The Better Credit Blog

Dear Ryan
I have 2 paid off installment accounts that have past due in late 2007. should i try to remove those 2 and how do i go about it? or should i leave them on the report.
Thanks for your time and help
-name removed

Hi name removed -
Assuming these accounts have an overall good payment history, I would try to remove the late payments on both accounts by sending the original creditor a “goodwill” letter kindly asking them to remove the late payments. Goodwill letters are highly specific to your individual situation, but I suggest taking a look at my sample goodwill letter.

Also, read this article I wrote a few months back on the same subject.

Best,
Ryan

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:

1. You have time to gather your thoughts and compose a letter that reflects your intention and not your defensive emotions.
2. You are not being rushed and lied to by an aggressive debt collector.
3. 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.

Now you’re ready to download My Free Removal Negotiation Letter

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.

Never call a debt collector and arrange to pay them over the phone. To better ingrain this into your head please refer to the visual representation below.

Here is what I did wrong:

I gathered all of my debt collection letters and started calling collection agencies. This was a big mistake. Tip: If possible contact the original creditor. For example, if you have a debt from a Capital One credit card, but are getting letters from a 3rd party collection agency, attempt to contact Capital One first. Click here to see my article on how to do this –in this article I will show you how to negotiate to get charge offs completely removed from your credit report

It is my experience that while many times it may appear as though a debt was sold to a collection agency, the original creditor still owns the account and are simply using the 3rd party collection agency to collect the debt. Therefore you can still cut the 3rd party agency out and contact the original creditor directly. Keep in mind: a debt has only been sold to a collection agency if the debt has a ‘Collection’ status on your credit report.

Always communicate with creditors via certified mail. This means that the creditor is required to sign for the letter before the post office will give it to them. The post office will also send you verification once it is signed for. I recommend paying the extra couple of bucks to get a copy of the signature once they have received it in case you ever have to go to court (many times creditors will claim they never received your letter). You can do this completely online. Download one of my example letters, edit it to fit your needs and go to the USPS website and upload the file.

A few things will happen if you contact a debt collector over the phone (particularly a 3rd party collection agency).

• You will be welcomed by the rudest people on the planet. If you do have to speak to one of them, try to remember that most phone debt collectors are under 25 and make $7 an hour –they don’t care about your problems. Some collection agencies hire employees as young as 16 years old.
• Collectors will say almost anything to get you to pay over the phone. Also, when you deal over the phone and they lie, you have very few legal protections. I will speak in another post about The Fair Debt Collection Practices Act and my bad experience attempting to get any protections under this.
• Resist! They will push hard for you to pay right there. They will ask for your bank account information so they can setup automatic deductions. In my case, they threatened a lawsuit if I didn’t pay them right away.

Remember that most of the tactics executed over the phone by collectors are done to scare the shit out of you. Keep in mind that collectors will say such things as, “Do you know what you have done? Do you know what is going to happen to you? Do you even realize how much trouble you are in?” In another words, they will make it sounds as though paying off the debt is the most important thing in your life, and while it may seem as though it is, never fall for this –it’s not the most important thing in your life.

I fell for this. I setup for automatic payments to be deducted from my bank account. I cannot tell you how many problems this caused me. Never give out your bank account information

Take home points:

1. Never make a deal over the phone. Request for everything in writing.
2. Always communicate with creditors via Certified Mail.
3. As difficult as it may be, never buy into their scare tactics.
4. Never give out your bank account information.

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