June 12th, 2012
I have an account in collections. What should I do?
Have you ever received a notice from a collections agency? You’re not alone. Nearly half of Credit Karma members currently have at least one derogatory mark, such as an account in collections, on their credit report. In our Credit Advice Center, members often ask about the best way to deal with debt collectors.
Here’s a quick step-by-step guide on what to do when facing an account in collections.
Check your credit score
If you received a letter or a call from a collections agency, first find out how the new collections account is affecting your credit score. The new account should show up in your Credit Report Card under derogatory marks, as well as your Credit Karma Notifications in your Score Center. You’ll be able to see how your score was impacted by the new derogatory mark.
Draft a debt validation letter
According to the Federal Debt Collection Practices Act (FDCPA), a collections agency must validate that they’re legally allowed to collect on your debt. Send a written request of validation within thirty days of receiving the first written notice of the debt and you’ll be within your rights, according to the FDCPA. You can see an example of a debt validation letter here.
The debt collector must stop attempting to collect the debt from you until they’ve sent a sufficient response to your letter. If they can’t validate your debt, you shouldn’t need to worry about repaying them. However, if they can validate it, you should work out a payment plan.
Negotiate an update to your credit report
If you have the funds to pay back the debt, first see if you can have the derogatory mark removed from your credit report. Write to the debt collector to ask if they’ll agree to remove the account from your reports if you pay it in full or pay an agreed-upon amount as settlement. This is called a “pay for delete” letter (example here). Do it in writing so that you retain a physical copy of the communication.
If the debt collector won’t agree to remove the account from your report (most probably won’t), write another letter to see if he’ll agree to update it to “Paid in full” once you’ve paid the debt. If you’ll be settling the debt (instead of paying it in full), he may agree to mark the account as “Paid – settled” instead.
Pay off your debt
Once you’ve negotiated with your debt collector, pay your debt as agreed. Keep proof of your payment for your records.
Monitor your credit report and score
When the debt collector has received and processed your payment, he should update your credit report to the status that you agreed upon: either by removing the derogatory mark, marking the account as “Paid in full,” or marking it as “Paid – settled.” If your credit report hasn’t been updated, you can dispute the account with the credit bureau or bureaus still reporting it. Here’s a guide on how to dispute credit report errors.
Check your credit score regularly to see how it’s affected by the account being removed or adjusted. Make sure you’re enrolled in credit monitoring so you can watch for a notification about the change.
Bethy Hardeman is the Social Media Manager and Writer at Credit Karma.
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Can the “debt validation letter” be sent to the collector if the debt has been transferred to a new company? The debt is several years old, but I just got a letter from a different collector. I think maybe it was “resold” to this another collector?
That will happen. You should send the letter to the collector who currently has your debt. The previous collector no longer has any interest in collecting your debt if they’ve sold it to another company.
I had a Workers Compensation claim that the third party contracted by my employer (Broadspire) has yet to pay. Every month I would receive the medical bills, and my personal insurance was listed as secondary after the workers comp. I’ve now been sent to collections. The debt is $115 which I can and would pay if it were my bill, but it’s not. Broadspire should be the one being sent to collections, not me. I was told by the hospital billing staff that since my debt was less than $150 it wouldn’t appear on my credit report. Is there any validity to this?
I don’t recognize the accounts “in collection” how do I find out who they are from?
Pull a copy of your full TransUnion credit report from AnnualCreditReport.com – that should give you the details.
If they sold it then why are they collection agency coming after me for it? Or do they sell your information along with it? If somebody else buys something, it now belongs to you. I suggest you find the right form on IRS.gov
If you DO NOT know what you are doing, don’t do, don’t handle, don’t transact, don’t report, don’t call about another person’s financial and monetary business. IF you are not sure and somebody just told you “yeah do this that’s what I have always done” don’t do it.
I have a four year old delinquent bank account of $122 and I would like to pay it but don’t know who to pay. I called the bank and they said to it pay them but if they sold the debt to collections than why would I pay them and not the collections agency. I have not received any letters from the collections agency but its on my report… So how do I find out who to pay to have it removed?! Please help!
Check your full credit report at AnnualCreditReport.com – that’ll give you the details of who currently owns the debt. You’re right – it might be with a collections agency, which means paying the bank might not help. Once you know WHO has the debt, you can follow the rest of the suggestions here. If your debt is with a collections agency, make SURE to get everything they agree to in writing. This can be a great help down the road. Good luck!
