How to Manage Settlement Risks

Settling a past due or delinquent account allows you to clear outstanding debt at a reduced rate. A debt settlement can adversely affect your credit rating and leave you susceptible to lawsuits if the settlement is not properly documented and followed as agreed upon by both parties. By managing the terms of your debt settlement agreement properly, you can be sure you and your credit report are protected against incorrect information.

Instructions

1

Prevent a negative or derogatory report on your credit rating. Ask the creditor to report the settlement as "paid in full." A "settled" or "settlement" report can adversely affect your credit rating.

2

Request a settlement agreement in writing. A written agreement prevents a creditor from collecting more than the agreed amount in court. Include the dollar amount at which the creditor agrees to settle the debt, the settlement due date and the date by which the creditor must report the debt as "paid in full."

3

Add a personal statement to your credit reports. Include the date by which the creditor must report the account as "paid in full." This statement will notify creditors of the account's status during the interim period.

4

Manage your credit rating. Purchase a copy of your credit report from each of the three national credit reporting bureaus. Don't assume your creditor will update each report at the same time, so follow up with each bureau within one to two months of the creditor's deadline to ensure all three of your reports are accurate.

5

Retain original billing statements along with a copy of your settlement check(s) and your original settlement agreement. Check the statue of limitations for debt collection in your state. Maintain your records until this period expires.