How do I Pay Collections for Credit Cards?
- 1). Pull a copy of your credit report before contacting the collection agency. Visit Annual Credit Report for a free copy of this report. Look for the account in collections. This account may show up as a trade line (like normal accounts) or as a public record (if the collection agency already took the account to court). Verify the balance and payment on the account.
- 2). Calculate your ability to repay the debt. If you are experiencing severe financial difficulties, you may need to file for bankruptcy instead of paying. However, if you can pay, you should start paying the collections account to avoid further damage to your credit. To calculate your ability, divide the total of all monthly expenses by your total gross income. A good ratio is below 50 percent.
- 3). Contact the collection agency to open negotiations. Be careful when discussing the sum owed, though. If you decide to settle for an amount less than what is owed, you will be agreeing to a legal "settlement," which will further hurt your credit. Instead, negotiate late fees, over limit fees and delinquency fees. These can be eliminated without a settlement.
- 4). Get a repayment agreement in writing. Do not start paying a collection agency until you have the agreement in writing, have reviewed it and consent to the terms. Fax, mail or email the signed agreement to the collection agency.
- 5). Pay the account monthly as agreed. When the account is paid in full, make sure to get a paid in full statement showing last payment amount, total balance (zero) and last payment date. This must be retained with your financial records.
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