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.