How Are Payment Arrangements Reported to Credit Bureaus?


When facing economic hardship, receiving constant calls from bill collectors can be stressful. Calls can be prevented if you communicate with the creditor or collections agency regarding how you plan to repay your debt. Making payment arrangements can help ease your frustration and simplify your payment schedule. However, not all companies report payment arrangements to the credit bureau identically.

Terms of Arrangement

Not all payment arrangements meet the minimum requirements of your creditor. A creditor may persuade you to set up an arrangement just so that the company can ensure the debt is repaid. Request details from the creditor on how the payment arrangement affects your account standing. You want the arrangements to bring your account back into good standing or at least halt any negative reporting to the credit bureau. Always get confirmation from the creditor during your payment negotiations.

Pays As Agreed

Creditors commonly report your account to the credit bureau under the classification "Pays As Agreed" when a payment arrangement is made. However, that payment arrangement must satisfy their requirements. In cases where a creditor still reports the amount as delinquent, contact the creditor immediately to report the error on your report. In addition to the "Pays As Agreed" designation, your account may include notes regarding your specific arrangements to repay your debt.

New Credit

When you apply for new credit, your credit report shows your "Pays As Agreed" balances and sometimes notes on your account. The fact that your accounts show your commitment to repay your debt can be positive to some creditors but a red flag for others who may view your delinquency as an unnecessary risk. If you must apply for new credit at this time, speak to a representative at the company to communicate the circumstances surrounding the previous debt mismanagement to increase your chances of being approved.

Credit Scores

Some payment arrangements will still harm your credit score, which means you have fewer opportunities to qualify for new credit accounts. For example, if you are behind on your mortgage payments, your lender may agree to receive payments and postpone foreclosing on your home. However, until you repay your past due balance, your credit score is still negatively impacted each month. The "Pays As Agreed" only implies that you made a payment arrangements. Some lenders and creditors will not report a "Pays As Agreed" on a past due account until your account is current. In this case, the account is listed as "Not Paid As Agreed."

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