Whether you have credit card debt, personal loan debt, medical bills, student loans, or any other type of debt, if you fall behind on payments, your debt will go to collections, and you’ll receive collection letters and phone calls. It’s important not to ignore debts in collection.

Fortunately, you still have a number of options for paying off collections, such as working out a payment plan or negotiating a lump-sum payment. If you feel stuck, you may want to seek professional advice from a debt relief company to negotiate on your behalf.

What Are Collections Bills?

When you have a bill in collections, it means that your original lender sold it or assigned it to a debt collection agency. Collection companies work to collect any unpaid debt you owe to another creditor. When you fall behind on your payments for several months, your lender can sell the debt, and the agency can contact you to arrange for payments.

While collection calls can be a cause of financial stress, it’s important to read the collection letter and ensure that the debt belongs to you and that the details of the debt are accurate before you pay it off. You have 30 days to dispute the validity of a debt after a collection agency first contacts you.

Seniors are often victims of scams, fraudulent activities, and collection activities, so it’s important for them to be fully aware of debt collection laws.

6 Steps To Pay a Collections Bill

If you’re wondering how to pay a collections bill, know that there are many repayment options available. Ignoring the debt will make things worse, so we recommend that you weigh your options and take action immediately.

1. Check the Debt Is Yours

When you have debt stress, you may want to immediately start making payments to the collection agency to resolve the problem. However, we recommend that you first ensure that the debt is yours.

Check the records thoroughly to ensure the details of the original creditor, contact information, account number, interest rate, and your outstanding balance are correct. This is a necessary step because mistakes often happen. If you think the debt isn’t yours, send a credit dispute letter within 30 days.  

2. Check the Statute of Limitations

The statute of limitations refers to the time limit during which a collection agency can collect a debt.

Each state has its own statute of limitations, and in some cases, making a partial payment or acknowledging a consumer debt can reset the clock. Check your state’s rules before you take any action.   

3. Contact the Collections Agency

Before you contact the collections agency to negotiate a payment plan or settlement, ensure you’re aware of your rights under the Fair Debt Collection Practices Act (FDCPA). If you’re receiving harassing debt collector calls, you can file a complaint with the Federal Trade Commission (FTC). 

Take stock of your finances, make a budget, and review your income, expenses, and debts. Determine how much you can reasonably afford to pay toward the debt.

You’ll need to think about whether you’ll be able to make a lump-sum payment or would prefer to pay a fixed amount each month. Once you know how much you can pay and which payment option works for you, contact the collections agency to negotiate. Be polite but firm, and keep a record of all your communications with them.

4. Negotiate Payment Terms

Once you know how much you can afford, negotiate a payment arrangement that fits within your budget. Most debt collection agencies will accept a payment plan you offer because smaller payments are better than nothing.

You’ll need to tell them how much you can afford to pay each month and the number of payments you can make.

5. Consider a Settlement

Another option is to negotiate a debt settlement with the collections agency if you can make a lump sum payment. You may be able to settle your debt for less than you owe.

“If you are already in collections, the damage is already done to your credit. At this point you should negotiate paying less than full balance instead of the full amount,” shares Teresa Dodson, a debt expert and the founder of Greenbacks Consulting. 

For example, if you owe $10,000, you may be able to make a lump sum payment of $6,000 to settle the account. This will allow you to save a considerable amount of money, but you’ll have to ensure not to cancel the debt settlement agreement once you sign it.  

In some cases, the debt can be erased from your credit report. If the collection agency doesn’t agree, they may still mark the debt as “paid in full.”

6. Make the Payment

Once you have negotiated a settlement or payment plan, the next step is to pay as per your agreement. While there are multiple ways to make lump sum or monthly payments to a collection agency, the most secure way is by sending a cashier’s check through certified mail.

Make a copy of the correspondence with the agency and request a return receipt. This will prove that the collection agency received the check.  

How To Improve Your Credit Score After Paying a Collection Bill

Now that you know how to pay a collections bill, it’s also important to learn more about rebuilding your credit. You can either work with a company offering credit repair services or follow the tips we’ve listed below to improve your credit score.

Monitor Your Credit Reports

It’s important to get your free credit reports after paying off collections to ensure they are marked as paid and there aren’t any errors.

If you notice any inaccuracies on your credit report, you can file a dispute by sending a credit dispute letter. Credit bureaus (Experian, Equifax, and TransUnion) are required to investigate all disputes within 30 days.  

Build a Positive Credit History

Once you’ve paid off your collections bills, you can focus on building a positive payment history by making on-time payments. Set up autopay for all your bills so you don’t miss any payments.

If you have credit cards with large balances, pay them down to improve your credit utilization. This can help improve your credit score.

Get Professional Help

If your credit history is complex, you may want to consider companies offering credit repair companies. If you need help with other debts, you can also seek help from credit counseling agencies. An experienced credit counselor can help create a repayment plan for your debts.

Be sure to vet any company you work with carefully because the industry can be rife with scams. The Federal Trade Commission (FTC) warns Americans against credit repair companies that promise to remove negative items from their credit report even if it’s accurate.

Pay Off Your Collection Bill

Paying off collections takes discipline and time. However, dealing with it is worth the effort because it can improve your financial situation and your credit score over time.

If you’re finding it difficult to deal with collections on your own, consider debt relief programs like settlement or debt consolidation loans. A settlement company can negotiate with collection agencies on your behalf and help you pay off your debts faster.

Once you pay off your debt, take extra precautions to ensure you make timely payments on all your debts to avoid the same problem in the future.