Should I Pay the Original Creditor or the Debt Collector?

If you have an unpaid debt that has been sent to collections, understanding whether you should pay the original creditor or a debt collector can save you money and help protect your credit. Negotiating repayment directly with the creditor is often more beneficial because creditors typically offer more flexible payment plans and settlements. However, if the creditor has already sold the debt to a collection agency, you'll need to pay the collector instead.

Learning how debt collection agencies operate, the differences between assigned and sold debts, and your legal protections under the federal Fair Debt Collection Practices Act (FDCPA) can enable you to make the best payment choice and avoid common pitfalls, like paying the wrong party. Plus, knowing your options when dealing with a creditor vs. a debt collector can make debt resolution less stressful and more effective.

Should You Pay a Collection Agency or the Original Creditor?

Generally, paying the original creditor rather than a debt collector is better, even if it is a debt collector who's contacting you about the debt. The creditor has more discretion and flexibility in negotiating payment terms with you. And because that company might see you as a former and possibly future customer, it might be more willing to offer you a deal. Depending on your circumstances, the creditor might let you make a lump-sum payment or a monthly payment arrangement.

However, whether you can work with the original creditor depends on whether the creditor assigned the debt to a collector or sold it to them. If the creditor sold the debt to a collection agency, you can't negotiate or pay the original creditor. Because the original creditor no longer owns the debt, paying that company wouldn't satisfy the debt you now owe the collector. However, if the debt is merely assigned to the collector, you can still deal with the creditor.

What's the Difference Between a Creditor and a Debt Collector?

The federal FDCPA sets out the differences between creditors and debt collectors. A "creditor" is the original lender who extended the credit. A "debt collector" is a business that regularly engages in the business of collecting debts owed to others. The term also applies to debt buyers who purchase and collect debts on their own behalf.

The FDCPA generally applies only to third-party debt collectors, not original creditors or their employees.

How Debt Collection Agencies Work: Assigned vs. Sold Accounts

Again, debt collectors are third-party organizations that often buy delinquent debts from creditors and try to collect on them. Or, sometimes, the creditor assigns the debt to a collection agency, and the agency tries to collect on behalf of the creditor. With an assigned debt, the collector generally keeps a percentage of the amount it collects and gives the rest to the creditor. If it purchases the debt, the collection agency keeps the full amount.

After the creditor assigns your debt to a debt collector or the agency buys the debt, the creditor gives up on trying to recover the debt. Then, the collection agency will probably contact you pretty quickly. Debt collection agencies know that the quicker (and more often) they contact you, the more likely they are to get you to pay up. So, you might get calls or angry texts from a pushy debt collector who isn't too concerned about violating the federal FDCPA or any applicable state law. They're mostly just concerned about separating you from your money.

How Do You Find Out If Your Debt Has Been Sent to Collections?

The easiest way to determine if your debt has been sent to collections is to review your credit reports. Once a debt is sent to a collection agency, the debt is reported as a separate account (tradeline) on your credit reports.

You can get copies of your credit reports from the three major credit reporting bureaus (Equifax, Experian, and TransUnion) from the Annual Credit Report Service at www.annualcreditreport.com. You can get free weekly reports online, a service the credit reporting bureaus started during the pandemic and decided to make permanent.

Pros and Cons of Paying the Creditor vs. Collection Agencies

The biggest advantage of paying the original creditor is flexibility. The creditor will typically have more discretion to work with you on repayment options, such as a repayment plan, settlement, or fee waiver. Also, they might want to keep you as a customer. Once the debt is sold to a collector, the creditor usually has no options for negotiation. (If the debt is assigned to a collector, the collection agency still has final say.)

Once a debt is sold to a collection agency, you'll have to pay the collector to satisfy the debt. On the upside, debt collectors usually buy debts for pennies on the dollar, so they might be willing to accept a settlement that's less than what the creditor would have agreed to. However, debt collectors are usually more aggressive and have less incentive to offer a payment arrangement. After all, you've already defaulted on payments at least once before.

In summary, it's usually better to pay and negotiate with the original creditor. If your debt has already been sold a debt collector, negotiating a settlement might be your only option (other than bankruptcy) if they won't agree to a payment plan. No matter who you pay, be sure to get any agreement you make in writing to protect yourself.

Can You Pay Your Original Creditor Instead of a Debt Collection Agency?

Again, you can negotiate with the original creditor if the debt was assigned to the collection agency, not sold to the collector. To pay your original creditor and negotiate directly with that creditor rather than a debt collection agency, ask the collection agency for the phone number of the original creditor's collections department. Then, call the creditor and ask if you can pay the debt directly to them.

