Introduction

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Paying a past due debt to a debt collector is a common action, but it's important to understand how this transaction impacts your credit report. Who reports this payment to the credit bureaus can depend on the nature of the debt collection process and the relationship between the collector and the original creditor.

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Understanding the Process

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When you deal with a debt collector, there are two primary scenarios to consider:

r r The Collector as an Agent of the Original Creditor: In this case, the creditor retains the original debt and the collector is merely collecting on their behalf. If you pay the collector, the payment is considered a payment to the original creditor. This payment will be reported to the credit bureaus and may show up as paid or paid late, but it's usually marked as a positive update.r The Collector as a New Debtor: If the collector has purchased the debt from the original creditor, they become the new holder of the debt. In this scenario, the original creditor will continue to report the debt as unpaid until the new holder reports that the debt has been paid. This can lead to a more negative impact on your credit score.r r

The key factor here is whether the collector has any contractual relationship with the original creditor. If they do, they are required to report the payment to the original creditor, who will then report it to the credit bureaus.

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Paying Back Multiple Times

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It's not uncommon for a debt to be sold to multiple collectors before it is eventually paid. This can lead to complications. For example, someone might pay the collector, only to find out later that they had already paid the original creditor. This process can be confusing and frustrating, but it's crucial to keep track of all payments and receive verification.

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Verification and Dispute

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Regardless of the collector's role, it's always a good idea to obtain a letter of verification after making a payment. This document can serve as proof that the debt has been settled and can be used when disputing claims on your credit report.

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When disputes arise, it's crucial to send this verification to the credit bureaus. However, it's important to note that paying a past due debt that has gone to collections rarely improves your credit score, as the delinquent account will still appear on your credit report for up to seven years.

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Conclusion

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Understanding how payments to debt collectors are reported can help you manage your credit more effectively. Whether you are dealing with an agent or a new holder of the debt, keeping track of the payments and obtaining verification is crucial. If you encounter any confusion or disputes, don't hesitate to contact the credit bureaus and the collector for clarification.

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Key Points Recap:

r r Agent of Original Creditor: Payment is reported to the original creditor, leading to positive updates on the credit report.r New Holder of Debt: Original creditor reports debt as unpaid until the new holder reports it as paid.r Verification: Get a letter of verification to support your claims during disputes with the credit bureaus.r Impact on Credit Score: Past due debt with collections will remain on the report for up to seven years.r r

For more information, consult the credit bureaus' guidelines and seek legal advice if necessary.