Negotiating Credit Reports With Collections

Credit card companies and other lenders often charge off accounts after six months of nonpayment, according to Bankrate columnist Steve Bucci. This does not stop collection efforts, and the debt may be sold to a collection agency. The charge-off is a serious blemish on your credit report that brings down your score. A collection agency's priority is to get your money, so you can often use that as leverage to negotiate for a changed credit report entry.

Instructions

1

Review your budget to see how much you can offer to settle your bill with the collection agency. Debt is sold for less than its face value, so the collector can accept a lower offer and still make a profit.

2

Call the collection agency and offer a settlement that is lower than what you can actually afford to pay, Bankrate recommends. The agency might accept your offer, or it might insist on a higher amount. Leave yourself some negotiating room. Tape the conversation if possible so you have proof of any agreements, advises Gerri Detweiler, author of "The Ultimate Credit Handbook." State law may require you to tell the agent you are taping the call.

3

Tell the agent you want your credit report entry changed once you agree on a settlement amount. Ask for the item to be removed or changed to "paid as agreed status." If the collector will not agree, ask for a "paid in full" designation, which is more positive than "paid in settlement."

4

Ask for a written agreement that outlines the settlement terms, including the credit report changes, before you make your payment. Collection agencies often pressure you to make immediate payment, warns WI consumer protection attorney Mary Fons, but this removes all your leverage. You need written proof so you can force the agency to follow through with its side of the bargain.

5

Check your credit reports after paying your settlement to ensure the collection agency changed the entry. The Federal Trade Commission explains that you are legally entitled to one free credit report every year from TransUnion, Experian and Equifax if you place your order with annualcreditreport.com. Dispute the item with the credit bureaus and include a copy of your agreement, if it has not been changed.