How to Pay Collections

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If you’re getting calls from a debt collection agency, it’s at best irritating and at worst frightening. The best way to make them stop is to pay what you owe.

However, don’t be intimidated. Instead look at it as paying a debt in collection as a hurdle that, once overcome, will take a weight off your shoulders and lead to a stronger financial situation.

Following the steps to pay collection, even if you don’t think you have the money, will lead to a solution.

Debts that aren’t paid usually end up in collection. Unless you are being contacted in error, you owe money and are obligated to pay it back. Ignoring collection calls won’t make them, or the debt, go away. Meanwhile, you’ll deal with intimidating calls and threatening letters in your mailbox. In addition, there is the impact on your finances and the threat of being taken to court.

Not paying debts leads to bad credit and bad credit means higher interest rates and more difficulty getting loans when you actually need some help.

You have the power to stop the debt collection calls. Let’s take a look at how.

1. Verify the Debt

If you are contacted by a debt collection agency, before you respond, make sure you actually owe the debt. Check the balance owed, as well as the original lender, against your records.

The 2021 Consumer Finance Protection Bureau Debt Collection Rule requires all debt collectors to send those they’re collecting from, in writing, a validation notice that includes:

  • Name and mailing information of the debt collector
  • Name of the creditor to whom the debt is owed
  • Account number (if any) associated with the debt
  • Itemization of the current amount of the debt (including interest, fees, payments, credits)
  • Current amount of the debt as of when the validation notice is provided
  • Information about your rights, including how to dispute the debt

This information allows you to verify that you owe the debt and the amount owed is correct.

The rule also requires that collection agencies provide a tear-off form that you can use to send back to

If you don’t dispute the debt within 30 days, the debt collector considers the debt valid.

If you do dispute the debt within 30 days – in writing or with the form – the collector must stop contacting you until it provides you with verification of the debt.

If you write a letter, instead of using the tear-off form, it should include:

  • Your personal identifying information
  • A request for verification, with documents, of the amount of debt owed
  • A request for the name of the creditor (if this is inaccurate or not included on the validation form)
  • A request the debt not be reported to credit reporting agencies until the matter is resolved or that it be removed from the report, if it’s already on it.

If the debt appears on your credit report, send a copy of the dispute letter, or tear-off form, to the credit reporting agencies, so they’re aware the debt is in dispute.

2. Review the Statute of Limitations

There is no federal law that keeps debt collection agencies from contacting you forever, though some states do put a cap on contact. There is a time limit on filing a lawsuit to collect the debt.

Each state has a statute of limitations on debt – how long a collection agency has to bring you to court if you don’t pay. Debt is divided into four categories – contracts, oral contracts, promissory notes and open-ended contracts. In most cases, credit card debt is considered an open-ended contract. The statutes of limitations range from three to 10 years in that category, depending on the state.

Other debt that goes to collection may come under other categories. Some states have the same statute of limitations for categories, some states have different ones for each. For instance, Maine has a six-year statute for open-ended contracts, but a 20-year statute for promissory notes.

The statute of limitations refers to you, the debtor, not the location of the lender. In other words, if you live in Rhode Island, which has a 10-year statute of limitations, and the original debt is to a lender in California, with a four-year statute, the statute of limitations on your debt is 10 years.

Rules also differ from state to state. In many states, if you respond to the collection agency, it resets the clock on the statute of limitations.

3. Know Your Rights

The Fair Debt Collection Practices Act, first passed in 1977, protects consumers from being harassed by debt collectors, as well as from false, deceptive, or misleading representations by agencies that collect debts.

In addition, 19 states and Washington D.C. have their own laws that take the federal one further.

The federal law covers credit card debt, auto loans, medical bills, student loans, mortgage, and other household and consumer debt. It doesn’t cover business debt.

