Why Debt Collectors Check Your Credit Report

Debt collectors do several things to try and collect debts from you. If you've ever had an account in collections, then you're already aware of the phone calls, letters, and placing the debt on your credit report. They also pull your credit report to get more information on you.

Unlike most other businesses, debt collectors don't have to ask for your permission before they check your credit report. Credit reporting law automatically allows collectors to check your credit report in relation to your debt.

Fortunately, your credit score won't be affected if a debt collector pulls your credit report. However, if they start reporting a new collection account, your credit score will likely drop. Even paying collection won't bring up your credit score right away. Still, in some cases it's beneficial to take care of a collection account. For example, if you're trying to buy a new house, paying a valid collection will improve your chances of getting approved for a mortgage loan.

When collectors pull your credit report, they're looking for more information they can use to find you or get you to pay.

To get your current address.

Collection agencies get information either from the company you originally created the debt with or from a previous collector. There's always a chance these details are outdated. If your mail has been returned or they're not sure the address on file is correct, collectors can check your credit report for an updated address.

Your latest creditors may have reported a new address, giving collectors a more accurate mailing address for you.

To find out where you work.

Some creditors report your employment information to the credit bureaus. If credit bureaus have it on file, your employer will be listed on your credit report. This can help debt collectors figure out whether you're employed. It also gives them another place to try to contact you.

Debt collectors are allowed to call you at work unless they know or should know your employer doesn't allow personal calls. The collector can't tell your employer about your debt, but they can check to see if you're still employed with the company.

To see if you're overwhelmed with debt.

Some debt collectors are selective about the accounts they go over. If your accounts are maxed out and you have several collections on your credit report, the debt collector may assume you're not worth going after. That doesn't stop all collectors. Some will try to squeeze whatever they can out of debtors. Or, they may try to trick you into restarting the statute of limitations so they have more time to sue you.

To see if your other payments are on time.

Paying your accounts on time is a good thing, of course. However, debt collectors see it as a sign that you may have enough money to make payment on your account too. If you have a mortgage loan with on time payments, but you tell the collector you can't afford to pay, they may suggest you take out a second mortgage to pay off the collection.

To see if you're taking on more debt.

Debt collectors want as much information as they can to figure out whether you're worth pursuing. If a collector checks your credit report and find new inquiries or newly opened accounts, they may assume that you have enough money for new accounts. If you happen to get on the phone with a collector, don't be surprised if they bring up your credit report information in the conversation.

Before You Pay a Collector

You have the right to ask a debt collector for proof of any debts they're alleging you owe. Debt collectors can't collect from you if they can't provide the proof you've asked for. Once you learn about a collection, send a letter to the collection agency requesting them to send proof that you owe the debt and that the collector has the right to collect on it. Don't make payment until you've received adequate proof of the debt.