Thanks for the advice and sorry to keep bothering you but I looked at my report from last year and looked at my report just now from this year but all it says is the banks name and that it was charged off… Estimated removal 07/2014… There’s a number for transunion… Would they tell me if I called or should I write and request who owns the debt now?
Hm – it does sound like the debt has been sold to a third party (that’s what “charged off” typically means), but the details of the third party aren’t there, unless it’s a collections department within the bank. Contact the bank to see who the sold the debt to. They would have more information than TransUnion. If you call, make sure to take down the name of the person you speak to and a case number (if applicable).
Thanks so much (= I really appreciate it.
You’re welcome! Good luck with everything.
i disputed an account through equifax showing up in collections on thursday and faxed proof of account paid in full on friday to the creditor. logged into credit karma sunday and it was off . does that ean its removed?
So on my credit report it lists kay jewelers and I called to get the matter cleared up and discuss a settlement. they told me they had sold it to a collections company and gave me the number. My question is how can kay jewelers still be on the report and the collections company is not. If the collections company owns the account don’t they have to update it? it has been this ways for over 6 months.
If you have a phone bill passed on to a debt collector, you then pay your bill they then re connect you, your balance is now nil… and you’ve received a letter from a debt collection firm demanding balance payment on this debt,do you pay them both?
That’s a great question! We encourage you to ask it in our Credit Advice Center. Chances are a Credit Karma member has had a similar experience and would be happy to share.
I don’t recognize the accounts “in collection” how do I find out who they are from?
Hi Dwayne, we’d recommend pulling your full credit report at http://www.AnnualCreditReport.com to learn more about your accounts in collections.
I checked my credit score several months ago and found that one debt was listed with two different collection agencies? I was looking to make payment arrangements to pay it off, but I don’t want to pay the wrong people. Also, if the first collection agency sold it, shouldn’t they take their credit posting off? I don’t like having two listings for one debt, it makes it look like I have two debts instead of one.
Hello! Wish I had your website when I first began paying this collection agency. I have heard nothing but bad reports about them. MGM Collections. My husband set a plan with them approximately two years ago. He NEVER received anything in writing from them stating the ending date which we showed this month which I marked on my check as BALANCE PAID.
I have kept every check stub and we have every mail receipt of the check sent so we would have a signature. I sent a letter with the final check and asked them to send a balance paid letter. (GOOD LUCK) What should I do at this point – we have paid them $277.00 a month until 2500.00 was met. This was originally a Home Depot collection handed over to someone and then to MGM.
Thank you for your assistance.
Carolyn
I have an account on my transunion report for dental work that i co-signed for my friend for but never got done. No work whatsoever was done to her but they still charged her and charged it off to a collection agency that now appears on my credit report negatively. I have already disputed the charge due to this reason but it still appears negatively on my report…what do i do?
I have tried to keep my credit in good standing till I got so sick and had to go to the emergency room. I had no stable job at the time and had a lot of financial difficulty. I started working two weeks ago and was making plans to start making payments when I suddenly received a letter from the collection agency. The letter stated:”Warning our client is a credit reporting client. Your credit may have a negative impact if we do not hear from you.”
I went ahead and pulled up my credit report from Transunion but it hasn’t shown up there yet. Today I went to the my creditor’s website to see if my account was still open. It was still opened so I called them to find out if i could pay through them but they told me to deal with the collection agency but not them. At this point, i know I have to start some kind of conversation with the collection agency but i just dont know how (i have 30 days to respond). Also, I want to know how long it takes to show up on your credit. Will paying it off immediately prevent them from putting it out on my record? Help! I know i’ve written too much but I’m just desperate and frustrated. Thanks for your help.
Hi Nelly! It should show up on your credit report within 30 days. You can read more about how to deal with accounts in collections here: http://www.creditkarma.com/article/accounts-in-collections and here: http://blog.creditkarma.com/debt/i-have-an-account-in-collections-what-should-i-do/. Hope that helps!
