Many Americans have been affected by the debt crisis and are struggling to stay on top of bills. Have unpaid debts due to financial instability? An account may get sent to a debt collection agency. As of 2019, approximately 68 million Americans have had debt sent to collections. You may wonder how to pay a collection agency. Learn what steps you can take to become debt-free!
Verify the Debt Collector Is Legitimate
Debt collectors use various methods to obtain unpaid medical debt, credit card debt, and more. You may receive phone calls, emails, text messages, or letters. Even if you have the money to pay a debt collection amount, don’t! Do not make any payments or provide information until you verify the debt collector is legitimate and the debt amount is correct.
Confirm the Debt Collection Agency
Many scam artists pose as debt collectors to steal hard-earned money. If a debt collector has contacted you, ask for contact information to verify the agency. Request the organization’s name, street address, and phone number. You can use this information to confirm if the debt collector is from a reputable company.
Calling the original creditor to ask which collection agency they work with can help you quickly verify the legitimacy of the debt collector. Scammers will refuse to provide contact details and avoid answering questions.
Check the License Number
Some states require debt collectors to have a license and register with the state, such as Illinois. If debt collectors contact you, you can ask for a professional license number. You can then check your attorney general’s website to view licensed collection agencies.
Ask for a Validation Letter
One of the best ways to avoid debt collection scams is to request a written validation notice. Once a debt collector informs you about debt in collections, you can send a letter to the debt collection agency to request proof of the debt. The notice must include the debt amount, creditor, and a description of your rights under the Fair Debt Collection Practices Act.
Can I Report a Debt Collector?
Legitimate debt collectors cannot threaten or harass consumers under the Fair Debt Collection Practices Act (FDCPA). Suppose you feel pressured to pay off your debt immediately through abusive or harassing behavior. In that case, you can file a complaint with your state attorney general’s office, the Federal Trade Commission, and the Consumer Financial Protection Bureau.
How To Pay Debt Collectors
If your debt gets sent to a debt collection company, you may wonder how to deal with debt collectors when you can’t pay. Luckily, there are options available to help you start the payment process! You can pay consumer debt through a payment plan or lump sum payment. Your payment option should work with your current financial situation without stretching your budget too thin.
Use a Payment Plan
Ask the debt collection agency if they provide payment plans. Some collection agencies are willing to work with consumers by setting up a payment plan, which can help you get a large debt paid. Ask for a written agreement with clear payment expectations. You should know the monthly payment amount, how many payments you have to make, and when payments are due.
Make a Partial Payment
Suppose you cannot afford to pay your collection account in full. In that case, you can talk to the debt collection agency about making a partial payment. Many collection agencies prefer receiving a small lump sum payment than no payment.
There is no set amount for a partial payment, but it should be enough to satisfy the debt collector. The debt collector could cancel or settle your collections account if you offer enough money. If the collection agency agrees to a partial payment agreement, get the agreement in writing for evidence of payment.
Take Out a Loan
Most debt collectors may not offer a payment plan, but you could pay your collection account over time using a loan. An installment loan can help you quickly pay off the debt in collections. Don’t worry if you lack excellent credit. Low credit scores may not make you ineligible for funding! When you apply for no credit check loans, same day funding is possible despite bad credit!
Use a Credit Counseling Service
You can work with a nonprofit credit counseling service if you have a debt in collections. A credit counselor cannot help you obtain money to pay a debt collector. However, a certified credit counselor can help you start a budget plan and make smarter financial decisions. Counselors can also provide resources to help you improve your credit score over time.
How Long Do Collection Accounts Stay on Credit Reports?
Unpaid debt sent to collections can negatively affect your credit score and appear on your credit report. While this information can seem disheartening, keep in mind that negative information on credit reports will eventually fall off. A collection account will remain on your credit report for up to seven years. Having a negative account does not mean you can’t work on improving your credit score.
The debt collector will notify the major credit bureaus if you have paid or settled your debt collection account. The collection account on your credit report will then appear as “paid” or “settled.” Paid or settled accounts on credit reports are less damaging to credit scores than unpaid debts. If you request your report from a credit bureau and the collections debt is not marked as paid, you can file a dispute about the credit reporting error.
Do Credit Scores Improve Once a Debt in Collections Is Paid?
You may be excited by the prospect of paying off a collection account looming over you, but know that your credit score may not improve immediately.
Your credit score depends on the credit scoring model used by the credit bureau. Newer scoring models dismiss collection accounts with a zero balance, which can help your credit score. But older scoring models may still include your paid-off collection account and prevent your score from increasing automatically. Paying collections agencies is the only way to know whether debt payment will help your credit score.
Dealing with debt collectors can be stressful, but don’t ignore them! Ignoring a debt collector can potentially result in a lawsuit and additional financial issues. You can take the initiative by speaking with the debt collector and determining how much you can pay. The debt collector may accept a partial payment, so answer those phone calls.
There are various financing options available to pay debt collectors! You can start a payment plan or pay a lump sum. The best payment option for you depends on your preferred payment plan. Paying your debts can help you work towards gaining financial independence!