How to Repair Settlements on a Credit Report

Debt settlement is a debt reduction strategy. When executed, lenders and borrowers negotiate a repayment amount on a debt--one that is usually far less than the amount owed. If you settled any of your debts, these old accounts will report as such. This can be a drag on your credit score and report for at least seven years. The only way to repair these negative marks is to plead with the credit bureaus with a goodwill letter

Instructions

1

Access a recent copy of your credit report. You need to both confirm the existence of the settled debts and review your credit history since the settlements. Visit Annual Credit Report in Resource 1 for a free copy. Also, pay for your FICO score. This three-digit number represents your creditworthiness. Scores over 720 are excellent; scores below 600 are poor.

2

Check to make sure the settled debts are still reporting on your bureau report. Look at the settlement date on the account. Now look at your entire credit history since you settled your last debt. If you continued to have credit problems, you will face an uphill battle when attempting to remove these.

3

Circle any positive elements on your credit report. Examples include perfect payment history on some or all accounts since the settlement, lower account balances on all cards, a higher FICO score and a healthy mix of credit accounts (e.g. two credit cards, one secured debt, one charge card).

4

Write your goodwill letter. This must be both a straightforward, fact-based inquiry, but it should also be emotive. After all, it is a plea for help. Explain your past hardships (disability, unemployment) and include any documents to support these claims.

5

Include a copy of the credit report you circled. Mention all positive aspects of your credit in your goodwill letter. Write several drafts and double-check all language and facts. Send this letter to all credit bureaus reporting the settled accounts (see Resource 2 for contact information).

6

Wait for the credit bureaus' responses. These companies have a legal obligation to acknowledge your inquiry within 30 days. They have 90 more days to take action, if they so choose.