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Credit Repair

What To Do If You Owe Money To A Defunct Collection Agency

Many people may think that if they owe money to a collection agency and it goes out of business, they no longer owe the debt. That is far from true. If you pull your credit report, you will find that the collection action is still showing as a negative issue, lowering your credit score. Here is your only option in the event that a collection agency goes out of business.

Under the Fair Credit Reporting Act, you have the right to dispute any item on your credit report. The credit reporting agencies (CRA) must investigate any disputed items within 30 days and either verify the item or remove it from your report if they can not. The way that the item is investigated is by contacting the collection agency. If it is out of business, then the agency will not respond. In general, a lack of response will cause the item to be removed from your credit report.

You will have to request an investigation of each item in writing to all three of the major CRAs. In the rare event that the item does not get removed, you have the right to challenge the investigation, requiring additional action from the CRAs – this is the core concept behind legal credit repair. One note of caution is that your debt can be bought by another collection agency, so you may hear from someone new. Keep in mind that if the debt is more than 7 ½ years old (from when you first fell behind with the original creditor), it can longer appear on your credit report.

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