Credit Card Debt Collection

Credit card debt collection is on the rise with the current economic downturn. While fewer and fewer credit cards are being extended due to the current global credit and economic crisis, many were issued in previous years and now have delinquent balances from past use. In many cases, accounts that have previously been in good standing are now beginning to fall past due more and more regularly. Many consumers today are seeking debt consolidation, and particularly credit card consolidation as a relief to mounting credit card debt. Don't let your business suffer because your customers fail to pay their debts.

Read the latest credit card debt collection industry news, updated daily.

Your Right to Collect Debt

Credit card debt collection can be extremely tricky and difficult due to the many policies and legislation associated with the process. It seems that some customers view credit cards as their right and privilege. Once an account goes past-due the attitude of many debtors seems to be that their business to the credit card company is so important that they shouldn’t have to pay for their past purchases that were put on their card.

This is of course not the case. It is very important for credit card debt collectors to remind customers that they need to take responsibility for paying the legally incurred debt.

Most credit card companies spend only short periods of time – often not more than ninety days – trying to collect debts themselves. After their given time period, which should always be outlined in the policy and agreement statements the consumer has signed when the credit card is issued, the account is sent to a third party collection agency to be collected on their behalf.

Third Party Collections

When hiring a third party debt collection agency for credit card collection, the person from the agency assigned to the account can pursue the debtor in a few different ways. While laws do limit the methods of debt collection, there are still many legal ways to remind a debtor that an account is overdue and to seek payment. Learn more about credit card debt collection practice.

Generally the company first contacts the delinquent party by mail reminding them that a payment is due and telling them the amount owed. The customer is informed their accounts have been sent to collections. This collection letter must be very carefully worded to state that there can be resulting credit damage if the account remains unpaid, but it cannot threaten or harass, as this is illegal.

In a case where the debtor has a lawyer, all communications are moved from the debtor to that lawyer. The collector must communicate only with that lawyer from that point forward. It is also important to know that the federal legislation Fair Debt Collections Practices Act has created a clause that if a debtor sends in a written request to no longer receive communications regarding their debt, the request must be abided by.

Continue reading here.

Efficient Debt Collection Techniques

Written by Viky
(Chennai, Tamil Nadu, India)

Gathering information needed at the beginning is an absolute debt collection technique. Make sure of my debtors financial position. Keep frequent contact with your debtor. Use an application form to get your debtors basic information that you will need in the future.

First of all, the payment terms must be specified correctly in your invoices and quotes. Send them a written reminder in a complete gentle manner and remind them to pay their debts.

There should be no rough handling in these written reminders because it may end in a bad way. Also keep your final choice to hire a collection agency. Because a third party’s warning will be more effective than your own company’s warning.

Debt collecting can be done by the choice of threat, which is illegal. But it will lead some negotiable defects and it is not the right choice until the situation is under your control.

These techniques differ for every creditor company. You are encouraged to evaluate any recommendations made or offered, and accept and adopt the debt collection techniques. You should deal them with the correct technique at right time.

via debtcollectionsteps.com

3 Main Things To Consider When Hiring A Debt Collection Agency

by David P. Montana

To operate a organization profitably, every owner has to stay on top of their receivables and check their cash flow. Whether you promote a product or offer a service, you probably have to deal with late-paying or none-paying customers from time to time. That means that you have to have a sound, consistent internal debt recovery policy in place. Part of your policy should include knowing when to contract out problem accounts to a debt collection agency.

One significant reason this is true is because your delinquent accounts continue to depreciate, at a rate of 15% per month. And the longer an account goes delinquent, the more difficult AND costly it is to collect. In addition to spending more time, money and resources going after these depreciating accounts, its also costing your organization in lost opportunity dollars, by taking you away from your core revenue-generating functions. It is far more cost effective and efficient to outsource these difficult accounts to a impartial third party debt collection agency.

Below are three significant tips to think about when hiring a debt collection agency.

When hiring a debt collection agency, you ought to make sure they are licensed in the state(s) where your debtors are located. As collection laws can differ significantly by state, its to your advantage to look at collection agencies that are qualified nationally. Because we live in such a transient society, and with people moving across state lines regularly, its better to know a debt collection agency that is approved in all states are familiar with all the different laws and regulations. In fact, collection agencies can only collect in the states they hold a license in.

