What Does it Mean When a Collection Agency Reports a Paid in Full?

Many consumers who have had credit problems in the past find themselves receiving notices from a debt collector. Once the consumer pays off the collection account, the debt collector may update the status on their credit report to "paid in full." However, the change in status can still have an effect on the consumer.

Debt Collectors

Whenever a customer fails to make a payment on a credit card, the financial institution will write off the debt and sell it to a collection agency. Typically, this occurs after the consumer fails to pay his credit card bill for 120 to 180 days, according to Bankrate. Once the collection agency purchases the debt, they will list the account on the consumer's credit report and a debt collector will attempt to collect the debt. Debt collectors attempt to collect debts in writing and over the phone.

Effects of Debt Collection Reports

Anytime the original creditor sells a debt to a debt collection agency, the consumer will get two negative marks on his credit report. The first mark comes from the original creditor reporting the account as a charge-off, meaning the consumer failed to pay his debt. The second mark comes from the debt collection agency listing the outstanding collection. Both marks will remain on the consumer's credit report for seven years, according to Bankrate, and will lower the consumer's credit score. Having these marks on a credit score may make it difficult for the consumer to obtain new credit, especially while the debt is outstanding.

Dealing With Debt Collectors

Consumers can negotiate with a debt collection agency to pay off their debt. Many collection agencies are willing to work with creditors, and will often settle the debt for a portion of the full amount or make monthly payment arrangements. Consumers should get any settlement amount or payment arrangement in writing before sending in payment to the collection agency. The consumer should also request that the collection agency report the debt as "paid as agreed" or "paid in full." While the file from the collection agency will remain on the consumer's credit report after she pays the debt, updating the status will show future potential lenders that the consumer handled her past bad debts.

Tips

Creditors, debt collectors and the credit bureaus can make mistakes. Consumers should research any debt collection notice they receive and verify that the debt does belong to them before making any payments. If the debt does not belong to them, the creditor can request that the original creditor, the collection agency and the credit bureaus validate the debt in writing. By law, creditors have 30 days to validate a debt, according to Bankrate. If the creditors cannot validate the debt, the credit bureau must remove the listing from the consumer's credit report and the debt collection agency must stop attempting to collect the debt.