So I called the collection agency today and as expected she was very brutal. They want me to settle or $268 paid within two months. I told her I could not afford to do that within two months but could pay it off in three months. She told I only had two months and that it’s going to show up on my credit on the 26th if I don’t come up with the payment. I in turn requested her to send me a new bill showing the settlement amount as the amount I owe but she told me she wouldn’t do that and kept threatening me with putting it on my credit on the 26th. I’m going through financial crisis right now. I’m solely responsible for my 7 yr old’s upkeep and I had to undergo surgery a week ago. I just don’t have the money right now. My credit score is 726 right now. How much will it be impacted if I get the debt on my credit report? Thanks
Hey Nelly, I’m really sorry for what you’re going through. I’d advise checking out our credit simulator to see how this will affect your credit. You can also read more here: http://www.creditkarma.com/article/accounts-in-collections
How do I go about getting the collection agency’s contact information?
Hey Lisa, I’d advise pulling your full credit reports at http://www.annualcreditreport.com.
I just got back over seas and checked my credit and it says I have two debts in collection and I tried to see what it was for but can’t find it. Help please? And I havn’t gotten any phone calls or any mail saying I owe anything.
Hi Katrina, I’d recommend pulling your full credit reports at http://www.annualcreditreport.com to learn more about those two accounts in collections.
I have 5 accounts listed on my credit report for the same debt with the same collection agency. How do I get the excess accounts removed from my credit report. Why would the same debt be listed 5 times.
Hi, Rhonda! Credit bureaus makes mistakes, and it’s up to you to keep them in line. Read this blog post on how to dispute errors on your credit report: http://blog.creditkarma.com/credit-101/credit-report/5-steps-to-cleaning-up-credit-report-errors/
Hi,
My wife followed your advice and sent a PFD letter to a CA over about a $200 old electric bill. She sent it certified mail on Tuesday offering to pay in full in exchange for all info being removed, then today (Thursday) CreditKarma had an alert that said “1 account has gone into collections” and when I open the alert, it says “The following accounts are now in collections since your last update on Mar 6, 2013:” It’s the same CA for the same amount.
What does this mean? I read in some places that some CAs “re-date” the collection account, and that since an offer was made, they can do so… other places reference the FCRA stating that re-dating the debt is illegal.
And if they don’t remove the negative mark, what is the benefit in paying off the old collections bill anyway when I could use that money to pay down one of her cards lowering the CC utilization.
Hey Eric,
That’s a tough question to answer, since all situations are unique and we don’t know all the details. I’d recommend describing your situation in detail and going here to get recommendations from the Credit Karma community. Good luck!
I have a bill in collections but I’ve lost my letter I received from them. How can I find out which agency my collections is with??
Hey Karl! Try pulling your full credit reports- they usually have more information about the collection agencies on reports.
I had great credit until the real estate market crashed. I am now retired with only a small SS check each month. I have several (4) bills I could not keep up. I tried talking to them and they were very nasty to me. I have since not taken any of their calls…one place calls me at least 5 times a day. I do not answer. Will these debts just fall off after 7 years? It looks like these debts have been sold over and over…I can’t make payments as I do not make enough money. I do not want to file bankruptcy if I don’t have to. What is the best thing for me to do? Thanks in advance!
Hey Ann, I’d recommend checking our advice and learning center to see what other CK members think. Chances are someone else in the Credit Karma community has faced the same issue you have, or has posed a similar question in our online community. If not, don’t be afraid to make your voice heard! Post your own question for others to answer.
I was wondering if you offer to pay a settlement of the amount owed and ask for it to be marked as “paid in full” and they refuse what should you try to do next?
I have 4 old medical bills in collections with one collector on my credit report but recently I entered into agreement with another collector for the same bills (unknowingly). The 2nd collector that I have been making payments to for 4 months does not report the debt at all on my credit report. In addition the collector has me owing for one bill a larger amount than the actual balance as I believe I made some sort of payment on this a long time ago. Please help!! Do I dispute???
Hi Nicole, great question! We’d recommend asking your question to our Advice and Learning Center. There are lots of friendly and knowledgeable Credit Karma members who can help you out there.
I proved a $1,700.00 Sprint/Nextel debt was not mine and they have written me back saying they acknowledge that the debt was fraud but it is still showing up on my reports on Credit Karma. When will this fall off?
Hi Nathan,
We get all of our information from TransUnion, so you can expect it to fall off whenever it falls off your TransUnion report. In most cases, this should happen within 30 days. Hope that helps!