Best way to pay debt collectors?
October 15, 2009 5:41 PM   Subscribe

Now that I am able, I would like to pay the debts I have accrued over the past few years. When confronted with debt collectors, what is the best way to deal with them so that this positively impacts my credit report?

Young and dumb, I didn't pay a number of bills that I should have when I was in school and just after I graduated. I would like to pay these off now. It isn't a huge sum of money, in total, but it is a black mark on my credit report. I've paid the original creditors when I've could but I have a number of debt collection agencies calling me about other debts. These are legitimate debts so I am not worried about that but with the horror stories I've heard about collection agencies I want to make sure that I do this right. It doesn't help that I have been ignoring the problem for a long time; in most cases I have never even spoken to these agencies.

When trying to pay a debt through a collection agency, how should I proceed? Should I request a bill in writing and then cut a check? Pay over the phone with a credit card? How do I ensure that the debts are marked as "paid" in my credit report?
posted by Loto to Work & Money (12 answers total) 17 users marked this as a favorite
Tell them you'll pay them if they send you a letter in the US mail promising that they'll update your credit report with "Paid In Full" upon receiving the full amount.

Having that, plus your cancelled check will give you documentation to follow up, should they not do the right thing.
posted by xingcat at 5:52 PM on October 15, 2009

If it were me dealing with collection agencies: I'd ask for full details (down to individual transactions on a credit card/utility bill/whatever) of exactly what they're supposedly collecting and what/when it relates to.

Ask for those details and never admit you owe a penny ("who me? I don't owe anything" should be your attitude) and certainly never pay anything up front to shut them up. Some of these debts may be outside the statute of limitations for consumer credit (in the UK I think 7 years, google around for your area)

They don't have any documentation? which they won't. Then that puts you in a much stronger position. Don't speak to them, do everything on paper and be consistent "I don't know what you're talking about. Give me the details".

I'd be looking at paying these people scum closer to 0.00% than 5% of what they say you owe.
posted by selton at 6:13 PM on October 15, 2009 [2 favorites]

You really do need to make sure that these collection agencies are legit and not collecting on bills that you've already paid. They need to tell you the original company that they are collecting for. Sometimes these bills will go through several collection agencies so be aware of that. Take selton's advice and ask for proof of whom they are collecting for before you pay them anything - or you could be paying a bill more than once.

Plus there are "bill collectors" who are not what they say they are. Not to be repetitive, but you really do need written proof that they're legit.

If it's been more than seven years (here in the US) then the statute of limitations has passed and they cannot come after you for anything - and the debt should be off of your credit report. I would check that first before you pay anything.
posted by patheral at 6:28 PM on October 15, 2009 [2 favorites]

Response by poster: A few things:
Nothing is over seven years old. The oldest is maybe three years. I don't want to wait for it to fall off.

In most cases, I know exactly where the debt originated. I have letters stating such. These are debts I -know- I have not paid and they are all different. I wish I could pay the money where it is originally owed, but this doesn't seem to be possible.

Also, with regards to proof, don't you have a time frame in which you can demand proof of the debt?
posted by Loto at 6:50 PM on October 15, 2009

Tell them you'll pay them if they send you a letter in the US mail promising that they'll update your credit report with "Paid In Full" upon receiving the full amount.

I would advise you tell them you do not believe you are the person who owes that debt, and will only communicate with them if they provide full documented proof of the debt owed and that you are the individual who owns it. After receiving that information, then and only then agree to pay on the terms cited above.

Meanwhile, pull your credit reports and challenge each one of the debts, so that they have to go back and prove you owe them. Pay any that can't be cleared off in that fashion.
posted by davejay at 7:01 PM on October 15, 2009 [5 favorites]

The key to demanding proof of the debt is this: the agency may know of your debt but not have the legal right to collect on it, and if you challenge something on your credit report and the debtor can't provide proof you owe the money, it can be removed immediately. If it isn't, they'll come back proving you owe the money, typically with contact information for the original debtor rather than the collection agency.

