Question: I have large credit card debt and am struggling to make my payments. I am behind 3 months right now and am receiving calls from collection agencies. If I can find a way to repay this debt what is the difference between paying it to the card company or to their collection agency? Is one option worse than the other and why? What are the long term effects on my credit score? If I can’t repay my overdue credit card bills what should I do?
Payment Arrears and Your Credit Score
Answer: Your credit report shows your payment history so missing payments regularly and being in arrears will definitely impact your credit score. If you are three months behind, you would normally be rated as an R4 (R1 means you are up to date; 3 months behind is an R4). Therefore whether you pay the credit card company or the collection agency typically does not matter; you are still an R4.
In some cases the credit card company will not accept your payment; once they turn it over to a collection agency, only the collection agency will accept payment.
If collection agents are calling and if you don’t have the money to pay them, it may be time to deal with the problem once and for all, perhaps by filing a consumer proposal.
The process of dealing with collection agencies can be made easier if you talk to an expert. To see what other options you may have to reduce your credit card debt, we recommend you talk to one of our licensed, professional experts today.