Fee structures can differ greatly with different collection agencies. Some offer prepaid, flat fee arrangements, as others charge a ratio of any monies collected, normally with no upfront costs required. Still others can propose some blend of the two. Depending on your establishment, there are advantages to either situation. Though there are upfront costs with flat fee based debt collection agencies, you can save a lot of money in the long run, since the collection costs tend to be a small percentage of the total dollars collected.

As your costs are set, you can also turn over problematic accounts sooner, when there's a better chance for recovering your money. Again, the longer you wait, the more difficult it is to collect.

Still, many organizations opt to give up a percentage of whatever might be collected to preclude the upfront dollar costs. Be sure to compare rates though: a debt collection agency can charge anywhere from 20-50% in contingency fees. One thing to keep in mind though: while you might be inclined to seek out the lowest fees, you should also know that if the fees are very low, it can mean the debt collection agency has inadequate staff, time and resources that they will dedicate to collecting your accounts. Although percentage fees charged are significant, success in total recovery is far more principal to your business bottom line. Whichever option you choose, make sure the debt collection agency you're considering spells out their fee structure clearly in writing.

Finally, when considering a debt collection agency, you need to think of them as an extension of your organization. Seeing as they will be collecting your money and acting on your behalf, its notable that they reflect your organization's viewpoint. For instance, if you manage a medical practice, your reputation in the community is something you value. You wouldn't want to associate with a debt collection agency known to engage in harsh, intimidating and/or inhumane behavior when handling patient collections. At the same time, you want a collection agency that while diplomatic, they are determined, steady and constant in their collections activity.

About the Author:
David P. Montana has published extensively and served as a business advisor in debt collection services for thirty years. David provides more beneficial tools and information about choosing the right collection agency.

12 tips for negotiating with debt collectors

 By Bankrate.com

When you bargain with a debt collector, you're going head-to-head with a tough, professional negotiator. Following these tips can help you come out ahead.

Learn your rights.
When collecting a debt from you, a debt collector must play fair.

A free consumer brochure on debt collection also is available from the National Consumer Law Center. Call NCLC's publications department at (617) 542-9595 and ask for a copy of "What You Should Know About Debt Collection."

Many states have their own debt collection laws. For more information, contact the attorney general's office in your state.
"When you know your rights, debt collectors know they can't get away with certain things," says Gerri Detweiler, author of "The Ultimate Credit Handbook." "They're less likely to try aggressive tactics."

First things first
Prioritize your bills.
No matter what a debt collector says, an unpaid credit card bill is not the most important bill you have to pay this month. Providing necessities for your family comes first.

"It does not make sense to put yourself in a position that you can't pay necessary bills," Detweiler says.

Estimate how much you can pay and offer less.
"Don't do anything you can't afford to do," says John Ventura, consumer attorney in Brownsville, Texas and author of the e-book "Stop Debt Collectors Cold." "And don't do anything dangerous."

Avoid sending postdated checks to a debt collector or agreeing to automatic electronic payments from your checking account.

"Presuming goodwill on the other side gets people in trouble," Ventura says.

Don't tell them your life story.
"Don't go into a lengthy explanation of why you can't pay," Detweiler says. "They don't have a lot of sympathy. This is what they do for their job. They hear down-on-your-luck stories day in and day out."

Control the information flow
Keep private information private.
Don't give a debt collector personal information such as where you work, where you bank or your checking account number.

"Say as little as possible and stick to the facts," Detweiler says.

Stay calm and focused.
No matter what a debt collector says, keep your cool and stay focused on the negotiation.

"The more in control you sound and the less you fall apart, the more likely you are to get what you want out of the negotiation," Detweiler says.

Tape the call if you can.
Flicking on a tape recorder is a great way to keep a debt collector in line. Plus, you get a record of the call.

Thirty-five states and the District of Columbia allow you to secretly tape your phone conversations. In the other 15 states, you can tape with the other party's permission. And if you tell the debt collector you are going to tape and he or she keeps talking, that's considered giving permission.

"Taping the conversation may keep them on their best behavior," Detweiler says.

Take notes.
File all collection letters and keep detailed notes of collection calls. Note the day and time of each call, the name of the collection agency, the first and last name of the caller and what was said.

"Make sure there's a record," Ventura says. "If you've made a deal with them, get proof."

Get proof of payment agreement in writing.
"Get it in writing," says Jerry Jarzombek, a consumer attorney in Fort Worth, Texas. "If they told you half of it satisfies the obligation and that's what you want to do, have it in writing."

Send a letter to the debt collector outlining the payment agreement. You'll want to send this letter via certified mail so you'll receive a receipt once the letter is delivered. Keep a copy for your records.

