Do you know your credit score? Do you care? You should.

It’s amazing but most people don’t know their credit score and most people don’t want to know. If you don’t believe me, just ask 10 random people when was the last time they pulled their credit report and their credit score. I guess most people think it’s kind of like cholesterol. They don’t want to know. Everyone you do business with knows your score, why shouldn’t you? In the world of credit, what you don’t know, can and will hurt you. In fact, it can hurt you for many years. At Access Receivables, we have recently undertaken a new initiative to educate our debtors on the importance of credit (Nice people collect more). Once people know the real facts about credit, we are confident that they will want to pay their bill before we are forced to report it to the national commercial and consumer credit bureaus (we report for most of our clients). At Access, we offer the debtor with a 90 day window of opportunity before reporting their account as a collection account. This gives them the time to deal with dispute issues, and to resolve the balance. Once we report the account, however, we are required by law to continue reporting that account accurately for as long as we have the account in our system (up to seven years). In the past few years, so many people have become frustrated by the sudden turnaround from easily available credit to very tight credit standards, many have just given up. The facts are the facts. We got into this current economic mess because we granted credit to everyone from high school students with no job, to aging seniors with no money. Although I am not on the current bandwagon to protest the banks, I have seen, first hand for many years, the effects of issuing too much credit to people who can’t afford it. The unfortunate thing is that most people felt for years that if the creditor granted the credit, they must know something we don’t. We actually believed them. As a result, i ran up my credit just like millions of other Americans (just doing my part here). It’s amazing to me that we do not teach people in schools how to write a check, make a household budget and set up good credit.
My Credit Story
Growing up in the 1970’s, it was much harder to get credit. The first thing I did was save up $1,000 and open a savings account at a local bank at the age of 19. I then took out a secured loan for $750.00. I made payments on that loan every month and 90 days later, I applied for and received a Sears Credit Card (Sears was the Wal-Mart of the 70’s). Soon after, I paid off the loan (because I never spent the money) and applied for an American Express Card. Yes, at the age of 21 making $11,000 per year, I was a card-carrying member of AMEX (your income is not a factor in your credit score). All these things continued to build my score and that same year, I bought my first home ($35,750 @ 8.5% 30 year fixed rate mortgage). Although I started strong because of that secured loan, I did not always have stellar credit. Fast forward 5 years and my wife and I had three children and a $60.00 per week diaper bill (yikes). Since I was in the collection business at that point, I knew that I needed to pull my credit report at least once per year and check for errors as well as make every effort to keep that credit card bill paid as best as possible. I have found MANY errors on my report over the years. Robbing Peter to pay Paul was a motto at my house in my formative years. When tax returns or unexpected bonuses came our way, we would pay down those pesky credit cards. There was one added benefit back then though. Credit card interest was a deduction on people’s taxes. The government was encouraging both husband and wife to work so we could buy that house and also to spend first-pay later. Why? Because our spending fuels the economy. Allot has changed since I was 26 years old. Here’s what I call the “Circle of Strife”.

Banking and Credit Cards

In the late 1980’s the deduction was eliminated. During the Reagan years, interest rates came down, houses continued to appreciate, home equity loans became popular (it was only deductible if your use of the money was “home improvement” related), banks began to increase credit lines, decrease credit score requirements and Americans began to “buy now-pay later” in huge numbers. In fact if you are between the age of 21 and 45, you probably have never had to worry much about getting turned down for credit. If your credit score was lower (<740) you just paid a higher interest rate. The interest rate became secondary to the "monthly payment". This was compounded by the fact that credit card programs were consolidated over the years and today, just six institutions issue the majority of all credit cards. As a result, interest rates have increased dramatically for those persons with lower credit scores. These people would have been denied credit in the past.

In 1987, we new legislation allowed for Interstate Banking. This created the enormous wave of bank consolidation over the next 20 years. Did you know that in 1987, Bank of America was a California bank? So the banks get bigger and during the Clinton years, we had a fundamental shift by eliminating the Glass-Steagall Act in 1999. The Glass Steagall Act of 1932 was written to make sure that banks did not get too big, made sure they had enough reserves and limited their scope in business activities. Fast forward to 1999 and the American banks were complaining that they could not compete with the largest "nationalized" banks in the world. As a result, banks became super-conglomerates with banking, insurance and investment products. Can you say "recipe for a financial meltdown?

