Can I pay my original creditor instead of collection agency?
Summary: You can pay off a debt to the original creditor if they haven't sold the account to a debt collection agency yet. There is a chance the debt may have been transferred to collections, but that doesn't mean it's too late to reach out to your creditor and settle the debt once and for all.
If you have delinquent debt that's been sent to collections, there might be options. In some cases, you may still be able to negotiate repayment directly with your lender. Working with your original creditor instead of a debt collector can be beneficial. However, this approach won't work for everyone.
Generally, paying the original creditor rather than a debt collector is better. The creditor has more discretion and flexibility in negotiating payment terms with you. And because that company might see you as a former and possibly future customer, it might be more willing to offer you a deal.
- Determine If Negotiation Is Right for You.
- Set Your Terms.
- Tell the Truth and Keep a Consistent Story.
- Learn Your Rights Under the Fair Debt Collection Practices Act (FDCPA)
- Keep Detailed Communication Notes.
- Negotiate with Creditors Directly.
- Get All Agreements in Writing.
Negotiating with a debt collector may mean that you offer to pay a portion of the debt you owe rather than the full amount. There are several situations where this may be a good option for the debt collector if they can get some of the money back and not have to pay court costs.
If you're able to do so, pay the original creditor before your debt goes to collections. Having a debt sent to collections will damage your credit score and may limit your options for repayment. In most cases, the original creditor will offer better repayment options than a debt collector will.
Summary: You can pay off a debt to the original creditor if they haven't sold the account to a debt collection agency yet. There is a chance the debt may have been transferred to collections, but that doesn't mean it's too late to reach out to your creditor and settle the debt once and for all.
The best method of payment will prevent a debt collector from having access to your financial accounts. For that reason, a money order is your best option. Be sure to keep a carbon copy and receipt.
Paying won't take a collections account off your credit reports. Many people believe paying off an account in collections will remove the negative mark from their credit reports. This isn't true; if you pay an account in collections in full, it will show up on your credit reports as “paid,” but it won't disappear.
Collections accounts generally stick to your credit reports for seven years from the point the account first went delinquent, even if the account has been paid in full. But you may want them off sooner than that because unpaid collections can make you look bad to potential creditors.
What is the lowest a creditor will settle for?
Some will only settle for 75-80% of the total amount; others will settle for as a little as 33%. Looking for a place to set the bar? The American Fair Credit Counsel reports the average settlement amount is 48% of the balance. Again, start low, knowing the debt collector will start high.
Paying off collections could increase scores from the latest credit scoring models, but if your lender uses an older version, your score might not change. Regardless of whether it will raise your score quickly, paying off collection accounts is usually a good idea.
“Negotiating with a collection agency can be challenging, but it is vital to reach a fair settlement,” Raymond Quisumbing, a registered financial planner at Bizreport, said. “Offering 25%-50% of the total debt as a lump sum payment may be acceptable.
Don't provide personal or sensitive financial information
Never give out or confirm personal or sensitive financial information – such as your bank account, credit card, or full Social Security number – unless you know the company or person you are talking with is a real debt collector.
Negotiating lower settlements on outstanding debt involves communicating with your creditors and reaching an agreement to pay less than the full amount owed. Evaluate your financial situation and determine the maximum amount you can afford to pay as a lump-sum settlement: this will be the basis for your negotiation.
They gave you the money, and you should pay. The same is true even if the debt is sold and belongs to someone else. However, you have every right to dispute the debt if details are lost during the transition from the original creditor to the debt collection agency.
Ask for Goodwill Deletions
If you have an excellent credit history, you may be able to get the original creditor or collection agency to remove the derogatory mark as a favor or act of “goodwill.” You'll generally have to pay the collection account off first, though, if you haven't already done so.
If you don't think you owe the debt
If you receive a validation notice, the end date of the 30-day period will be specified. Once you've disputed the debt, the collector can't call or contact you to collect the debt until they've responded with verification of the debt.
If you notify the debt collector in writing that you dispute the debt within 30 days of receiving a validation notice, the debt collector must stop trying to collect the debt until they've provided you with verification in response to your dispute.
Debt collectors cannot harass or abuse you. They cannot swear, threaten to illegally harm you or your property, threaten you with illegal actions, or falsely threaten you with actions they do not intend to take.
Can original creditor and collection agency both report?
Once a debt is sold to a collection agency, they can begin reporting that account to the credit reporting agencies. The collection agency becomes the legal owner of the debt and has the right to begin collection efforts. Once reported, both the original account and the collection account will appear on a credit report.
And if you have multiple debt collections on your credit report, paying off a single collections account may not significantly raise your credit scores. But if you have a recent debt collection and it's the only negative item on your credit report, paying it off could have a positive effect on your score.
It may be good not to pay a collection agency in the following circ*mstances: You don't have any income or assets, and you don't plan to change that. You don't owe that debt. Your plan is to settle the debt for less than what you originally owed.
Generally speaking, having a debt listed as paid in full on your credit reports sends a more positive signal to lenders than having one or more debts listed as settled. Payment history accounts for 35% of your FICO credit score, so the fewer negative marks you have—such as late payments or settled debts—the better.
PayPal. While it's uncommon for debt collectors to accept PayPal to collect on a debt, it's possible a collector would allow this payment method. PayPal is likely safer than letting a debt collector take money from your bank account, but transfers could take several days, and there may be fees involved.
