’t report an employee of a business who promised to pay you either. If your debtor is a consumer and you have a legitimate debt, you might be able to credit report him/her and you might not.  It will depend on what kind of information and documentation you have.  A valid social security number or date of birth is often enough.

Is Your Debt Reportable?

If you’d like to discuss your consumer debt – call me at 800-201-CA$H (2274) my extension is 110.

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