Have you have been making debt payments for several months and are now down to the last payment? If yes, then you'll require a record from the collection agency acknowledging you've paid the debt in full. This is when you'll need a Paid in Full letter.

You should send a Paid in Full letter to your creditor or collection agency once you have paid the agreed amount in full. A Paid in Full letter notifies your creditor or collection agency of your final debt payment. It also requests acknowledgement of the completed debt payment in writing. The letter not only informs the agency of the final and last payment but also warns of repeated collection efforts. Alternatively, you can also receive a "Paid in Full" letter from the creditor or collection agency informing you that the debt has been paid in full.

Generally, once you pay off the debt in full, the collection agency informs the credit bureaus about it. The credit bureau in turn should update your account status as "Paid" on your credit report. You should pull your credit report and find out whether your account status has been updated or not.

Sample Paid in Full letter

Your Name __________
Your Address __________
Your Phone # __________