A person who has encountered financial difficulties may have multiple accounts listed for collections on their credit report. Each of these collections accounts has a negative effect on the consumer's credit rating and may make it difficult to obtain new credit at a reasonable price. A person owing money on collections accounts may look for a way to eliminate these listings from his credit report to see if he can quickly improve his credit score.
Reporting the Past
A credit report is intended to be an accurate report of history and should detail the good and the bad records of how a consumer has used or abused debt. Banks depend on accurate information to make good credit decisions that are risk-appropriate and priced according to that risk. For this reason, many creditors and collectors will not remove accurate collections information from a consumer's record under any circumstances. Larger creditors tend to take this stance more often.
Positive Entries
If you are successful in getting someone from a collection agency or a creditor to talk with you about a past-due or collections account, how you negotiate the reporting will be important. You want collections accounts to report as "paid as agreed" or "paid and closed." Anything other than this is a negative entry on the credit report. Experts cannot agree on if it is better to have an account in collections that is listed as either "paid in full" or "settled in full." Still, either of these entries expressing that the debt has been paid will be better than an active collection that shows as unpaid.
Negotiate From Strength
If you pay off a collection account, you have no basis to negotiate with the creditor about eliminating or deleting the account. The creditor or collection agent is interested in collecting money and will make a deal only if it looks like it is the only way it will get paid. Do not pay any money on the account until the terms of the agreement have been completely negotiated, including how the creditor will show the account on the credit report.
Get it in Writing
Perhaps the most important rule about negotiating with a creditor for a lower payoff amount or elimination of debt notations from the credit report is to get any agreements in writing before you send money. The creditor or collections agency should be willing to give you a letter saying the amount it will accept as a settlement in full and should note any details of how it will report the debt in this document as well. Once you receive the confirmation, send in a cashier's check or money order; do not give the creditor access to your bank account information for an electronic draft. Keep proof of this payment with the letter from the creditor in case you need to prove the debt has been paid.
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