If you plan to pay by check, add the following disclaimer: "Cashing this check constitutes payment in full." Write this right on the check.

Timing it right
Wipe your credit clean.
Ask a debt collector to remove any negative information they've placed on your credit report. At the very least, insist that your account be listed as paid in full rather than paid in settlement. Once they agree, get it in writing.

Don't be rushed.
A debt collector will push and push for you to send them money immediately. Don't do anything until you have confirmation of a payment agreement in writing.

"Because you need it in writing, you have to resist all those demands and quick offers to do it overnight," says Mary Fons, a consumer protection attorney in Stoughton, Wisc.

Negotiate at the end of the month.
Because commissions for debt collectors are based on what they do each month, you may want to try negotiating near the end of the month. You could land a really good deal. 

Handling Debt Collectors: What are Time Barred Debts?

Handling Debt Collectors: What are Time Barred Debts?

"Time-barred" debts are debts so old they are beyond the point at which a creditor or debt collector may sue you to collect. State law varies as to when a creditor or debt collector may no longer sue to collect: in most states, the statute of limitations period on debts is between 3 and 10 years; in some states, the period is longer.

Federal law imposes limitations on how debt collectors can collect debts, including time-barred debts. Under the Fair Debt Collection Practices Act (FDCPA), a "debt collector" generally is any person or organization that regularly collects debts owed to others. The term includes lawyers who collect debts for others on a regular basis, but it does not include creditors collecting their own debts.  Most courts that have addressed the issue have ruled that the FDCPA does not prohibit debt collectors from trying to collect time-barred debts, as long as they do not sue or threaten to sue you for the debt. If a debt collector sues you to collect a time-barred debt, you can have the suit dismissed by letting the court or judge know the debt is, indeed, time-barred.  Old debts are usually purchased by scavenger debt collectors.

You can stop debt collectors from contacting you about any debt, regardless of whether you owe it, by writing a letter telling them to stop contacting you. Once the collector gets your letter, it may not contact you again except to say there will be no further contact or to let you know that the collector or creditor intends to take some specific action.

Importance Of The Fair Debt Collection Practices Act http://ping.fm/Vag0U

Know These Debt Collection Laws To Recover Your Business Debt http://ping.fm/AYM7w

Know These Debt Collection Laws To Recover Your Business Debt

By David P. Montana

When it comes to trying to recover unpaid accounts from your debtors, the myriad of debt collection laws can sometimes feel as though they're getting in the way. Obviously your main goal is to try and encourage as many late-paying account holders as possible to pay their debts and help keep your business cash flow strong.

Communicating With Your Customers - Do you know the guidelines and rules when it comes to communicating with your late-paying customers? The Fair Debt Collection Practices Act protects and regulates the kinds of communications allowed between creditors and debtors.

Basically this means that the hours in which you're allowed to contact debtors are limited, so you need to be sure you make your calls during the allowed times. You may also find that there are strictures placed on where you're able to contact customers regarding payment of their outstanding debts.

Should you reach a third party in your attempts to reach the original debtor, there are also restrictions on what you share with that third party. You're only allowed to ask the best way to reach the actual debtor.

Disputes About Debt Ownership - There may be situations when a debtor may deny owning the debt in question, or that they owe you any money. When this happens, you will need to provide written verification and proof of the alleged debt.

Correct Information - It is important that you give accurate and truthful information to your debtor. This means you cant imply that you'll involve law enforcement to arrest them, nor can you give the false impression that you may have legal representation working on your business. You are also under obligation not to falsely imply that you have any government agent chasing after them.

You're allowed to give only accurate information concerning the debt, and all of your collection strategies must be in accordance of debt collection agency laws at all times. Should you violate these laws, you could be sued by your debtor(s). They could also collect up to 1 percent of the collector's net worth.

It is very important that your business clearly understand the debt collection laws as related to your collection methods. Collection agency laws extend beyond simply getting customers to pay their delinquent debts.

You may also need to learn how the changes to the Fair Debt Collection Act may relate to customer access to credit reporting information. They may wish to verify the information listed on their credit report, so you need to be sure the information you provide is always accurate. Business owners that don't adhere to these laws may face some steep fines and they may even find that the debt owed to them could be discharged.

Sometimes debt collection can be a difficult process, but as long as you understand the debt collection laws or the collection agency laws and how they can affect which actions you need to take to recoup money owed to you then you may find its not as difficult as it sounds.

