The terms "debt collector" and "collection agency" have the same meaning. A debt collector is a third-party agency assigned the task of collecting allegedly delinquent debts. The Fair Debt Collection Practices Act applies to debt collectors, as well as to lawyers who regularly engage in debt collection activities that do not involve the court system. A company's own internal collection department is classified as a "creditor", not a "debt collector": The Fair Debt Collection Practices Act does not apply to creditors (but there are plenty of state laws that do).

Your credit score is a measurement of your creditworthiness, and is the most heavily weighted variable that lenders consider when deciding to lend you money. Debt, and how you deal with it, determines how much credit you can access in the future. It is important to understand how your credit score is affected when you use consumer credit to accumulate debt. It is equally important to maintain the highest credit score possible so that you will have no problems accessing more money, getting good insurance rates, and getting a job or a place to live.

The amount of debt that you carry impacts your credit rating. When most creditors evaluate your credit report before offering you more credit, they often consider the ratio of available credit to used credit. If the average balance that you carry on your credit accounts is greater than 50%, you will be considered a greater credit risk. In order to get the highest credit score possible, try never to use more than 50% of your available credit. Your creditworthiness hinges on how you address destructive debt and use credit wisely.

You may feel that paying your bills late or not paying your bills at all will have no serious repercussions. While non-payment may have a minimal effect on a lender's bottom line, it will ruin your credit. Having poor credit will make it difficult and costly to obtain the essential implements of modern living such as: car insurance, a car loan, a lease on an apartment, or even a job. Therefore, if you have already accumulated a great deal of destructive debt, you should confront your spending habits and eliminate the debt. The costs of ignoring destructive debt span from credit card fees and interest, to ruined credit, to legal action that your creditors initiate against you.

Credit card fees, high interest rates, and finance charges can make inexpensive items much more costly. For example, the average credit card balance of twenty-five hundred dollars could take more than seven years to pay off at the minimum monthly payment. You could spend several hundred dollars more for your purchases by financing them in this way. Similarly, you can ruin your credit by ignoring destructive debt. It is easy to ignore the letters that creditors send when you have fallen behind on your obligations, but ignoring these attempts at communication are fatal to your credit score. Not only will your credit be ruined, but your creditors have the right to take legal action against you to collect the debts that you have incurred. Creditors will often file suit against debtors who neglect to pay. This can mean judgments, wage garnishments, or even involuntary bankruptcy. Removing these blemishes from your credit report could take seven to ten years.

Treating either form of debt, whether secured or unsecured, with respect is critical to your financial success and maintaining your creditworthiness. Remember, you are using other people's money to attain some of your most prized possessions. Without access to these funds, you may not be able to purchase a home, car, or other assets that are important to your way of life. One aspect of treating debt with respect involves remembering that your ability to borrow money is crucial to building your overall net worth. Most people fail to realize that debt can and should be used to improve one's financial stability. Those who use debt to purchase commodities are constantly fighting an uphill battle when attempting to become solvent and build wealth. By using debt to invest wisely, you become less dependent on debt for the commodities that you desire. Rather than paying interest on car notes, you will earn returns that exceed your investment expenses. That is using your debt wisely.

Anyone is able to build credit and use debt wisely. Whether you make millions of dollars each year or have no salary at all, you should explore ways to make your credit and debt work to your benefit. Consider a teacher in Minneapolis who saved and used his credit and savings to buy a rental property. By building relationships with his local bankers, buying property every year, and always repaying his debts as agreed, he was able to increase his net worth to more than $5 million within 10 years, and able to borrow up to $1 million at any given time. Anyone can reach this level of wealth with the proper plan and a great deal of self-discipline.

The fact that anyone with a plan and discipline can attain wealth does not mean that everyone is prepared for wealth. You must know your own level of risk tolerance, or the amount of risk that you can comfortably take on, before taking on debt for investment purposes. Not everyone is able to psychologically handle $1 million dollars worth of debt. Some people are able to take on more than $1 billion without blinking an eye. If you will lose sleep over the debt that you take on, perhaps you are better suited for smaller amounts of debt. The main factor that increases an investor's risk tolerance is understanding the investment and understanding agreements with business associates.

Understanding the contracts that you sign before you sign them is crucial to improving your emotional outlook on debt. By studying a contract and investigating any part that seems unclear or ambiguous, you eliminate most of the uncertainty surrounding an investment or an agreement. Remember that if any points are unclear, you should ask an attorney and other trusted colleagues for a second opinion.