If you choose to stop paying on an account or debt, the lender may sell your account to a collection agency. This action turns a credit account into a collection account.
Collection agencies specialize in collecting money from people who don’t want to pay. One of the ways they can convince a customer to pay up is by reporting the collection account to the credit bureaus.
Creditors can also consign a past due account to a collection agency. For example, if you owe an apartment complex $4,000 in unpaid rent, they can hire the collection agency to collect it from you. In exchange, they may keep 40-50 percent of the amount collected as their consignment fee.
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