The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
You can pay a debt collection agency by contacting the agency, creating a repayment plan and mailing a payment check.
Debt collection works to recoup unpaid debts owed to a lender through a debt collection agency. If you’re overdue on your debt payments, there’s a chance your debt has gone to a collection agency. The agency will contact you via phone calls, emails or text messages.
Understanding the full picture of paying collections debt can make repayment less stressful. We’ll guide you step-by-step on how to pay off collections, as well as provide resources you can use to help you.
1. Confirm the debt is yours
Don’t make any payments to a collection agency unless you’re certain the debt is yours. Verify your records to make sure it’s accurate. You can also contact your original debtor to confirm you’re working with the appropriate collection agency.
Mistakes can happen—lenders or creditors occasionally report inaccurate information to collection services. If the debt doesn’t appear to be yours, you should send a dispute letter to the debt collector within 30 days of first contact.
The FTC requires the collection agency to stop seeking payment until they can provide written proof of the debt, such as a bill after you send a debt validation letter.
2. Check your resident state’s statute of limitations
The statute of limitations, which establishes how much time collectors have to take legal action to collect a debt, varies by state. But note that just because the statute of limitations has passed doesn’t mean you don’t still owe a debt. You should check with a local debt collections attorney to know for sure what your options are.
Before making any collection payments, you can review your state laws and ensure bankruptcy or another legal procedure hasn’t dismissed the debt.
3. Calculate how much you can afford to pay
If you’ve confirmed that the debt is yours and you need to pay it, the next step is to determine the best plan of action for repayment. Before speaking with a debt collector, review your budget to see how much you can pay back.
Typically, there are two ways to pay off your debt:
- Installment payments: With installment payments, you can divide the debt repayment into smaller portions over a fixed period. However, with this option, you do risk restarting the statute of limitations on your debt.
- Lump-sum payment: Paying the debt in full is the quickest way to end the collection. Plus, you won’t have to be bothered by phone calls or emails from the collection agency after fulfilling payment.
4. Contact the debt collection agency
After you’ve calculated how much you can afford to pay, your next step is to contact the debt collector.
There’s the option to have a third party handle communications with the debt collector, but there are drawbacks. Hiring a third party can be costly and unreliable, which could jeopardize you and your credit.
You should be able to find the collector’s contact information on your credit reports. Look at your most recent credit report, as collectors can buy and sell debt among themselves.
Then speak with an agent of the collection agency. Discuss your payment plan and the agent’s contact information, and get a copy of your agreement.
5. Submit the debt payment
After you’ve established a repayment plan and received a written copy of your agreement, it’s time to submit payment.
Sending a check by mail with a return receipt is the safest way to pay a collection agency. This does cost a couple of dollars more than paying electronically. However, having printed receipts will help you dispute any credit reporting errors if they occur, as well as confirm you paid the bill.
Tips for paying collections debt
Paying off any debt can be overwhelming at times, but resources are available to help guide you through the process. Here are several tips to help you pay collections.
Contact a credit counseling service
Paying off debt can be overwhelming, so you may want to seek help from a professional credit counseling service. A legitimate credit counselor will provide you with a personalized repayment plan and help you budget so you can get back on track financially.
To find a service, the U.S. Department of Justice’s U.S. Trustee Program lists government-approved agencies on its website.
Hire a lawyer
If you haven’t paid off your collections debt, your debt collector may decide to sue you, and in this case, you may want to hire a lawyer to represent you in court. The debt collector will not contact you once you appoint an attorney to represent you. All communication will instead take place between your attorney and the debt collector.
Don’t ignore the debt
It can seem easy to ignore the debt collector’s calls and emails. However, ignoring the debt won’t make it go away but will only worsen the circumstances. Therefore, facing debt head-on is your greatest option. You’ll feel better, and your credit score may suffer less by doing so.
How does debt end up in collections?
A debt that you don’t pay in time can end up in collections. For example, if you have a credit card bill after a certain period, the creditor could write it off as a loss and sell it to a collection agency.
Selling your debt to collections is usually the final decision when the payment is seriously delayed. Different lenders and creditors have their own guidelines but generally send the debt to a collection agency after 90 to 180 days of nonpayment.
Once the debt collection agency receives your debt, you’ll likely notice a series of reminder emails and phone calls to settle the payment as soon as possible.
