How to make a payment to a debt collection agency?

Paying a collection agency is not as easy as writing a check or paying over the phone. There are important steps you need to take to protect yourself. The following are common questions and good practices to understand before you make any payments.

1. Verify that you owe the debt

Even if you’re ready to take care of your collection accounts, you may want to pump the brakes. Step one is to check your credit report and gather a few details about your debt.

Errors often happen. Don’t let them happen to you.

Credit reports are not 100% accurate. Sometimes, lenders make mistakes about how much you owe and report the wrong information to the credit bureaus. Errors can also happen for other reasons.

According to a recent study, a whopping 79% of all credit reports contain inaccurate and unverifiable information.

See an error? Make sure you reach out to both the lender that issued the inaccurate information and the credit bureau that’s reporting it. It’s also good practice to notify all three major consumer credit bureaus to make sure the mistake isn’t repeated.

If you have questions about whether you’re liable for a debt, call us.

You may also want to review the rights afforded to you by the Fair Debt Collection Practices Act, which goal is to end abusive and illegal debt collection practices by debt collectors.

Is it legal for a debt collector to harass you?

No! According to the Fair Debt Collection Practices Act, “a debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.”

2. Calculate how much you can afford to pay

Say you’ve determined that you do, in fact, need to repay your debt. Next, you’ll want to start thinking about what it will cost you to do so.

Before having a conversation with a debt collector, review your budget to determine how much you realistically can pay.

It’s crucial to do this first, since failing to uphold your repayment agreement (or only paying part of what you owe) could restart your seven-year period of credit reporting and restart your period of legal liability.

The best payment option depends on your personal circumstances.

  • Lump sum payment, or paying off all your debt at once, is the fastest way to resolve a collection. It’s typically the most cost-effective, too, since it could give you leverage to negotiate a lower payment amount. But be warned that settling an account for less than the full balance owed may not be ideal in terms of your credit. Since you didn’t pay off the entire debt as agreed upon originally, your lump sum payment may not have as positive an impact on your credit scores as paying the original account in full.
  • Installment payments can help you manage the financial burden of repaying a large debt by spreading it out into monthly installments.

Can I negotiate with a debt collector?

Yes! Collection accounts are often purchased for pennies on the dollar, so you may be able to satisfy your debt by offering as little as 30% to 80% of what you owe.

The older the debt, the more negotiating power you may have. Note that if you make a settlement and your lender cancels all or some of your debt, you’ll normally be taxed on any debt you didn’t have to pay. That’s because the IRS usually considers it as income.

3. Contact the debt collection agency

Once you’ve determined how much you’re able to pay, the next step is to reach out to your debt collector.

While you may be tempted to let a third party manage the negotiations for you, you may want to reach out to your collector directly. Hiring a third party to settle or negotiate your collection debt can be expensive. In cases where the third party may not be reputable, it could also further damage your credit and put you at risk legally.

You can typically find your collector’s information on your credit reports from the three major consumer credit bureaus. Since your debt may have been bought and sold by multiple collectors, be sure to look at your most-current credit reports to determine which company to contact.

You can obtain a FREE copy of your credit report by going to  

4. Make your payment

Once you’ve received a written agreement from your debt collector and reviewed it for accuracy, then — and only then — should you take the final step of submitting your payment. Be sure to thoroughly document your payment so you can prove you’ve upheld your end of the deal. Consider paying a little extra to send it by certified mail and get a return receipt. Having this kind of documentation can not only help you prove you’ve paid your debt, but it can also help a credit reporting error if your payment information isn’t updated correctly.

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