How to Repair Credit With a Collection Agency

You can work with a collection agency to take care of debts that affect your credit in a negative manner. If you settle and pay off debts, the agency will be able either to remove them from your credit report, or, at the very least, report them as paid-in-full debt obligations. This will slowly raise your credit score over time.

Instructions

1

Speak to a collection agent about settling your debt -- tips can be found at the Vision Credit Education website. Many collection agencies buy debt for less than the face value. They will often offer settlements to debtors for them to take care of a past-due bill. Get the offer in writing to assure there are no mix-ups in the future regarding the amount and the terms of the settlement offer. Attempt to have them completely remove the debt from your credit report. In some cases, they may do it willingly, but others will want a higher return on their investment and refuse to do so unless more money is paid.

2

Send your acceptance of the offer by certified mail and keep a copy for yourself. You can find samples of what the letter should include at the Credit Infocenter website. This will create a paper trail that you can use and send to credit agencies when the business is taken care of to prove that you have paid the debt off. You will want to have proof of the accepted offer if the collection agency loses the information and keeps reporting the debt as unpaid after you have already taken care of the problem.

3

Pay the debt off in the way it is stated in the offer by the collection agency. Some debts will take several payments to pay off, while others are paid in one lump sum. Regardless of the process, the debt cannot be cleared until the agreed-upon amount is paid, regardless of how much of it is related to the original amount. If you were able to negotiate a 50 percent reduction from a $1,000 bill, it is paid off when the collection agency receives $500. You can also sometimes use this tactic for settling recently closed credit card accounts, as these credit card companies would often rather receive part of the balance rather than sell it to a collection agency.

4

Ask the collection agency to remove the debt or inform the three major credit reporting bureaus that the debt is paid in full. You may not be able to have it removed, but if you can, that will help your credit score immensely. Over time, debts that have been paid off will no longer affect your credit negatively. This process may take up to 30 days, as collection agencies often only report debt once a month.