Can paying off collections raise your credit score?
It is important to note that debt and credit are two different things. Debt (paid or unpaid) that has gone into collections can hurt your credit score. Even if you pay off or resolve your debt, if a creditor or collections agency has already reported it to the credit bureaus, it will likely be seen as a negative item on your credit report(s). Collection accounts with paid collections are typically ignored by newer credit scoring models, such as VantageScore® 3.0 and 4.0. However, older scoring models than FICO® Score 8 do consider paid collections.
This means that while paid-off collection debt may improve your credit under newer scoring models, it may not raise your credit under older scoring models. Because you won’t know which credit scoring models your future lenders will use, it’s impossible to determine whether paying off a collection account will raise your credit score.
Paid collection debt, like all collection debt, will stay on your credit report for seven years. After seven years, the collection account should disappear from your credit report.
What happens if you don’t pay off a debt in collections?
If you are unable or unwilling to pay a debt in collections, you’ll see a negative impact on your credit with the newer credit scoring models. Collectors will also likely continue to reach out until you pay the debt.
If the balance is large enough and you’re still within the statute of limitations, the agency can take you to court with a lawsuit.
Does debt collection affect you legally?
If you don’t answer a debt collector within a specific time frame, they can sue you in court to collect the amount owed including fees and interest. The period differs by state, so check your state laws or reach out to a local debt collections attorney to find out how long the period is before the agency can sue you.
If the collection agency wins the lawsuit, the court may grant them the authority to garnish your wages. Wage garnishment means the agency has the legal right to contact your employer and request a percentage of your paycheck be sent to them.
The agency could also place a lien on a piece of property, like your home. While the lien is in effect, you’d be unable to sell your home. Depending on the court’s decision, your lender could even foreclose your home.
FAQ
Below are some commonly asked questions about how to pay a debt in collections.
Which debts should you pay first?
Any toxic debt should be paid first. Toxic debt refers to types of debt with high interest rates. Toxic debt includes credit cards, payday loans and rent-to-own agreements.
How does a debt end up in collections?
Each lender has rules about the number of payments a borrower can miss before defaulting. For some lenders, a loan immediately defaults when you miss a payment. Some lenders may also charge late fees for the first missed payments before the borrower is in default.
It usually takes three to six months before a lender declares the borrower’s account as in default. When the debt is in default, they will either sell the debt to a collection agency or attempt to collect the funds themselves.
How long will collections stay on your credit report?
Like most negative items, collection accounts can stay on your credit report for seven years. Other negative items include any missed or late payments. Paid collections can also stay on your credit report for seven years. There are state exemptions—New York removes paid collections from reports after five years.
You typically can’t get collection accounts removed from your credit report unless they’re fraudulent or misreported. Contact the collection agency immediately if you see a fraudulent collection account on your report. The agency will be able to confirm whether or not they’re the ones attempting to collect that debt.
Is it worth paying the debt in collections?
There aren’t any benefits of not paying collection debt. Making on-time payments and satisfying your debt is better than not paying your debt and getting sued by the agency. Plus, having a paid collection on your credit report supports your case for a better credit score in the eyes of lenders.
How do you avoid debt collection scams?
A debt collection scam can look like a phone call, text message or email from a fake collector who claims you owe a debt. The best way to avoid debt collection scams is to confirm your debt amount.
Below are a few ways to spot a debt collection scammer:
- Asks for personal information: Debt collectors already have your information on file, like your address and social security number. If the caller asks for this information, they’re likely a scammer.
- Doesn’t provide company information: Ask for the collector’s information, such as the caller and company names, the company’s main phone number and the website address. If they can’t provide this information or you find the company doesn’t exist online, it’s likely a scam.
- They ask for untraceable payment: A real debt collector will request a traceable payment, like a debit card or check. It’s likely a scam if the caller asks for an untraceable payment, like a Visa gift card or a wire transfer.
A debt collection scammer can be quite convincing, so take full precautions before submitting a debt payment request or giving our sensitive information. Maintaining payment records and your original contract can help you stay on top of payments and ensure you’re paying the right collector.
Collection accounts and credit repair
Lexington Law Firm can help you address items on your credit reports, including information related to collection accounts. Start learning more about your credit today, whether on your own or with the help of a trusted credit repair company.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
