CREDIT REPAIR
Repairing your credit with debt
settlements
Many times you may set out to repair your
credit using the method of disputing to the credit bureaus
alone. While this may work a majority of the time, there is
a percentage that remains unaffected by this. Another alternative
to repairing your credit- permanently is to do it through
an accord
and satisfaction also known as a restrictive
endorsement and validation
of debt. You can read much more about this topic here.
How it works
When you have a charge off or collection account and it
has been verified as accurate from the credit bureau, that
is telling you that the credit bureau has questioned the item
to the source which is usually the creditor or collection
agency. They have replied back that the negative account is
accurately listed. Once that has taken place you are usually
at a dead end to repair your credit but... you can try to
do two things. Offer a partial settlement for full satisfaction
or offer monthly payments with a restrictive agreement that
will allow for the debt to be reported as paid once the final
payment is received. Or you can request debt validation. It
is up to you to decide which works best for your unique situation.
Next you will want to determine which way to go.
Start by offering in writing about 30% of
the total debt as full and final payment. If they agree, make
sure it has all been done in writing not via phone. Writing
preserves your rights and shows a paper trail. Do not discuss
any details by phone. Once you offer to settle the debt for
less and have sent off your offer certified mail, wait for
a reply of yes or no from the creditor (usually a collection
agency). If yes, simply make several copies of their signed
agreement and forward the settlement amount to them via money
order. I don't recommend using your personal check. The less
they know about you, the better. Make sure your offer includes
a clause that the debt will be reported as paid upon settlement.
If they fail to update their records, you have the proof to
send to the credit bureaus. See
here for how the restrictive endorsement works and which State's
it is valid in.
The second method of settlement does not
involve a partial payment offer that is sent off in one payment
say to settle a 3000.00 debt for 1250.00. This method is settlement
by payment. Many times if a creditor feels there is absolutely
no other way to get money from you, they will accept payments
of either the full amount or a settlement offer. This works
well especially if the creditor knows that you know the SOL
(statute of limitations) is expired. Be
sure to check your SOL. If the creditor understands that
the debt is totally uncollectable, the SOL is expired, the
reporting time has passed or simply feels giving that day
(sure) then your odds of improving your credit via settlement
payments fairs quite well.
Draw
up your offer to make payments with the restriction that
at the end of the final payment, the account will be rated
as paid. Ratings vary depending on what the creditor agrees
to but generally speaking you want to take a collection, charge
off or delinquent debt to "paid." If that is not
possible then your next best rating would be "paid for
less" which then moves onto "settled for less"
or "settled." Any rating of "paid was charge
off, paid collection or creditor disputes" are all ratings
that do not work in your favor. Your ultimate goal here is
to get the rating up. After all that is why you are paying
on the debt to begin with. Remember to remain on your toes
when dealing with creditors and collection agencies. They
are quite savvy and once slip up by you could renew the SOL
or worse. Be sure to check this
page for the state's that work well with restrictive offers.
OC vs. CA
Finally consider the above methods depending on whether you
are dealing with an OC (original creditor) or CA (collection
agency). Creditors do not follow the FDCPA
and therefore do not have to allow you VOD
rather they follow state laws
and federal truth in lending
laws. A VOD will NOT work with
an original creditor only a collection agency.
Either way whether you are settling prior to charge off or
after charge off be sure to use Restricted
Payment options to ensure that either the OC or CA change
the rating. With a collection agency you would shoot for total
deletion first (only accept paid or settled if you feel it
will improve your credit because anything from a CA is negative!).
Caution!!
If a collection item is NOT yet on your credit reports (check
to be sure) then be sure to add a Confidentially Clause
in your settlement to ensure they do not report after payment
is received. By adding a confidentiality clause you prevent
the CA from disclosing anything about the debt. However if
it is already on your credit reports DO NOT add that clause
or you will prevent them from adding the new better rating
or worse.
Notice:
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elsewhere.
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