In general, debt collection rights mean that debt collectors:

  • Can’t call between 9 p.m. and 8 a.m.
  • Can’t contact you at work if you’ve asked them not to
  • Must contact you through your attorney if you’ve asked them to
  • Can’t tell others (coworkers, employers, family) about your debt
  • Can’t lie to you about how much you owe, the statute of limitations, and legal repercussions of not paying
  • Can’t harass, threaten, or abuse you
  • Must stop contacting you if you request it in writing

» Learn more: Debt Protections for Senior Citizens

4. Determine How Much You Can Afford to Pay

It may seem overwhelming when a debt collector notifies you that you owe a debt and have 30 days to make payment arrangements, particularly if you don’t have the money to pay.

The first thing you should do is figure out if you can pay, even if you think you can’t. This could be a lump sum for the full amount, a lump sum for less, or monthly installments.

If you don’t have a monthly budget, this is a good time to work one out. A monthly budget doesn’t have to be complicated – it’s simply a working document that sets out how much money you have coming in every month, what bills and expenses are “must pays” and how much money is left over afterwards.

You can use a fancy app, software, a spread sheet, or simply keep track on a legal pad. The best way to do a monthly budget is whatever way will be easiest for you to consistently use.

If your expenses exceed your income, try to find ways to cut back, or contact a nonprofit credit counselor who can help you work it out.

Once you determine a budget, leaving some slack for emergencies and unexpected expenses, figure out how much you can reasonably pay the debt collector. If this is less than what you owe, that’s OK (we’ll get to negotiating your payment shortly).

Most debt collection agencies give you the choice of paying a lump sum or paying in installments. Both have pros and cons. Knowing what you can afford before you talk to the debt collection agency will help when it’s time to negotiate.

Lump Sum: A lump-sum payment allows you to pay the debt off quickly. It’s a great negotiating tool, even if you can’t pay the full amount. Once you pay, you can ask the collection agency to delete the debt from your credit report or mark it “paid in full.” They don’t have to, but some will agree to. A drawback is that if you settle with the collection agency for less than the full amount, it will have a negative impact on your credit, since, technically, you still owe money. If the amount forgive is over $600, you have to treat it as income and pay income tax.

Installments: Monthly installments make paying back the entire debt more manageable. On the other hand, it may restart the clock on your debt account, which means a hit to your credit score, since it won’t come off for another seven years.

5. Negotiate Your Payment

When it comes time to pay, rather than being intimidated, remember that you are in the driver’s seat. The debt collection company wants your money, so you have the upper hand, even if you can’t pay the full amount.

Before you call and start negotiating with debt collectors, write down your plan, including how much you can pay, either in a lump sum or monthly installments. Determine if there is interest and fees you can ask to have removed. Writing it down will help you remember what you wanted to say and keep you on point during the phone call.

Write out a script, or outline, which will help keep you on point. It should include:

  • Introduce yourself and what account you’re calling about, including the account number.
  • Get the agent’s name and contact information, and right it down.
  • Explain your financial situation and what you’re able to pay. Be clear that you’ve gone over your financial situation to get to the number you’ve reached.
  • If necessary, point out that you want to take care of the debt, and are not ignoring debt collector, but trying to find a solution.
  • Stick to the point and don’t go on personal tangents or get defensive or accusatory.
  • Ask for what was agreed to in writing. Don’t make a payment until you get it and have made sure it’s accurate and has all the information necessary.

Take notes, or record the conversation, to help you remember clearly what was said and agreed to.

If you’re recording, it’s ethical to let the person you are talking to know that you are. Some states require the other party’s consent to record.

Aside from a payment amount, the debt collector may make other promises as well, like removing the debt from your credit report. Be sure you get a document in writing that has exactly what you agreed to before you make a payment.

Medical Debt Negotiation

If you are contacted by a collection agency about medical debt, contact the provider’s billing office before responding to the debt collector and see if you can negotiate interest-free payments directly to the provider. If your income is limited, they may have programs that can eliminate or reduce the balance or allow flexible repayment.