Housing Market

The greatest investment that anyone could make when i was growing up (Born:1957) was a house. The problem was, you generally needed 20% down. Remember that first house for $35,000? Well a $7,000 down payment was a lot of money for a couple of earning $21,000 per year. This was the reality in 1978. Starting with Jimmy Carter, every President had an initiative that every American should “own their own home”. It was an American rite. The government initiated many programs including Fannie Mae and Freddie Mac while the mortgage companies came out with more and more creative finance programs to fuel the fire. People that had rented for years were buying homes because they were told they could now afford “the monthly payment”. The products were way too advanced for the average person to comprehend but it didn’t matter because housing prices went up so fast that they could refinance at 100% loan to value in a year or two after they purchased the home. It was a pretty good deal while it lasted…The result was, as everyone knows, a huge housing bubble that led to the collapse of our real estate market in 2008 and continues with no immediate end in sight.

What does this have to do with me, Tom?

Well, we are now “back to square one”! The circle of strife. I seriously doubt the levels of credit that were extended in the past will ever be re-visited. We came so close to financial ruin in 2008 that we have new restrictions in place and even our politicians have stopped speaking about “The American Dream”. Today, the American dream is to have a job, good credit and decent medical care. Credit scores are now being scrutinized by every credit grantor before they decide to lend me the money for that new car, washing machine or dare I say, a 72 inch LED Screen? Today, the credit standards are going back to more conservative levels and if you have good credit, everyone will want to give you more. If you don’t have good credit, you’ll need to get some in the next few years. In addition, credit grantors use behavior scoring models and other complex formulas to decide if they should lower your credit line or increase your rate, even if you are paying your bills. Foe example, did you know that if you pay one creditor late but the others are current, they can all increase you interest rate next month? Read your credit card agreement.

At Access Receivables
we often hear people say (out of frustration), “I don’t care about my credit”. This is one stance that no reasonable person can afford to make in 2011. A few years ago you didn’t have to worry. If you were breathing, someone would lend you the money. Also, just before the financial meltdown, we reformed the Bankruptcy laws. If you know someone who is thinking about Bankruptcy, there is a strict procedure that includes credit counseling and education before you can file. In essence, if you want to attain any decent standard of living, you must protect that credit report and that credit score as you would protect a Honus Wagner baseball card (last sold at auction for $2.8 Million). Today in 2011, credit reports and credit scores are being used to decide “if” you get that new car, “how much of if” you pay for the insurance (most insurance companies pull credit reports) “if” you get that job you applied for (statistics show people with higher scores are better employees) “if” you get that apartment, how much credit you “deserve”, etc. In essence, to get enough credit to support a higher standard of living, today we need to earn it one payment at a time. How do you get good credit, or repair bad credit? That’s another article. But a good place to start is WWW.MYFICO.COM. If you go there today, at least you will know what everyone else knows about you tomorrow.

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Nice People Collect More

I am so excited about the transformation our company is undertaking. We are creating a whole new website and educational presence on the web to educate people (debtors) on the importance of paying bills and improving credit. I have always believed that a helpful and knowledgeable approach to collections is far more successful and will assist both debtors and clients to get through difficult times and come out stronger on the other side. Our theme is “Nice People Collect More”. It’s more than just a slogan however, it’s a whole new way of collecting. Actually, in some respects, it’s getting back to the basics of collecting.

Over the years, i have seen many changes in the collection industry but this new transformation is one i really believe in. We are going to start an education program for our debtors in tandem with our responsibility to collect for our clients. The point is that many people today are simply not well informed about the importance of their credit and many have given up. From 1990-2008, it was pretty easy for everyone to get credit regardless of their past payment habits. In turn, collection agencies did not have to work very hard to get customers to consolidate their bills and PIF the account. In fact, terms like “account treatment” and “dunning” went hand in hand with going through the motions. Enter 2009 and the recession. Going forward, it appears that banks are going to be far less aggressive in lending. That means fewer credit cards, lower limits, fewer auto loans, mortgages and home equity loans. The people who are affected the most are the ones who will also need the most credit in the next 5-10 years. Life happens. Babies are born, cars need replacing, washing machines break down and so on. The only way to improve your credit, is to pay your bills. Over the last few years, people have been conned that not paying their bills or even getting out of paying their bills is a better option. I hear things like, “well I don’t care about my credit” or “The government doesn’t pay their bills, why should I”.

