How to Pay Off Derogatory Items on a Credit Report and Increase the Score?

Charge-offs, past-due accounts and other derogatory information are bad for your credit scores. Excellent scores that were once in the upper 700s can fall to the low 500s or even lower because of negative entries. The best way to reverse the free fall is to clean up the bad marks while continuing to pay everything else on time.

Instructions

1

Get a copy of your credit report. Free reports are available from the website Annual Credit Report, which is authorized by the Federal Trade Commission to issue reports without charge. Visit the site or call 877-322-8228 to order. Beware of copycat sites with similar names. Other sites offering free reports will also try to sell you services, while the Annual Credit Report site will never ask for money. After you have received your credit report for free you will be able to order your credit score from one of the three nationwide credit bureaus -- TransUnion, Experian and Equifax. There will be a charge for the score. Visit the websites to order.

2

Study your report and find the delinquent accounts you wish to pay off. Note the name and telephone number of the creditor or collection agency.

3

Call the creditors or collection agencies or write letters. Offer to settle the delinquent accounts for less than the full amount owed. That's called debt settlement, and is commonly used to resolve old delinquent accounts. Or ask the creditor to confirm the amount due and then pay in full. If you wish to pay less than the full amount, offer say, 20 percent of the balance in your initial communication and await a response. According to The New York Times, some companies will settle for as little as 20 percent of the balance. But generally, settlement agreements are for about half the amount owed. Also ask about a "pay-for-delete" option. This allows you to pay off the account in exchange for the creditor instructing the credit bureaus to remove the derogatory information from your credit reports. The creditor is not obligated to remove the information, but it won't hurt to ask. Having the derogatory information removed entirely could give an immediate boost to your scores.

4

Pay off the balances. Wait about 60 days and order another copy of your credit report. Notice how the derogatory information has changed. An item marked "Collection Account" may have been upgraded to "Paid Collection Account." Or the account may have been deleted by the creditor, per your request.

5

Get an updated credit score to chart your progress.