In my case, I owed $20 for a late fee I didn't know I'd incurred on an account I closed. By the time I found out, collection activity had come and gone, and nobody would take my payment -- the original company claimed they knew nothing about it, yet it kept getting renewed as delinquent on my reports. I finally challenged the reporting, and it came back with a contact at the company who claimed he did have proof. I called, we talked, and they agreed to take the $20. Done and done.
posted by davejay at 7:06 PM on October 15, 2009 [1 favorite]

Know that if you cut a deal for a "chargeoff", it WILL show up negatively on your credit, PLUS you WILL get a 1099 and owe taxes on the amount they wrote off. Since you didn't pay it, even though it may be a "future debt", the IRS still considers it income!

Contact each one and request a breakdown of what you owe, including interest and fees. Once you receive the account information, and are satisfied that you owe it, set up your OWN budget of what is affordable and will decrease the balance. Even $5 a month will help on SOME accounts, but most will try to get a HUGE amount from you because they don't have any evidence that you will continue - yet! Contact them on your own, and tell them how much you are going to pay them each month. Set a date, and make sure every single time you talk to the agencies, you get a name. Make copious notes. Try to speak to the same person each time you call so their data is all together. Some of them are mean, but most agencies are sooo happy to get money from you!

MAKE THE PAYMENTS AS YOU PROMISE. They may call you at first to try to get more money from you, as again, they don't have proof that you will continue payments! Let them know you are going to be paying it every month, and DO NOT let them convince you to pay more unless you are ABSOLUTELY sure you CAN!

You may have to do this for several months, 6 to 18, before you can contact the agency and request that they report the account as current, or no longer a negative account. A friend was finally able to do this with his student loan, and now is able after DECADES to grow positive credit!

Keep on in this vein, you want to pay them. If you are making monthly payments consistently, they DO NOT have the right (or need) to continually call and dun you. If they do, get all the info you can about the person calling, and then call whichever contact person you have at the agency about it, and request politely that the harassing calls cease. In many states, it is ILLEGAL for them to call you at your place of work, and before or after certain hours of the day. Contact your legal aid or consumer help agency about it. You may have to ask a few times, and it may take a week or so for the "do not call" to get around the agency. You can also combat them with concrete data. Stick to your guns. Tell them you made a payment, which check number it was, and what date you sent it. Give them the name of your contact, and tell them you will be sending in your next payment on whatever date you decided on. That should mollify them!

It may take years to do, but each time you send in a payment, you will feel better. With each account you pay off, you will feel a surge of pride and accomplishment. Revel in that feeling!

You are "allowed" one free credit report per year. Each year, get one. Check these accounts, make sure they are appearing as current, or that there is some sort of notation that you are paying them. If there is no change, contact those agencies and ask them their policy on reporting accounts. (Also, educate yourself on your state's laws on reporting! Knowledge is ammo with these guys!)

Even though you will still have accounts in the negative column, your credit will slowly improve. To "restore" credit (if you want to) try store credit cards. I got a Lane Bryant card with a charge off from Discover card. My first limit was like $100, but since I pay it on time, and keep it paid off mostly, I can get an increase pretty easily.

The credit game is weird. I usually just save my money and pay cash for most things. At least until the charge off goes away. (Never get the disability insurance on a credit card! They don't honor them!) Your positive credit (paid off cars, etc) should stay on the report for a few years longer than the negative ones. This is VERY helpful!

If you are a man, this process will be fairly easy for you. The system does not favor women, so we have to play it carefully and with a LOT of intelligence and knowledge of laws.

Good luck, and congrats!
posted by Jinx of the 2nd Law at 12:39 AM on October 16, 2009 [1 favorite]

Hi, and congratulations on stepping up responsibly. What I'm about to tell you, I have done myself and it works. The very first thing I did, which I didn't see anybody else mention ( I might've missed it), is pull my credit from all three credit reporting agencies. As you may know, all of them report differently. A debt on one may not be on another. So, that is the first thing - compare them against each other to see what they say you owe, exactly.

Next, after you compare them against each other, compare the letters against the reports. Who is the original debtor in the letter versus who does the credit report say the debtor is? This is important, because as selton says, you don't want to be paying zombie collection agencies; those that dig up debts that have either been settled or reported as unpaid and resold to new agencies for collection.

