For those agencies attempting collection on the over $850 million in outstanding student federal loans, this legislation mandates they play fair as well. It is estimated by the bureau that slightly more than 30 million Americans are experiencing debt collection with an average amount being $1,500. The impact of being in collection can lower your credit score making borrowing more difficult.
In the FICO scoring model, 35% of your credit score is made up from ‘Payment History’ with another 30% categorized as ‘Amounts Owed.’ Collectively, these two factors amount to 65%. So how you pay your bills and how much you owe goes a long way in lender determination of interest rates charged, contract stipulations and most important, if lenders will give you a loan at all.
If you are one of the over 30 million Americans the CFPB reports as being in collection, chances are your ability to borrow at the moment, might be challenging. If there is an upside to those in collection, it is the CFPB’s new mandate to monitor and control many of the collection agencies preventing abusive and illegal practices. Coupled with existing FCRA legislation that allows consumers to challenge the accuracy of the information noted on their credit report, these efforts might even bring some borrowers, peace of mind.