Most people pay a bill late or fall behind on monthly expenses from time to time. It is not unusual, but when it happens habitually, it can be seriously detrimental to your credit and finances. This is especially true if the account goes into collections. If you go long enough without making a payment on an account that has a balance, the account will eventually be sold to a collections agency.
A collections agency typically buys delinquent accounts for less than their initial value and attempts to collect payment from debtors. When an account goes into collections, it can be detrimental to your credit and trigger aggressive collection tactics. The following are three ways to avoid this:
Know the time frame
The first step to avoiding collections is understanding the time frame that applies to your account. Many companies will send an account to collections after 180 days of nonpayment, but some will initiate this process sooner, and some will wait longer. According to Experian, once an account is in collections, there is no national mandate limiting the period of time that a company may continue attempting collection.
Make minimum payments
Once you understand the period of time you have to make payments and stay out of collections, you should try to make minimum payments that will buy you time. The company managing your account will likely send you bills that list the amount necessary to get your account up to date, but you may be able to make smaller payments that prevent the collections process from beginning.
Set up a payment plan
If the company in question will not allow you to make smaller individual payments, they may allow you to prevent collections by setting up a payment plan. This may allow you to minimize your payments and stay out of collections, but it could also necessitate that you agree to automatic payments on a schedule you agree to.