6. Make Your Payment

Once you’ve determined the written acknowledgment sent to you by the debt collector is what you’ve agreed to, you’re ready to pay.

Many collection agencies have an online payment option. If you pay debt collection online, be sure that you get an email receipt. If you don’t, immediately contact the collection agency and ask for proof of receipt of payment.

The most secure way to pay is by certified mail with a check. Mail it at the post office and pay a little extra for a “return receipt.” The receipt will either come to your email or be mailed to you, and it’s something to keep so you can prove you paid if there’s ever any question. If you don’t use checks, your bank can give you a blank check tied to your account, or you can pay with a cashier’s check.

If there’s a deadline, be sure you pay the debt collection agency well before time is up. Even online payments that have apparently gone through may be returned if they’re a day late. Once that happens, you’ll have to start all over again with a new collection agency.

Ask the collection agency to provide a letter of completion once you’ve paid. Keep this, and all your documentation and notes, including the notes from the conversation you had when you negotiated payment. They’ll come in handy if the collection agency denies you paid, disputes the amount agreed to, or another collection agency starts contacting you about the same debt.

7. Check Your Credit Report

After your debt is paid, your credit report should reflect that fact. Give it 30 days, and if it doesn’t show as “paid,” contact the debt collection agency and ask them to change it.

If the debt collector agreed to remove the debt from your credit report, be sure that they did.

If, after 30 days, the debt still shows as money you owe, the documentation showing the agreement, as well as the letter of completion, will allow you to prove you paid what was agreed to.

Hang on to that documentation even after your credit report is made accurate, just in case you are contacted in the future.

The debt will come off your credit report seven years after the last action on the account. For every year it’s on there, it has less of an impact on your credit score.

What Is Debt Collection?

Now that you know how to pay off debt that’s in collection, let’s take a closer look at what exactly debt collection is and how unpaid bills get there.

When a debt isn’t paid after a certain amount of time – whether it’s a credit card bill, a medical bill, a loan, or more – the lender sells it to a collection agency, usually for less than the full amount. The lender has other business to take care of and can’t chase down unpaid bills full-time, but a collection agency exists solely to get people to pay up. The debt collector makes its money by getting more from the debtor than what it paid for the debt. This could include fees and interest on the debt.

» Learn More: What Is Debt Collection? 

When Does Debt Get Sent to Collection?

How long a lender or company will hold out before sending a debt to collection varies – there’s no law that governs how long they must wait.

Many companies – particularly medical billing offices, mortgage and auto loan lenders – will put an unpaid bill into a collection account after 30 days. This means the bill is red flagged as a debt owed and the company will start contacting you about paying.

Most companies wait three months before sending a debt to a collection agency. Some wait as long as six months. Keep in mind that if it’s a secured debt – a mortgage or auto loan – you’ll likely be foreclosed on, or your car will be repossessed, before you’re contacted by a collection agency.

Once the debt goes to a collection agency, you will start getting multiple calls a day, as well as letters, emails and texts. The caller ID for phone calls likely won’t say it’s from a debt collection agency, and many agencies even use “spoof” numbers – a variety of different phone numbers from different areas – to get you to pick up. You can stop collection calls by asking, in writing, that the debt collection agency stop contacting you.

You can also stop debt collection agencies from calling by picking up the phone, finding out what you owe and to who, and paying the debt. If you answer the phone, ask the agency to send you a validation letter with all the necessary information, even if they say they already have.

If you need help managing your debt, contact a nonprofit credit counseling agency. A counselor will talk to you for free about your options.

Types of Debt that Go to Collection

Unsecured consumer debt is the most likely debt to be sent to a collection agency. Since unsecured debt is not “secured” by property (for instance, a house or vehicle), the lender has no other way to make up the money they are losing but to try to squeeze it out of the person who owes.

Debt collection isn’t just for loans. If you can’t pay your electric bill, or owe the heating oil company for your last delivery, those can go to collection, too.

