One of the most powerful tools in the pocket of anyone attempting to collect an outstanding debt is the ability to report that debt to the major credit rating agencies. These agencies have become a go-to source for all kinds of businesses that lend money to their clients, and they are just as important for customers who are looking to prove their track record.

However, the credit rating agencies are only able to document the outstanding debts that are reported to them, so whether or not a debt is actually declared is something that becomes a powerful leverage in the hands of a smart collection agency. But before we get into how credit reporting can work from the collection side, let’s first take a look at how it works from the debtor’s perspective.

The Debtor’s Perspective

There is an interesting survivorship bias that occurs with debtors. The ones who recognize the importance of being in good standing with the credit bureaus are also the ones that are going to work the hardest to make sure that their accounts are settled.

In many cases, the people who let their accounts become delinquent in the first place are also the people who don’t particularly care what the credit reporting agencies have to say about them. But that can all change over time.

As people grow and evolve over the course of their lives, they can suddenly become concerned with their credit rating. This often happens when they decide that they want to purchase something like a house or a car, or they need a respectable rating to qualify for a new job.

When these life changes happen, even the toughest debtors will suddenly become desperate to resolve any outstanding credit issues as fast as possible.

How to Manage Reported Debts

If you are someone who has delinquent accounts listed on your credit report, the best thing that you can do is work with the creditors who reported those debts to get your account into good standing as quickly as possible.

Whether you need to have a better credit score right now or not, you are going to want to improve it sooner or later. There is no time like the present to start working on your credit.

The Creditor Perspective

From the perspective of a creditor, reporting a client or customer with a delinquent account is the best way to ensure that you will eventually get paid for the services you have rendered.

Sometimes, just the threat of reporting a debt can have a huge impact on your relationship with the debtor. But even in situations where a debtor says they don’t care about their credit, you will find that they almost always change their tune at some point down the road.

Make Sure Debts Are Reported

In order to make sure that you are on the list of people that a debtor wants to work things out with when they decide to improve their credit, the best thing that you can do is to make sure that you are working with a collection agency that makes the point of reporting all outstanding debts to the credit rating agencies.

No matter what side of a given debt you find yourself on, the key takeaway to remember is that everyone wants to work out the delinquent accounts on their credit report eventually. The only thing up for debate is just how long they are willing to put it off.