When you settle your debts, you pay a negotiated amount to your collector to close your accounts. The creditor should report this action to the credit bureaus, who should adjust your report accordingly. Check all three credit bureaus -- Experian, Equifax and TransUnion -- and make corrections if one or more of them is not showing the up-to-date information.
Gathering Data
You'll have to present some sort of proof to the credit agency that you did indeed settle your debt. Gather as many documents as you can to support this. For example, you should have a copy of the cashed check from your bank or a bank statement that shows the payment, a copy of the settlement letter and a list of any phone calls to the collection agency, preferably including who you spoke to.
Sending a Letter
Write a letter to the credit agency or agencies reporting the inaccurate information. The letter should detail your name and Social Security number, the account in question and the fact that you settled this account. Include copies of the supporting materials you gathered. Send this letter by certified mail to prove that the company received the letter. The company should respond to your request within 30 days.
Checking Your Report
After 30 days from the date that the company received your letter, you can check your credit report to confirm that the company updated your file. If the company does not respond within 30 days, the company is required to drop the information from your credit report, according to Bankrate.com.
Effects of Settlement
Though paying some of a debt is better than not paying anything at all, having a settlement on your credit report still harms your score. With positive credit behavior, such as paying bills on time, you can gradually increase your score, However, the settlement will remain on you account, affecting it negatively for seven years.
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