How to Clear Settlements on a Credit Report

Settlements let you clear up old debts for less than the original account balance. Creditors usually accept less than the face value on old debts that were charged off after several months of non-payment. This activity does not automatically help your credit report, though. Other lenders can still see that the account was severely delinquent, even though it was eventually paid. You must clear settlements from your reports by negotiating special terms with the creditors before you send any money.

Instructions

1

Calculate a realistic amount that you can afford to pay as a settlement, based on your current income and financial responsibilities. Many creditors are willing to accept less than what you originally owed, according to Steve Bucci, Bankrate's Debt Adviser columnist. Make a lump sum offer and be prepared to negotiate. Do not commit to paying more than you can really afford.

2

Tell the creditor that you want its credit report entry totally wiped from your records when you make your payment. Bring up this stipulation before you send any money because that is when you have the most leverage. The creditor may deny being able to change your credit report, but Melanie Sullivan, a writer for the Military Money financial website, explains that it does have the ability to make a change or stop reporting a negative entry.

3

Ask the creditor to send you a written agreement prior to sending in your payment once you have reached a mutually acceptable deal. You cannot easily enforce an oral promise, but a written copy gives you leverage if the creditor does not follow through with altering its entry on your credit report.

4

Order your three credit reports from Experian, Equifax and TransUnion to ensure that the creditor follows through by clearing the account after your settlement. The Federal Trade Commission (FTC) website advises getting them from annualcreditreport.com because this site gives you free copies from all the bureaus once per year. Read each report to see if the relevant entry is deleted.

5

Dispute the settled account if it still appears on any of your credit reports after you fulfill your part of the bargain. The FTC website recommends doing this in writing. Enclose a copy of your letter from the creditor promising to get rid of the item and ask the credit bureaus to clear it from your records. The credit bureaus have 30 days to investigate your letter and remove validly disputed data.