Finally, after you know exactly who you owe what to, and how the credit reporting agencies (Transunion, Experien, and Equifax) say you owe it, contact the original debtors; not the collection agencies, but the original debtors. Here's why. These people long ago turned your account over to collection agencies. But all they ever wanted was to be paid. You want to start doing that now. Plus, remember that they are customers of the collection agencies, who in turn, are customers of the credit reporting agencies. If you contact the originial company, and reference the account number, explain your situation, apologize and pay them, your fix will move quicker than is conventional.

If you do all of that, be sure to ask them for a letter, on their letterhead, with a signature, stating you have paid them. Also, ask them to say something like, "Please remove the derogatory information about XXX from his credit file." They are likely to do this because they understand people make mistakes, and they will be appreciative that you are paying them. Usually, they are not vindictive and have no reason to be vindictive. Send the letter to the collection agency and the credit bureau. I found it very difficult to get a collection agency to respond until I provide them with a letter from the client themselves. And I've found if difficult to get a response from the credit bureau until they were provided a letter from the client or the collection agency saying, in their own parlance, that the debt has indeed been paid. Getting a letter from the client, and sending it to both is proof to them that the debt has been paid and the client is asking them to remove derogatory information from your file.

And if you continue to get letters from secondary collection agencies who shouldn't be contacting you, just send them a copy of the letter from the debtor, a copy of the payment receipt and a note that the debt has been satisfied and derogatory information has been deleted from the credit file. They should go away. If they don't, tell them they aren't following Fair Credit Reporting Act guidelines, and that you can sue them.

Regarding the credit bureaus, even if they are covertly punitive, the law requires that they not be. And a letter from the client asking for bad stuff to be taken off leaves them with no reason to leave it on. I know the guidelines are that derogatory information can remain for between seven and twelve years. But that is at the discretion of the agencies and is a little thing most people don't know. Anyway, I paid a lot of past due bills and got a lot of stuff deleted from my report thanks to courage like yours and compassion from the original debtors. Now I check my credit quarterly, pay my bills on time, don't overspend. It really has been a behavioral change. Granted, a catastrophic event would throw me back into default. But, those scenarios aside, the effort to recovery really involves more humbling, compassion, communication and honesty than you would think. And some may disagree with this, but it worked absolutely for me. Good luck.
posted by CollectiveMind at 6:45 AM on October 16, 2009 [6 favorites]

What CollectiveMind said: If you contact the originial company, and reference the account number, explain your situation, apologize and pay them, your fix will move quicker than is conventional.

This should be possible in most US states. Check with that Atty General to be sure.
posted by Lesser Shrew at 1:07 PM on October 16, 2009

Sorry. When I said "letters", I meant those correspondences you've had with the debtors that you've paid and haven't yet paid. They contain exactly what the debtors say you owe.
posted by CollectiveMind at 1:20 PM on October 16, 2009

The debt collectors just want to get paid. Once they get paid, they don't care about holding your credit history hostage anymore. So as you pay off legitimate debts to legitimate owners of those debts, wait a couple of months and then dispute the record of the (now paid) debts on your credit report.
posted by Jacqueline at 2:36 PM on October 16, 2009

A few tips from when I paid off a debt I knew I owed (I allowed an old checking account to go into overdraft and get sent to a debt collector...out of sight out of mind was my thought back then...)

-Get them to send you an invoice in the mail before you pay them anything. (This way you have proof of the amount they say you owe)
-Send them a money order NOT a personal check. (This way they don't have any of your account info, checking or credit)
-Send the money order CERTIFIED MAIL, RETURN RECEIPT REQUESTED. (This way YOU have proof that they received it).
-Get them to send you proof that your account has a zero balance. (This was they can't claim that you didn't pay them)

PHOTOCOPY EVERYTHING! KEEP EVERYTHING! Make notes and keep track of every communication you have with them, their rep numbers or names, everything you can. I was terrified that they would screw me over when all I wanted to do was make good on the money I owed. Following those steps, I was able to cover my ass and prove that I did everything right. That way, if after a reasonable amount of time, the debt is still showing on my credit report, I have all the proof I need to show that I paid it off.

Good luck and congrats on taking responsibility. It feels REALLY GOOD to have the debt collectors off your back.
posted by ThaBombShelterSmith at 9:03 PM on October 16, 2009

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