Even though an auto loan is a secured debt, it, too, can go to collection if the lender doesn’t get the balance owed, it repossesses your car and sells it.

Anything debt more than $100 can be sent to a debt collection agency. The most common types of debt to go to collection are:

How to Find Out Which Collection Agency You Owe

Thanks to the Fair Debt Collection Practices Act, a debt collector should be crystal clear on who you owe the money to. The information for the original lender or business, as well as the current collection agency, will be in the validation letter it’s required to send you.

That information should appear on your credit report. You can get a free credit report from all three of the credit reporting agencies – Experian, Transunion and Equifax – by going online to or calling 877-322-8228.

If you’ve owed a debt for a long time, it may have gone through several collection agencies, so be sure you pay the one that currently holds the account.

If you think you owe a debt and want to pay it, or a debt collection company has contacted you but you can’t find the debt on a credit report, do some research before paying. Medical debt, unless it went to a collection agency, likely won’t appear on a credit report. If you keep old bills, check them to find the creditor, or go through your email or online bank statements to find payment or contact information.

If you’re contacted by a debt collector, they’re required to give you the information for the original creditor. If it’s not on your credit report, contact that creditor and ask for information about what you owe.

How Much Does Collection Affect Your Credit Score?

The two things regarding debt collection that will have the biggest impact on your credit score are:

  • How late the payment is
  • How many accounts you have in collections

Credit scores are determined by on-time payment history, amount of money owed vs. credit limits, longevity of accounts, credit inquiries and more. On-time payment history is one of the biggest factors, so an account in collection weighs heavily. If you have more than one account in collection, the negative impact is exponential.

Once unpaid reaches your credit report, it stays there for seven years. While its effect on your credit score diminishes with each year, it still has an impact until it’s gone. It’s also a red flag to lenders – an indication that you are someone who may not pay money you owe.

How Many Points Will My Credit Score Increase When I Pay Off Collection?

Collection accounts stay on credit reports for seven years. FICO and VantageScore scoring don’t count collection with zero balances; those scores will improve with a payoff. But most lenders use other scoring models that don’t change. The account, though, will be marked “paid,” which potential lenders will notice. The longer it’s on there, the less impact on your score it will have.

» Learn More: How Long Do Negative Marks Stay on Your Credit Report?

Should You Pay Off Collection?

If you are contacted by a debt collection agency, it’s time to find a way to pay what you owe.

In practical terms, paying the debt collection agency will stop the barrage of phone calls and other contact. It will also remove the threat of legal action, including the time and expense of going to court, hiring an attorney, possible wage garnishment and more.

In the bigger picture, don’t you want to be someone who repays money they promised to pay? It will be a huge weight off your shoulders.

Again, before you make a payment, be sure to verify you owe the debt being collected and do your homework on repayment.

Get Help Navigating Your Debt

When you incurred the debt, you intended to pay it back. For whatever reason, you didn’t, and it ended up in debt collection.

If you are being taken to court for your debt, it’s a good idea to get legal help.

If you’re overwhelmed by debt and want to pay collection before things get worse, but can’t figure out how to, contact a nonprofit credit counseling agency, like InCharge Debt Solutions.

Certified credit counselors are required by law to give you advice that’s in your best interest, rather than sell a product. They will help you sort out your income and expenses and create a monthly budget, as well as review options for debt management that range from better money management, to debt management plans, debt consolidation, debt settlement and, in extreme cases, bankruptcy.

Credit counseling typically is done over the phone, but can be offered in person.

If you’re being contacted by a debt collection agency, a free credit counseling session with InCharge Debt Solutions can be the first step toward stopping the phone calls and paying off the debt.

About The Author

Maureen Milliken

Maureen Milliken writes about personal finance and debt relief topics for InCharge Debt Solutions. She started as the “Business Beat” columnist for the now-defunct Haverhill (Mass.) Gazette and has been writing about finance, real estate and business for more than 30 years. She also is is the author of three mystery novels and two nonfiction books.


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