What happens if your name goes to a collection agency?

Question

My best friend borrowed a bunch of books from the library using my account because he didn't have his library card. He returned them late and lost one.

The library sent me a letter saying that I owe them $42.50 worth of late fees and if I don't pay in 21 days, my name will go to a collection agency.

Will I get bad credit? What happens when your name goes to a collection agency?

I'm turning 19 and I'm about to start college. I might need to apply for a government loan. I really can't afford to have bad credit, I'm really worried.

Answer 1

Not everything that goes to a collection agency goes on your credit report, but you should always assume it will.  The not affecting your credit scenario happens only a very small portion of the time.

It’s $42.50. Your friend should pay it, but if I were you, I’d just pay it myself immediately and then worry about trying to get it back from him. After all, it’s only you that suffers if the bill isn’t paid.

And even more important, take this as a lesson about loaning people anything of yours and never do it again. Be glad you’re only out $42!  Plenty of people learn this lesson only after making huge monetary loans to “friends” who never pay them back.

Answer 2

You should pay the amount to save your credit since derogatory item remains on your credit file for seven years. After settling the account, you should try to collect the money from your friend.

Answer 3

Tell your friend to give you the money he owes for borrowing your books and have lates and lost items.

If the account goes to collections it will leave a negative mark but what I would do is pay it yourself (I know it's not fair but it's not worth a bad credit score) and negotiate with the library/collection agency to remove the item from your credit report.