When money is tight and it looks like some of your due payments are not going to be met, the most important thing you can do is to seek help. That help may be in the form of a visit to a credit counselor, an accountant, or simply a call to the creditor to see what they can offer. The unfortunate thing is that whatever action you take will be unlikely to stop a note on your credit file, in turn affecting your credit score, but the damage will be less if you maintain communication and do what you can to remedy the default as soon as possible.
If you don’t do any of these things and the creditor deems you to be unreliable, untraceable or that you avoiding your responsibilities, one of their remedial actions may be to hand your account over to a debt collection agency. Once they have your account, you can experience the annoyance and sometimes harassment of calls to your home and/or workplace from debt collectors chasing the outstanding money. Some of these collectors act well within the law and observe your rights, but others do not, and many a person has been affected in other ways through the intimidation used by some unsavory characters posing as debt collectors.
When a debt gets to this stage, you have already left it too long unattended. Debt collection companies will usually buy the bad debt from the creditor for a fraction of the outstanding amount, and the creditor will in some cases write the debt off their books at that time. This means that any communication you now have concerning the debt is with the collection agency who is looking to obviously make a profit on what they paid for your debt. The problem with most debt collection agencies is that unless you declare bankruptcy, they will hound you for a very long time.
Avoid allowing your debts to get to this point, and if you follow the steps above when you feel trouble brewing, you will save yourself a lot of anguish in the medium to long term.