Editorial Policy

What to do when a creditor calls

Erica Sandberg

January 30, 2015

QHi Erica,

I got a call on my cell from a man who says I need to pay a bill of $322. I swear to my knowledge and memory I never had a debt of that amount. I said: “What are you talking about? Send proof!” He said if I don't pay, he will garnish my job. He hung up, but now I'm wondering what it is all about? And what I should do? Should I tell my boss? –Noah

ADear Noah,

I'm glad you wrote. The last thing you ought to do is discuss this matter with your employer at this juncture. Unless your wages really are about to be attached, it's not their concern.

The call may be a scam or a mistake, but exert due diligence to make sure you do not owe the money.

The first step is to pull your credit reports.

Go to AnnualCreditReport.com and access your files from the major credit reporting agencies — TransUnion, Equifax and Experian — for free. These are three separate companies, and most of the time the information on their reports is the same, but occasionally a collection agency will only subscribe to one or two.Ask Erica

Read over the trade lines section of the reports carefully. If you had a credit card or loan balance similar to the amount the collector is asking for, yet it indicates that it's been charged off, that's likely the bill in question. If the balance was incurred to a non-lender, such as a utility company or hospital, it won't be on a credit report unless it goes into collections, so just look for a match.

Nothing on your credit reports? Call the collector back and ask him to provide you with details about the account, such as who the original creditor was and when it went into collections (they are supposed to tell you). That could jog your memory. Remain calm and know that they can't abuse you, for example by calling all hours of the day or yelling at you.

Perhaps the debt is accurate. For example, it could have been for a medical procedure, such as blood work or a dental procedure that occurred long ago. When you received the bill, you meant to pay but simply forgot to write the check. This can happen when the amount is so small it seems insignificant. Who knows, you may have even thought you satisfied it.

Then when the business did not get the money, they might not have tried terribly hard to find you. After all, the debt wasn't so large that not getting it hurt their bottom line. Rather than chase you all over town, they sold the delinquent account to a third party collection agency for a percentage of what you owed, and closed their books.

So why haven't you heard a peep until now? Again, as the sum wasn't huge, it could have fallen to the bottom of the collector's priority list. Sometimes these accounts get bounced around from one agency to the next, until eventually your number comes up, and some eager beaver tracks you down.

A legitimate bad debt can appear on a credit report for seven years. The guy you spoke with mentioned a wage garnishment, which can only happen after a lawsuit when they win the case. State law dictates how many years a creditor can take you to court for an old debt (called the statute of limitations), so check with your state attorney general's office for the time frame in your area.

Mind that debt collectors are not allowed to threaten you with legal action unless they truly intend to follow though. Odds are against a lawsuit for such a tiny balance, but it can happen. If it sounds like they're really serious and the debt is truly yours, scrape up the funds and pay. On the other hand, if the debt is not yours or if it is and it has passed the statute of limitations for a lawsuit, the worst they can do is keep sending information about it to the credit reporting agencies until it can no longer be reported.

The other scenario is that you don't owe the money at all. It's one big mistake — they've got the wrong guy. In that case, if the debt does show up on your credit reports, you need to dispute it, because it is hurting your credit score to have it there. Only dispute the information if it is incorrect, however.

Finally, if the debt is not yours or it is but you can't be sued, you can feel free to tell the collector to stop contacting you. By law, they have to honor that demand.

Got a question for Erica? Send her an email.