Knowing what legal actions you can take can also help you with creating and building successful debt collection strategies, wherein you are able to properly communicate with your debtor and recover the debts owed to you.

About The Author
David P. Montana has been a noted industry expert, business consultant and author for over three decades on the subject of collection agencies. He offers more valuable tips and information on debt collection laws.
Content is copyright of David P. Montana and “DebtCollectionSteps.com” -

Importance Of The Fair Debt Collection Practices Act

By David Montana

The Fair Debt Collection Practices Act was enacted to address and reduce the problems associated with harassing debt collectors. It does, however, offer benefits to collection agencies as well. Through these laws and regulations, the Fair Debt Collection Practices Act encourages collection agencies to act in a professional manner when attempting to collect a debt.

Those that are in the business of extending credit have a reasonable expectation of being paid back. Whether a product is delivered with the agreement to pay upon receipt or an individual is issued tens of thousands of dollars in unsecured credit card cash advances, the lender is entitled to being paid back.

Of course, there will be those instances where the lender is not receiving the payments he or she is due. There can be many reasons for this. Sometimes, the individual borrower needs a little more time to navigate out of a bad financial situation. In other instances, the borrower is simply negligent and defaults. Regardless of the reason, it is within the rights for the lender to seek payment.

This is the area where collection agencies become important. Their goal is to get the payments due their clients. They cannot, however, act recklessly in attempting to collect these debts. This is where the Fair Debt Collection Practices Act comes into play.

The Fair Debt Collection Practices Act was first enacted in 1978. Since then there have been amendments added and modifications to the Act that have altered the law in some ways. For instance, an added clause to The Fair Debt Collection Practices Act states that a borrower in collections can request that the collection agency cease contact with him/her, and the collections rep must cease further contact.

Consider though, that this does not prevent the collection agency from pursuing a valid debt. Collection agencies are still within their rights to inform the debtor of their intention to pursue the debt via other legal channels, namely through an attorney.

This can only happen if the debtor makes this request in writing. If communication has stopped due to the collection agency's inability to reach the debtor, then it is legal to contact third parties in a non-threatening, nor harassing manner. Also, the collections rep cannot disclose the nature of the call, so that it doesn't violate the debtor's privacy rights. The rep can only ascertain the whereabouts of the debtor from the third party. While these rules can appear skewed in favor of the debtor, they're also designed to steer the collection agency clear of potential trouble and from engaging in unprofessional conduct.

As these laws and regulations clearly demonstrate, the aim of The Fair Debt Collection Practices Act is to curtail the abusive and unprofessional behavior on the part of some collection agencies. This behavior undermines the credibility and reputation of the business. It also makes it difficult to collect revenues. After all, no one wants to deal with rude, abusive collection agencies.

Collection agencies found to be in violation of The Fair Debt Collection Practices Act can be penalized in a number of ways, to include legal actions. They can also have their license revoked. Most common are fines levied against offending agencies. However, collection agencies are within their rights to appeal these fines.

The Fair Debt Collection Practices Act is both a lengthy law, and can be rather complex. It is posted in its entirety on the Federal Trade Commission's website. Those wishing to explore the entire treatise are invited to do so.
About The Author
David P. Montana, who has been an author, lecturer and business advisor in debt collection services for thirty years, provides more tips and tools on The Fair Debt Collection Practices Act
Content is copyright of David P. Montana and “DebtCollectionSteps.com” -

Discover How to Improve Your In House Debt Collecting Success STARTING TODAY!

Are you tired of dealing with slow paying and non-paying customers?

Is debt collecting taking more time, energy and resources away from you running your business?

Are you sick of ever growing bad debt and shrinking cash flow month after month?

Discover the strategies and techniques that the top collection agencies use in the successful collection of debt.

Did you know there are many tools, tips and strategies you can implement in your business to make a tremendous difference in your debt collecting success?

David Montana, a DebtCollectionSteps.com Senior consultant, has written "A COMPLETE Step-by-Step GUIDE To SUCCESSFUL In House Debt Collection" to help business owners significantly improve their collection of debt.

In this information-rich GUIDE, David reveals the insider secrets collection agencies use very effectively in the collection of debt.

"My name is David Montana, and I've written 'A COMPLETE Step-by-Step GUIDE To SUCCESSFUL In House Debt Collection', which is THE reference book for every business owner who is dealing with slow and non-paying customers, who would like to improve their in house debt collecting performance, and increase their cash flow."

