Is It Worth Paying Back a Collection Agency?

When a creditor cannot collect from you, it will usually write off your account and transfer the account to a third party for collection. These third-party debt collectors, or "collection agencies," work in conjunction with creditors or alone to recover past due debts. Depending on your situation, paying a collection agency may not benefit you in any way.

Age of Debt

One incentive many consumers have for paying off past due debt is the possibility that, should they fail to do so, they could face legal action. Each state restricts the number of years a creditor has to seek recourse for unpaid debts through a lawsuit by setting a statute of limitations for legal action. If a collection agency can no longer sue you, leaving your debt unpaid will not result in a court judgment, garnishment, a lien or any other unpleasant consequence you may otherwise face as the result of debt-collection lawsuit.

If you make a partial payment on your debt, however, you could reset the statute of limitations, depending on your state's laws. When you reset the statute of limitations, the collection agency once again has the right to file a lawsuit against you -- even if you make regular payments.

Credit Reporting Period

Your original creditor and the collection agency both submit reports of your outstanding debt to the credit bureaus. These reports appear within your credit record and renders future creditors less likely to work with you, as individuals with poor credit ratings pose a higher than average lending risk.

Seven years and 180 days from the date you defaulted on the debt, the Fair Credit Reporting Act requires the credit bureaus to delete credit information connected to the debt from your file. Paying off the debt only benefits your credit if the collection agency removes its negative report as a result. Once the federal reporting period expires, however, the debt vanishes from your credit for good -- eliminating any incentive you may have previously had to pay off the collection account in exchange for early credit removal.

Moral Considerations

Even if paying the collection agency does not benefit you, that does not mean that you should necessarily leave the account unpaid. Unpaid debts are valid until resolved through payment or discharged in a bankruptcy -- regardless of whether the creditor can legally sue or the debt still shows up on your credit report. For many consumers, paying off debts is a matter of honesty. If unresolved debt leaves you with guilt, paying the collection agency is worth it -- regardless of how old the debt is and whether or not leaving it unpaid carries any consequences.

Eliminating Reminders

Just because the statute of limitations has expired in your state or the collection account no longer appears on your credit file, that does not mean that the collection agency automatically stops contacting you. Should you choose to ignore an old collection account, you can legally eliminate constant reminders that you have yet to pay the debt. The Fair Debt Collections Practices Act notes that you can send the collection agency a letter stipulating that it must stop contacting you. If the debt collection letters and calls continue after you request that the company discontinue its debt recovery efforts, you can sue the collection agency for harassment.