Advice on Settling Debt and Credit Scores

Thanks for your questions, Liz. I salute your effort to resolve your debt and improve your credit. As to whether or not you would be better off accepting the collector's settlement offer or paying in-full depends on your current credit score. Someone with very good credit would be well advised to settle accounts in full, but your email mentions that you have two charged-off accounts (at least), so the two options are likely to be similar in their credit improvement effects, so long as the end result is the account being reported as resolved and having a zero balance owed.

You also mention that you don't know how to negotiate with a creditor, so here are a few suggestions I hope you find helpful:

Be polite. This will get you further than anything else when negotiating with a creditor. After all, collection agents are humans too. They spend most of their time dealing with angry and difficult customers, so you may find that by being courteous the creditor will be more likely to give you what you want. Like my grandmother used to say "You'll catch more flies with honey than vinegar."

Be specific. Always let the creditor know that your goal is to clean up your credit and that you would like to have them remove their negative item from your credit report as part of your payment agreement. They don't have to grant your request, but if you don't ask, the answer is always no.

Be flexible. Let the creditor know that you are willing to compromise. Creditors need to meet their objectives, too. If you present a "win-win" situation, then the creditor can feel good about the negotiation.

Be realistic. Some creditors will refuse to negotiate. Don't take it personally. Wait a few months, and then try again.

Be persistent. The credit repair process takes time and effort. And as with many things in life, hard work and persistence will help improve your chances of success.

Get It In Writing. It's important, when resolving a debt, to always get the agreement in writing before sending your money, and to have them also send a letter confirming that the account is resolved and at a zero balance once they receive your payment. This is the proof you'll need in cases where a creditor fails to properly report your payment to the credit bureaus or tries to make additional claims on the account in the future. You can ask them to send the agreement letter by mail or fax, which most will be happy to do to ensure your payment. Make sure their offer letter is on the creditor's letterhead & signed. Also, while negotiating with creditors, it never hurts to ask for the negative item to be deleted in return for payment.

Finally, on the account you previously settled with an original creditor, but are now being asked to pay again by a collection agency. Do not pay twice. Find the check, bank statement, or some proof of your payment along with the any other documentation regarding that account and then contact the original creditor and explain that they need to recall this account from the collection agency and for them to kindly remove this inaccurate item from your credit report. If they are un willing to do so, your next step would be to dispute it directly with the credit bureau showing the item. The FTC has a terrific website covering credit reports, including sample forms and instructions on how to address inaccuracies on your report (the reports are infamous for containing errors). Visit www.ftc.gov for more information.

As you undertake all this, it is also a good idea to keep an eye on your credit report and to make sure that the changes in these accounts are accurately reflected in your report. You can receive a free copy at www.annualcreditreport.com. (This is the only official website for getting a free annual credit report from all three credit bureaus – beware, as there are a lot of other websites offering “free” reports that are not, in fact, “free.”).

Keep up the good work and eventually you see your credit score rise.

Best,

Bill

www.bills.com/