Debt is a complicated business.
Life can be hectic, making it easy to lose track of your old debts amongst the sea of junk mail and robocalls. This is especially true if you’ve recently moved, changed your name, or even just gotten a new phone number.
But even if debts have fallen off your radar, it doesn’t mean they are forgotten. Unfortunately, they can come back to haunt you and keep you from fully becoming debt free.
There are few things more inconvenient than a long-forgotten debt creeping back up just in time to ruin your mortgage approval, auto loan approval, and so on.
Debts you owe will broadly fall into one of two categories: debts that are easily visible on your credit report, and debts that are – for whatever reason – not mentioned in your credit report at all.
Here is how to find your debts and deal with the creditors you may owe.
Study Your Credit Report
The first step to getting in control of your debt is to check your credit report. Sites like annualcreditreport.com allow you to pull one free report per year, while sites like Credit Sesame can help you get a copy of your full credit report anytime, including any soft or hard inquiries that have been made.
It’s good to note that if you are looking for very recent debt, it may not have showed up on your report yet.
When you’re pouring over your credit reports, pay attention to the following:
Review Soft Inquiries
As opposed to hard inquiries, soft inquiries are seen only by you. A soft inquiry gives an incomplete picture of your credit report and is common amongst lenders looking to update their portfolios.
Employers and credit card companies looking to send out new or updated card offers may also typically perform soft inquiries.
By looking into all the recent soft inquiries that show up on your report, one of them may lead to a lender you owe.
Collections can be a little confusing, especially if you are aren’t sure of your rights and how to deal with debt collectors. If you are long enough overdue on debt payments, the original lender may send the debt to collections, where it will show up on your report as a separate account. Collections have a significant impact on your credit score and your ability to get new loans, so they should be treated seriously.
Don't Accept Mistakes
No system is perfect, and that includes our credit proceedings. It’s not uncommon for errors in reporting or systems management to result in incorrect information on credit reports. Unless you contest these errors, they will affect your credit and potentially your life.
If any collections or debts on your report seem suspicious or wrong, look into them immediately and contact your bank if you need assistance contesting them. I can think of at least ten things I’d rather be doing instead, but addressing these potential mistakes on your credit report now will save a lot of time and headaches later.
Other Debts That May Arise
Whether or not a debt appears on your credit report is entirely up to the lender. A lender may choose to report your debt to any one of the three major credit bureaus, or they may choose not to report it at all.
Debts Don’t “Magically” Disappear
It’s a common misconception that when lenders forgo reporting your debt to one of the major credit bureaus that you are magically “off the hook.” That’s simply not true. You are still legally responsible for debts that are not on your report, but they will have no immediate effect on your credit.
Your Debt Might Be Sold
Be aware that lenders frequently sell debts, meaning debts from a lender that didn’t report may be sold to a collector that does. This is how old debts that have fallen off your radar may suddenly pop back up out of nowhere.
It Might Be Unearthed in Public Records
Other surprises might be waiting for you in public records as well. If you are taken to court over an unreported debt, the debt will become part of the public record, which means it will likely show up on your credit report not too long after your court date.
You May Have Already Paid It Off
Be especially incredulous of debts that come from collections. It’s not uncommon for these debts to be mistakenly attributed to you even if you have already paid them. This is because when lenders sell debts, they do not give very detailed information to the collector.
This miscommunication can result in a collection agency going after the wrong person or trying to collect a debt that has already been paid. If you feel an agency is trying to double charge you, address them about it. Do not pay debts you don’t owe, but do not ignore incorrect collections, either.
Passive Ways to Find Debts You Owe
If you’re on the warpath to defeat every debt that’s hiding out there – including those not found on your credit report – then you’ll need to be diligent and proactive about hunting them down.
This usually requires knowing the lenders to whom you owe money. Even if the original lender has sold the debt to a collector, they should have that information on file, thus allowing you to contact your new collector.
If you hit a dead end, there are a few passive actions you can take as well.
Check Your Messages and Caller ID
Generally speaking, if someone wants money from you, it’s pretty likely you’ll hear from them. Whether it’s the original lender or a collection agency, someone will probably try to get in contact with you.
Normally this isn’t a concern, but if you have changed phone numbers or if you have email addresses that have fallen into digital disrepair (read: 10,000 unread messages), then you may be missing messages concerning older debts.
If you change home addresses, be sure to update all relevant contacts and sign up to have your mail forwarded. It only takes a few minutes, and again, saves you a headache from having to deal with any fallout from being uncontactable in the future.
Calling a Debt Collection Agency: If you’ve missed a call from a collection agency and have to call them back, be aware that the representative will attempt to collect payment from you during the call. This is part of their job, and likely can’t be avoided, but it’s good to be prepared for the conversation.
Wait For Them to Contact You
If all your contact information is up to date, sometimes it can just be a matter of waiting it out.
As mentioned above, when a company wants money from you, they will actively do all they can to get that money.
Keep your eye out for phone calls and letters in the mail from lenders trying to contact you. And, once you hear from them, plan to start dealing with it immediately.
The Bottom Line
Despite what it may feel like at times, debt will not stay on your record forever. Once your payments fall into delinquency status, they will usually remain on your credit report for seven years. You will be unable to find debts on your credit report that are older than this. Unsecured debts, such as medical bills, are the most common debts to be “forgotten” this way.
It isn’t a foolproof or even advised way of handling outstanding debts – especially since your credit score is linked to big credit decisions, such as mortgages, auto loans, and more. But the more you know about the debts you owe and how they get handled, the better.