How An Account Accidentally Went to Collections — and What I'm Doing to Prevent It from Happening Again
A cautionary tale of how the outstanding balance on an account can default and go to debt collections — and how it could've been avoided in the first place.
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A few years ago, I received a letter from a company unfamiliar to me. I opened it, and to my surprise it was a notice from a debt collections agency stating I had an outstanding balance in the grand sum of $15 that defaulted and went to collections.
The company reporting the outstanding debt looked unfamiliar, and while I assumed it was a bogus letter — I had never had anything go to collections in my adult life — I found the small sum of money owed to be peculiar. If a fraudster was out to shill a few bucks out of me, I imagine it would be more substantial than that. So, I decided to call the number on the letter.
It turned out that the debt was indeed legit, and the unpaid balance was from a web domain company for a domain I never used and vaguely remember purchasing many moons ago. The account was linked to my former mailing address, and to a now-defunct email address. And since that particular bill was set on auto renewal, it was linked to a credit card that I had since closed.
I felt duped — and a bit sheepish. As a self-proclaimed money nerd, I prided myself on being keen to staying on top of my bills and paying my credit card balances in full each month.
Since the incident, I've vowed to prevent that from happening again at all costs. Here are the steps I've taken to steer clear from unknowingly having a bill go to collections:
At least once a year, I check all the payment settings for recurring bills I have on autopay, which includes:
- Website hosting
- Software and online products and services for my freelance writing business
- Financial and budgeting apps
- Cloud storage
- Utility bills
- Credit cards
I know, it's not entirely exciting, nor is it particularly noteworthy. But it's important to do, lest I make the same mistake in the future. I make sure all my accounts have up-to-date billing information, and my physical address is also current.
Common culprits that tend to fall under the radar are the expenses where I'm billed only once a year, so I am sure to review info for those, too.
Update Account Info When I Move or Switch Credit Cards
I am not one to uproot very frequently, but when I do, I update the billing address on all my accounts. It's also an opportune time to scour through and make sure my credit card information is accurate.
Along the same lines, if there's a new credit card I want to use to pay the majority of my bills with, I make the change on all my accounts in one sitting. I typically use a personal credit card for my personal expenses and a business one for bills for my freelance business.
Order Credit Reports
To make sure I'm not missing any notices and that information is correctly reported on my credit reports, I order credit reports at least once a year. You can get one for free during each 12-month cycle from AnnualCreditReport.com (during the pandemic AnnualCreditReport starting offering free weekly credit reports but it is unknown how long that program will continue).
Pro tip: You can get one for free from each of the three major credit bureaus — Experian, TransUnion, and Equifax. So, if you wanted, you could stagger and receive reports throughout the year, one every four months.
Keep An Eye on Changes in Credit
Had I kept a more careful watch of my credit score, I would've most likely noticed it taking a slight dip when the account defaulted. Besides ordering a credit report and staying abreast of any changes, I also monitor my credit throughout the year.
I signed up for a free credit monitoring service and receive alerts each time there's a change in my credit score, if there's any new activity on my credit file, such as a new account added, or a — gulp — notice of a credit line or account going to collections.
I also receive notifications on changes in my score from a few credit card issuers.
While the score might not be identical to the one on my credit report (slightly different credit scoring models may be used), the scores are pretty similar as the same criteria are being used.
That being said, there is a new free, credit monitoring service that I recently signed up for that actually offers the FICO® Score. The FICO Free Plan offers me a FICO Score for free, plus a free Equifax credit monitoring and credit report each month.
Know My Rights
Should I be faced with another account defaulting and the outstanding balance going to collections, I am now aware of the rights I have as a consumer. Under the Fair Debt Collection Practices Act (FDCPA), the debt collecting agency isn't allowed to:
- Contact you before 8 a.m. or after 9 p.m. — unless you agree upon it
- Contact you at your job, if you aren't allowed to receive calls at your workplace
- Abuse or harass you
- Stay anonymous– debt collectors need to identify themselves during the phone call.
- Keep contacting you after you ask them to stop– if you ask them to stop contacting you in writing, they must cease efforts in getting a hold of you.
It was a lesson certainly learned the hard way. But after accidentally having an account go to collections, I'm far more vigilant about how to keep an eye on my credit situation.
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