"Because of my 30-plus years of collection agency management and consulting experience, I'm very familiar with the issues you're facing daily with slow and non-paying customers:

    * the promised, but delayed payments
    * continually ignoring your phone calls and notices
    * decreasing cash flow due to growing past due debt
    * etc., etc.

Its taken many years of research, consulting, writing and experience to compile all the information contained in "A COMPLETE Step-by-Step GUIDE To SUCCESSFUL In House Debt Collection".

If you tried to hire me one-on-one to consult with you, it would cost you THOUSANDS OF DOLLARS to pass on all my knowledge and experience. Because I'm going to allow thousands of business owners to take advantage of this information, you're going to get all of this research and experience for much less.

I've compiled all those years into "A COMPLETE Step-by-Step GUIDE To SUCCESSFUL In House Debt Collection", and I'm going to teach it to you in concise, easy steps that are simple to implement.

Let me explain how my book is going to help you. In this book, I cover everything:

    * the art of collections,
    * effective negotiation skills,
    * warning signs to spot potential collection problems,
    * setting up clear credit and collection policies,
    * and so much more.

"A COMPLETE Step-by-Step GUIDE To SUCCESSFUL In House Debt Collection" includes everything you need to know about collecting debt, building an effective in house debt recovery program, as well as implementing solid and proven systems to minimize your bad debt risks from occurring.

"Every business owner knows how expensive it is to acquire new customers. The system I'm going to teach you is going to save you THOUSANDS of dollars in both new opportunity costs AND in successfully recouping the debt that's owed to you and that is just sitting out there uncollected."

If you follow even just a few of these tips and suggestions you will be more successful!

Topics Covered Include:

    * Sample collection demand letters, procedures and policies that have been time-tested and proven to work with collection agencies.

    * Pre-collection tips, tools, strategies and techniques to both minimize serious delinquencies, as well as help make the collection of debt process more effective and efficient.

    * Discover how to identify problem accounts early on, and collect on them sooner rather than later. Proven techniques and telephone call strategies that help maximize collecting debt.

    * Learn how and when to implement proven strategies for maximum effectiveness and debt collecting success.

Ask yourself a simple question: With the money that's owed to you RIGHT NOW, how many NEW customers would you have to acquire, at your present profit margin, and after paying expenses, to simply EQUAL WHAT'S OWED TO YOU!?

With the system I teach in "A COMPLETE Step-by-Step GUIDE To SUCCESSFUL In House Debt Collection", I will show you how to systematically, efficiently...and consistently recover what's already owed to you!!

Information Revealed in This Book:
Chapter 1

    * Terms and Conditions: The Importance of Setting Up Clear Credit Policies and Guidelines;Why You Should Always Ask For a Personal Guarantee; How To Get Your Non-Paying Customers To Pay The Costs For Hiring a Collection Agency; Customer Contracts and Agreements...and much more

Chapter 2

    * Reasons Why Many Businesses Fail At Debt Collection; Why Unclear Policies Are costly To Your Business' Bottom Line; Fear of Loss, and Why Many Businesses Don't Pursue Collections Properly.....and much more.

Chapter 3

    * Implementing Proper Debt Collection Strategies and Policies; Training Employees and Delegating Responsibility....and much more.

Chapter 4

    * Debt Collection As A Learned Skill; Time, The Depreciation of Money, And The Probability for Successful Collection; Taking Advantage Of Your Debt Collection Narrow "Window Of Opportunity"; Using This Simple Tactic Will Solve Many Slow-Pay Problems Significantly; Signs To Spot a Potential Slow-Payer.....and much more

Chapter 5

    * Proven Tactics Used By Collection Agencies; Vital Communication Skills You Need To Increase Your Debt Collecting Success; How To Make Every Collection Call Count...and much more.

Chapter 6

    * Debt Collection Letters- How To Make Them More Impactful; Collection Letter Advantages, and Challenges To Overcome To Make Them More Effective; Stregthen Your Debt Recovery Letters With These Tactics; Why Timing Is very Important; Sample Collection Letters That Get Results...and much more.

Chapter 7

    * Telephone and Negotiation Skills- Key To The Successful Collection of Debt; Elements That Should Be In EVERY Telephone Collection Call; Sample Telephone Debt Collecting Scripts- Things To Say- Things To Absolutely Avoid...and much more

Chapter 8

    * The Art of Collecting Debt, and The Ingredients That Will Make It Work For You; Developing Your Listening And Communication Skills To Precision; Hear What Your Debtor Is REALLY Telling You- And What He's NOT Saying; Sharpen Your Persuasion Skills And Collect More Money; How To Handle Objections Like The Pros And Turn Them To Your Advantage...and much more.