A positive win-win approach is always better than an adversarial one. There are scores of default judgments out there collecting dust. As with all collections, nothing is a total answer. Many people will continue to ignore their responsibilities hope that the problem just goes away. There will be some that embrace “the facts” and make a sincere effort to resolve their account who may have simply ignored it in the past.

Our collectors are being trained every day how to be counselors. We are training them to assist the debtor in resolving an unpleasant situation. The debtor is not our enemy, they are our ultimate customer.

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The Collection Evolution

The Dinosaur Age

The year I entered the debt collection industry was 1980. The year that FDCPA was enacted. Over the next few years, I watched as the company I worked for (an industry leader) struggled to comply with a new business model. One time we lost 5 major clients in one day because we ended up on the evening news. This was the result of one collector that came to work on a Saturday morning and threatened someone. I am not saying it wasn’t justified.  It was just difficult to get thousands of collectors to embrace a change and get compliance without technology. New training programs were implemented, floor monitors were employed, but change was slow. The company on the whole embraced the change but it was difficult with 120 offices to get experienced collectors to comply with new regulations. People don’t like change. Back then the approach was simple; 1). Call the debtor 2). Make a demand for the balance 3).Give the debtor 5 days to get the balance in your office 4). Hang up on the debtor 5). Keep calling every 2-3 days until you got their attention. 6). If they resisted, talk louder. 7). Make the debtor prove that they exhausted every possible friend and relative, life insurance, retirement account, etc. If that did not work, drop to a payment plan as a last resort.

Not All Clients Embraced Change

I am often reminded of “Morrie” in “Goodfellas”. “Jimmy, I want my money”. Most of my clients in the 80’s felt that way. They did not have to embrace my regulations.  In the collection business, you are only as good as last months remittance check.  As a result, there was always lots of pressure to collect more than your competitor to keep your client. At the end of the day, managers would look the other way as long as you didn’t get caught. When you did get caught, you got fired.  Someone would give everyone a speech about the importance of collecting without complaints and then the next month your client would call, put more pressure on you and the process would start all over again.  What i am saying here is that clients need to be part of the process for change. It’s not just about the money anymore.  You need to be concerned about reputation.

Collections Evolve

Since those early days in 1980, I have watched as most of the 2000 companies in our business and creditors alike have worked tirelessly to evolve into a sophisticated business. Phone calls are recorded, training is ongoing, certification is available, everything is documented. We deal with an ever increasing and sometimes conflicting minefield of regulations.  Today, agencies are evolving in a difficult environment. That being said, we still have thousands of complaints. I have to laugh though when I hear that complaints to the FTC and State regulators are at an all time high. These statistics are never compared to the volume of accounts handled, just the number of complaints received. In 1980, the largest company in the collection industry received about 500 million in placements per year. Compare that with the hundreds of billions of dollars placed for collection in 2010. If you did the math, you would find that the percentage of complaints is significantly lower over the last 30 years. In addition, many (unfortunately, not all)  of the “complaints” today are more technical in nature and not egregious.

The New Shift in Collections

Unfortunately, our media and our government have not helped to promote the idea that its’ not “OK” not to pay your bill.  As a result, it doesn’t carry the stigma it used to. But its a fallacy.  People say all day long “I don’t care about my credit” or “Sue me”.  This is obviously not a good solution for them or our clients.  Having good credit is even more important now than ever since the financial meltdown in 2008. You see, prior to 2008 and bankruptcy reform, it was easy to get credit after declaring bankruptcy.  Not any more.  As a result, we need to educate our debtors that their credit is more valuable now than ever.  That takes more effort than simply “dunning people” to pay the balance.,  In order to be successful, we need to become more salesman, less collector. I applaud the ACA for their ASK Doctor Debt Website. (  Today, successful collections is about educating, counselling and selling the debtor on the benefits of paying their bill. The phone calls are longer, the good collectors are way more savvy and management spends every day trying to figure out how to do the best job possible for the client, stay out of trouble and keep moving forward. I’m proud to be part of this industry. Regardless of what outsiders say about us, I am proud to be a debt collector. This is the future of debt collection. It’s doing the right thing even when everyone else criticizes you, regardless. I have been in this business a long time so I have learned not to take it personally.


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