When a credit payment is severely past due, it’s not only embarrassing but it may result in the debt being sent to a collection agency. Just the thought of a debt collection call can be scary, but the job of a collection agency isn’t to threaten or frighten you into paying. Their goal is to help you work out repayment plan. Once you agree to begin paying, they collect their fee, which is typically a percentage of the collected debt. While most consumers wouldn’t consider a debt collector a helpful resource, you may want to rethink their role, especially with the amount of damage a collection account can have on your credit.
Your credit score will drop like a rock and limit your ability to get approved for a new loan if your debt is sent to a collection agency. If you have multiple collection accounts it will make matters even worse. So it’s easy to see why it’s so important to get a handle on the situation and to work hard to eliminate or change the status of unpaid collection accounts from ‘delinquent’ — to ‘current’ or ‘paid-in-full’.
Negotiate for a Clear Record
The most important step if you’re trying to minimize the damages of a collection account is to negotiate with the debt collector to change the status on your credit report. Collection companies are interested in one thing – making the account current or getting it paid off. Almost every debt collector has the authority to settle your debt for less than you owe. To that end, many are willing to delete the account from your report, if you fulfill a specified payment obligation and agree to continue making payments.
But don’t be confused. Collection companies are not obliged to expunge the record nor are they required to remove an accurate entry from your credit report. If they won’t clear your record with a payment and a promise to keep paying, they may be willing to remove the account if you pay it in full. Some debt collectors may refuse to delete the entire credit report entry. In this case, request that the account be marked ‘paid-in-full’, as opposed to ‘settled’, which is a less favorable designation.
Ask for Help
Send your request to negotiate in writing – ask for a lower payoff rate and/or a settlement payment in exchange for the deletion of the collection account on your credit report. If you pay the collector in full, keep detailed proof of your payment. Request the agreed upon terms in writing. Review the terms to ensure their accuracy.
Be sure to review your credit report to make sure the collector updates the account appropriately. If, after agreeing the collector does not update the account, dispute the account with the credit bureau, providing proof of payment if necessary. Know your rights as a debtor under the Fair Debt Collection Practices Act (FDCPA). And don’t hesitate to ask for the help you need. A nonprofit debt counseling service like the National Foundation for Credit Counseling (NFCC) is a resource you can trust. In addition to their website, you can call 800-388-2227 to get help in turning your financial troubles around.
* If you’re having trouble settling your debt, consider our debt settlement plans.