Chapter 9

    * Debt Collecting Do's and No-No's; Federal And State Debt Collection Policies, And How They Your Ability To Collect Debt; Maximize Your Success And Leverage Your Time With These Tips; Collection "Landmines" To Avoid...and much more.

Chapter 10

    * Know When You Should Outsource to a Collection Agency, and When You Shouldn't; Considerations For Outsourcing, and Disadvantages; Some Collection Agency MUST-HAVES's; Debt Collection Litigation...and much more.  

source

courtesy of  DebtCollectionSteps.com's Article Archive

What are the benefits of a good business credit score?

Good credit is the lifeline of your business. Sure, it's a must for obtaining funding for launching or expanding your business. But that's only the beginning. Here are just a few of the many benefits of good business score.

    * It can save you money. Lenders offer better interest rates to businesses with good credit.
    * You can obtain business credit without the need for a personal guarantee. This reduces your personal liability and protects your personal assets.
    * It can help you stay ahead of your competition. You can pass your interest savings onto your customers or keep a larger margin of profit for yourself.
    * You can make decisions with confidence and get the money you need, which can reduce stress on you and your company.

   
The bottom line?
    A good credit report and score are essential for getting the money you need to successfully run and grow your business. Whether you already have an excellent credit rating or are just starting out in business, we can help you connect with lenders who work with companies in your situation.
 

One of the best ways to build and protect your business credit is to pay your utility bills on time. To help ensure you do, sign up for a business bill pay service (most banks offer it). Then set it to automatically pay the minimum amount due on each card each month. You'll never have to worry about late payments bringing down your credit score or paying late fees. 

source 

Myths Regarding Debt Collection.

Myth #1: A debt collector can't come after me if my debt is too old.

In every state, there is something called a "statute of limitations" that covers different types of debts. In most states, the statute of limitations runs between three and six years. In a few cases, it goes as long as fifteen years.
The fact that the statute of limitations has expired on a debt doesn't mean a debt collector still can't try to collect from you. But, they don't have any leverage to force you to pay. If they sue you, you can go to court, raise the statute of limitations as your defense, and they would lose the case.
Watch out though. If you make a payment on a debt or even agree to pay, the statute of limitations may start all over again.

Myth #2: I can just tell a debt collector to stop contacting me.

Many "experts" online recommend you send a letter to the collection agency and tell them to leave you alone. It's true that if you send a "cease communication letter" to the debt collector, they must stop contacting you, except to tell you they are taking legal action against you.
So why wouldn't you just send a letter asking the debt collection agency to leave you alone? The problem is sending one of these letters leaves the debt collection agency no option but to take legal action against you if it wants to collect. In fact, telling the collection agency not to contact you again may mean your debt is automatically sent for legal action.
We don't recommend you send a cease communication letter unless you are confident the statute of limitations has expired, or if you don't owe the debt and could demonstrate that in court. Otherwise, we recommend you stay in communication with your creditors and collection agencies and find a way to resolve your debt.

Myth #3 If I make a small payment a collection agency can't take me to court.

The notion that by making a token payment you can keep your debt from escalating is simply false. In fact, making a payment when you really can't afford to, or when you don't owe the debt, can backfire against you.
Anytime you are contacted by a debt collector, you have the right to request written verification of the debt and/or to dispute the debt if you don't believe it is correct. If you can't afford to pay a debt, then you need to explain to the collection agency that you can't pay now, and offer to stay in touch with them. Tell them you are willing to work something out as soon as the circumstances change. (Keep in mind if you can't pay the debt, you may be sued.)

Myth #4 Paying off a collection account will help my credit scores.

We've heard numerous times from people that think by paying off a collection account they will improve their credit scores. Again, that is simply not true. A collection item on your credit report is regarded as seriously negative, whether it is paid or unpaid.
There are two things to keep in mind regarding your credit report and collection accounts.
The first is that collection accounts can only be reported to the credit agencies for seven and a half years from the date you first fell behind with the original creditor. That's true whether or not you pay that account off. The second is that paying off or settling a collection account can still be beneficial in the sense that it will prevent the debt from growing larger, or from ending up in court. (If you lose in court, the creditor or collector will get a judgment against you, which starts a brand new 7.5 year reporting period.)
Also keep in mind the older the collection account becomes, the less of an impact it has on your credit scores. That's especially true if you are actively building positive references that will eventually outweigh the old.