Ideally, the creditor will immediately agree to accept payment from you, and you'll work something out. Unfortunately, that doesn't always happen. The creditor might agree to work with you only if you first deal with the collection agency.

Steps to Negotiate With the Original Creditor If Your Debt Is in Collections

If the creditor agrees to negotiate with you, make sure it still owns the debt. If the collection agency bought the debt from the creditor (rather than the creditor just assigning the debt to the agency for collection), the agency owns the debt. If you negotiate with and make payments to the creditor, the collector might refuse to credit you for those payments. The FDCPA gives you the right to verify who owns the debt (see below).

But even if the original creditor still owns the debt, it doesn't have to negotiate with you. If you want to negotiate with the original creditor rather than a collector, it's best to contact them as quickly as possible after the debt goes to collection. Or, even better, start your negotiations before the debt goes to collections.

Steps to Negotiate Directly With the Creditor

If you have money available, you could contact the creditor and offer a lump-sum settlement. Creditors are often willing to settle a debt for less than they're owed if it means getting a decent amount of cash soon. Or you could try to work out a payment plan. These are the same options available if you negotiated with the collector, although the creditor might be more flexible and willing to compromise. (Collectors are generally less willing to accept a repayment plan over a lump-sum settlement because they know you might default on payments again in the future.)

Get Your Repayment Agreement in Writing

Get any agreement you reach in writing—preferably, in a document the creditor or collector provides to you. However, a letter from you to the creditor or collector confirming the agreement is better than nothing. Part of the written agreement should be an acknowledgment that the party accepting payment owns the debt or is working on behalf of the debt owner.

How Paying a Creditor or Debt Collector Affects Your Credit Report

After paying a creditor or debt collector, the status of the debt on your credit report changes, but doesn't go away. Creditors can report delinquencies to the credit reporting bureaus for up to seven years from the due date for the last scheduled payment before the delinquency occurred. An account sent to a collection agency can be reported for seven years and 180 days from the date of the delinquency that led the account to collections. (15 U.S.C. § 1681c (2025).)

If you negotiate a settlement, you can ask to have negative information about the debt removed from your credit files or shown as payment in full if you make the payments under the new agreement. The creditor or collector might not agree, but it doesn't hurt to ask.

Also, paying a debt in collections can help your credit scores because newer scoring models won't use this information against you. In other words, paying a debt that's in collections can help your credit over time, even though it remains on your credit reports.

Legal Rights Under the Fair Debt Collection Practices Act

The federal FDCPA (15 U.S.C. § 1692 and following) protects debtors from harassment, deception, and unfair treatment by third-party debt collectors. It also gives debtors the right to validate a debt and verify who actually owns it. Some states also have laws that cover debt collections.

Frequently Asked Questions (FAQs)

Here are some frequently asked questions about paying creditors and collection agencies.

What happens if I pay the wrong party?

If you pay a company or collector that doesn't actually own or service your debt, that payment usually doesn't count toward your owed balance. The legitimate creditor or current debt owner can still legally pursue you for the full amount because your payment went to someone with no legal claim to it. This situation can arise when consumers misunderstand whether a debt was assigned or sold.

You can protect yourself by requesting written validation of the debt before you pay it. Again, the federal FDCPA gives you the right to ask any collector to prove they own or have the authority to collect the debt. Unless they verify it, don't send them money. If you already paid the wrong party, you might need to dispute the charge with your bank and alert the credit bureaus that you made a mistake.

Can I get collection accounts removed from my credit report?

You might be able to negotiate a settlement of the debt that includes an agreement to delete it from your reports. This kind of agreement is sometimes called a "pay for delete" agreement. Also, if the debt is reported in error, you can dispute it with the credit reporting agencies and request deletion.

Will paying off collections improve my credit score?

Paying off a debt in collections won't erase it from your credit report. But it can improve your credit scores (which are based on what's in your credit reports). Some newer credit scoring models ignore paid collection accounts when calculating a score. Older models usually still count them as negative but as less damaging than unpaid ones.

Paying off debts is also a step in the right direction for rebuilding your credit. This step, along with paying your bills on time, using credit wisely in the future, and reducing your credit utilization ratio, will help in the process of repairing your credit.

Talk to a Lawyer About Dealing With Creditors or Collection Agencies

If you need help dealing with a creditor or debt collector or would prefer someone else handle your debt negotiations, consider talking to a debt settlement lawyer.