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How to Pay a Bill in Collections and Boost Your Credit Score

Don’t let those collections accounts sit. Pay them off using these steps.

Justin Cupler

Contributing Writer at Tally

April 22, 2022

Any consumer debt, including auto loans, personal loans, credit cards and more, can end up in collections if your late payments become excessive. This typically happens when your payment is 180 days late and the creditor performs a charge off, which is when the creditor decides attempting to collect is useless and uses the unpaid balance as a tax write-off.

The creditor may also recoup some of its losses by selling your debt at a deep discount  to a collection agency. This agency then becomes the rightful owner of your debt and can begin attempting to collect the total debt balance from you.

Collections accounts can significantly impact your credit score. Plus, there are many misconceptions about paying collections accounts, such as the idea that paying them will actually hurt your credit score. However, the sooner you repay your collections accounts, the better it is for your personal finances.

Below, we outline how to pay a bill in collections and how it can impact your credit score.

How to pay a bill in collections

By following these steps, you can pay off a bill from a collection agency and be back on track to building a good credit score.


1. Verify the debt

Before you consider paying a collection agency, make sure the debt is yours and accurate. Check the account balance against your records to verify the amount of the collections is correct and the account is indeed in default.

If something doesn’t seem right about the debt, the Consumer Financial Protection Bureau says to dispute it. Do so by sending the collections company a dated dispute letter within 30 days of the company contacting you about the debt. 

Once it receives the letter, the debt collection agency must cease all collections activity, including phone calls, verify the debt, then send you the information used to verify the unpaid debt, like a contract signed by you.

Be sure to send this validation request as a certified letter with a return receipt so you know when the collection company has received it.

If the collection agency finds a discrepancy, you could owe less or nothing.

2. Confirm the debt is still within the statute of limitations

Each state has its own rules on how long a debt collector can attempt to collect a debt.With a statute of limitations tool, you can determine how long your state permits debt collection activity.

Some states also allow zombie debt, which is when a collection agency collects even a small payment on a debt — willingly or through a judgment or wage garnishment — which resets the clock on the statute of limitations.

If your debt is outside the statute of limitations, don’t pay anything or you risk restarting the clock.

3. Determine what you can pay

Review your monthly budget closely and see what you can afford to pay per month or in a lump sum on your collections account. To free up enough cash to repay the debt, you may need to cut less-important items, such as eliminating streaming services and downgrading cell phone plans.

4. Negotiate account deletion

If you plan to pay the collection account in full in a single lump-sum payment, you’ll still have a $0 collection account on your credit report. The latest FICO 9 credit scoring model ignores all $0 balance collection accounts, but not all creditors use FICO 9. As a result, creditors using the FICO 8 or older scoring method may see a lower credit score.

You can ensure credit score improvement in all cases by negotiating to have the debt wiped off your credit report at all three credit bureaus. Not all collection agencies will agree to this but you won’t know until you ask.

5. Negotiate a payment plan

If you can’t pay in full, you’ll want to contact the collection agency and negotiate a monthly payment plan. Let the agency know how much you can afford to pay and let them determine how many payments you must make to pay off the past-due account. Some debt collectors have fixed payment options that you’ll have to adjust your budget to match.

You can also ask if the company is willing to delete the account after you’ve paid in full, just like above. It’s unlikely the company will but it’s worth trying.

6. Request the payment plan and agreement in writing

Document all your negotiations on your end and request a written agreement from the collection company outlining the agreed-upon terms. This helps you keep track of what you agreed to and ensures you have official documentation outlining the plan, should the collection agency break the terms.

7. Complete the repayment terms and get confirmation

Complete the repayment plan as agreed upon, whether by sending a check or automatic withdrawals from your bank account. Once completed, check your credit report to ensure the account was updated as agreed. It could take up to 30 days for the changes to show on your Experian, Equifax and TransUnion credit reports.

After completing the payment terms, you should also contact the debt collector and request a letter of completion. This is your proof the debt is paid in full and you should file this somewhere safe in case an issue arises in the future.

Paying collections accounts can improve your credit score

FICO is slowly rolling out its latest credit scoring model, FICO Score 9. Two key parts of FICO 9 are that it gives less weight to medical debt and ignores all $0 balance collection accounts. So, in the FICO 9 model, the paid-off collection account will likely help your credit score.

However, many lenders haven’t switched to the new credit model yet and still use FICO 8. Unfortunately, a collection account still counts against you on FICO 8, regardless of its payment status.

Negotiating a full deletion of the collection account may help improve your credit score, regardless of the scoring model.

Always understand your debt collection rights

The federal government put the fair debt collection practices act (FDCPA) in place to protect consumers from harassing and unethical debt collection practices. FDCPA is a far-reaching law but the areas that generally impact consumers are:

  • Contact time and place: A debt collector may not contact you before 8:00 a.m. or after 9:00 p.m. local time and cannot contact you at work if you tell them you cannot receive calls there.

  • Harassment: It is illegal for a debt collector to harass you or others via phone or another medium over your debt.

  • Attorney representation: If the debt collector is aware you are represented by an attorney regarding the debt and has the contact information for the attorney, it can contact only the attorney.

Handle your collections accounts today

The sooner you get on the path of repaying your collections accounts, the sooner you’ll see improvements to your credit score. And learning how to pay a bill in collections is a big part of that process. Yes, not all lenders use the new FICO 9 model that ignores paid-off collections but the rollout is in progress. Soon, it’ll be the preferred scoring model.

Getting ahead of your collections accounts now means you’re better prepared for when the FICO 9 model is fully adopted.

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