Negotiating for a creditor to completely remove a negative record on your credit report will usually increase your credit score more than if you pay the account off and the creditor changes the account status to ‘PAID IN FULL’. This is because even though your credit report may reflect that you have paid off the account, it still shows the history of the account (i.e., late payments).
Before you continue
If you have already made arrangements with a creditor or given them any money, you have lost your power to negotiate!
Negotiating a debt is intimating if you aren’t the “car salesmen type”. In fact, I am advising you against attempting to negotiate a debt over the phone. Keep in mind that debt collectors are not only well trained to get as much money from you as possible, but they also have the advantage of negotiating debts all day, everyday –that’s a lot of practice.
It’s important to remember that collectors project a hostile and very aggressive demeanor over the phone. This naturally puts you at a disadvantage because humans tend to become abrasive and on the defense when in the presence of such behavior. This means that you are more likely to let emotion skew your logic –ruining your chance to negotiate a lower debt.
Instead, I am going to discuss how to negotiate a debt by writing letters. In this situation you have the advantage. Here are a few reasons why:
- You have time to gather your thoughts and compose a letter that reflects your intention and not your defensive emotions.
- You are not being rushed and lied to by an aggressive debt collector.
- Most important: A written correspondence offers you legal protections. On the other hand, if you come to an agreement over the phone and they fail to honor the agreement (it happens a lot), it’s difficult to prove.
There are also disadvantages (or minor inconveniences, rather) to negotiating via mail. Corresponding with creditors through the mail can be an exhaustingly long process –often it can take several months to receive a response. You have to decide if you’re willing (or if it’s worth it) to wait for the peace of mind that a negotiation can provide. I say go for it if you are the type of person that can mail a letter and forget about it. However, if you are the obsessive, nervous type, the waiting period can be stressful.
Your best chances for a successful negotiation
If you haven’t yet made any agreements with the creditor, you have a very good chance. This is because you still have the upper hand –they want something from you, not the other way around. Nonetheless, I have found that some types of accounts can be very difficult to get removed completely from your credit report.
Accounts and success rates
- Closed accounts (ex: Charge off) that have been since paid are extremely difficult to get removed. If you still carry a balance and the creditor is actively attempting to collect, getting a complete removal will have about a 1 in 3 chance of success.
- Open accounts, regardless of the account type (i.e., installment, revolving), that are delinquent have a marginal success rate of complete removal if you offer to pay the balance in full.
- Open/Active accounts that are reported as ‘LATE’ have a very high success rate of complete removal. This is particularly true if the account is in Collections.
Creditors often claim that they cannot remove records from credit reports. This is false. Creditors absolutely have the ability to completely remove a record.
Shooting for the stars
Keep in mind that getting a creditor to completely remove a negative record from your credit report is the best case scenario so try not to get your hopes up too much. However don’t let this bring you down, because you have nothing to lose by attempting to negotiate a complete removal. Also, don’t trick yourself into believing that you can negotiate a complete removal by promising to pay a small amount of the debt. In most cases, the creditor will only consider a complete removal if you offer to pay off the debt in full (or very close), in a short period of time.
To give you an example
I was able to get a $2000 credit card debt in ‘charge off’ status completely removed from my credit report by proposing to pay the creditor IN FULL over a 3 month period.
I hope I have provided you with an informative overview of the negotiation process. Take note that I cannot get too specific on this topic because individual situation are so widely varied. And ultimately your individual situation will determine your chances of getting a complete removal.
One last note: The success rates I have stated in this article are from my own personal experience. Your success might be different. Nevertheless, I’d love to hear how it works out for you, so drop me a line with your story
Independent Thought
Most companies have a dedicated consultant for debt management. Because companies rely so heavily on debt capital they have to have a specialist. Corporations risk bankruptcy if they don’t manage their loans. Why most companies don’t like to be bankrupt? Because they won’t be getting bankrupt loans or any other help when they are off the business. Firms with a bad credit history find it difficult to secure a bad credit loan. Such a loan is on stern conditions. If all goes wrong a reputable debt relief agency can rescue a ailing company.
As a matter of fact, I read a few weeks ago that they got themselves in big trouble for deceptive practices –if you look at the bottom of their new commercial there is a disclaimer that says (and I’m paraphrasing), “the credit report is free but you have to pay us a monthly fee for some other crappy product”.
