You are likely to hear from a collection agency if you let your debts go unpaid for many months, even if the original creditor charged off the bill. Debt collectors can pursue you as long as they follow the Fair Debt Collection Practices Act, according to the Federal Trade Commission. You can stop the calls, and possibly save some money, by reaching a settlement.
Negotiate the Amount
Credit card issuers and similar lenders try to collect money from you for about six months after you stop making your scheduled payments. They often sell off the debt after writing it off to get a tax break, according to MSN Money writer Liz Pulliam Weston. Collection agencies buy bad debts for pennies, then make a profit by collecting as much as possible. They still make money even if you negotiate a discount, so offer a lump sum payment that you can afford even if it does not cover the whole debt. Edward Jamison, a Los Angeles attorney, reports in a Bankrate.com article that you may be able to settle for half the original amount.
Negotiate Reporting
Collection agencies often report their activity on your TransUnion, Experian and Equifax credit reports, which brings down your credit score and looks bad to lenders, cell phone companies, insurers or anyone else who pulls your records in response to an application. Tell the collector that you will send your payment in return for removal of the credit report entries. This doesn't cost the agency anything, so it shouldn't affect your settlement amount.
Get a Written Agreement
A debt collector can promise anything, but the agreement is not easily enforceable until you have it in writing. Request a letter stating the agreed-upon settlement amount and the fact that the collection agency will no longer report the debt to the credit bureaus, Bankrate.com columnist Steve Bucci advises. Ask the agency to commit in writing not to resell the debt to other collectors or your phone might start ringing again with someone else wanting more money. Enclose a copy of the agreement with your payment and mail it certified, with delivery proof requested.
Check Your Credit Report
Make sure the collection agency removed its entry from your credit reports. You may have a written commitment, but that does not guarantee a follow-through. The FTC website explains that annualcreditreport.com is the only no-obligation free credit report website, and it provides Experian, Equifax and TransUnion reports once per year. Order copies and complain to the collection agency or dispute the information directly with the credit bureaus if it still appears.
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