Congratulations! You’ve finished paying off a collections account. You’ve taken a giant leap forwards in your financial wellbeing.
No more calls and letters from collection agencies. No more hassle. You’re free.
However, before you pour a (large) glass of wine to celebrate, you’ll want to make sure this problem is gone for good. Here are four things to do after paying off a collections account.
Most likely, your debt was sold to a collection agency by your original lender.
This is how it landed in a collections account.
It’s unnerving, because you’re paying off a collections account with a company you don’t know. Thankfully, most collectors are registered with the FCA (Financial Conduct Authority) and must respect your rights as a borrower.
Nevertheless, unscrupulous agencies do exist.
After paying off a collections account, you don’t want to risk having your debt re-sold. You don’t want anyone chasing you for further payments.
So print all of your bank statements proving your installments were paid.
These records may also come in handy when applying for a mortgage or credit card.
After paying off a collections account, wait a few days.
Then call the agency to make sure your payment has processed.
Once you’ve confirmed your balance is zero, ask for a written confirmation and receipt. Keep this with your bank records in case it’s needed for proof.
Also, ask to be removed from their records.
This prevents further hassle, and they are legally required to follow your wishes.
Even after paying off a collections account, your credit score may be affected.
It suggests missed payments in the past. Your original lender likely sold the debt at a loss, and will report negatively to other creditors.
But don’t panic.
Time heals this wound.
Six years after paying off a collections account, this blemish should have left your credit report.
And you can take some action to solve this problem sooner.
Experian delivers detailed, up-to-date credit reports. If there’s anything harming your score, you can possibly have it deleted. Or, failing that, you can ask to leave a note explaining the problem and how it was resolved.
This shows other lenders you’re responsible.
Also, consider writing to your original lender. Ask them to remove the mark against you.
You’d be surprised how often this works.
Keep your letter short and polite. Avoid blaming the lender. Briefly list the reasons you had trouble paying and how you resolved the issue.
Paying off a collections account is a huge step forwards in your finances.
Now it’s time to make this change permanent.
List all of your outstanding debts, if any. Note down the balances, interest rates and minimum payments for each.
Pay down your highest-interest debts first. Do this as quick as possible, while paying minimum instalments on the rest.
For most people, this is the fastest, most efficient way to make it happen.
You’re saving money faster.
Your credit score improves.
And when you follow the steps above, your past problems are less likely to haunt you in the future.