Negotiating With Creditors To Get Negative Records Deleted

Negotiating for a creditor to completely remove a negative record on your credit report will usually increase your credit score more than if you pay the account off and the creditor changes the account status to ‘PAID IN FULL’. This is because even though your credit report may reflect that you have paid off the account, it still shows the history of the account (i.e., late payments).

Before you continue

If you have already made arrangements with a creditor or given them any money, you have lost your power to negotiate!

Negotiating a debt is intimating if you aren’t the “car salesmen type”. In fact, I am advising you against attempting to negotiate a debt over the phone. Keep in mind that debt collectors are not only well trained to get as much money from you as possible, but they also have the advantage of negotiating debts all day, everyday –that’s a lot of practice. That is why you should hire me!

It’s important to remember that collectors project a hostile and very aggressive demeanor over the phone. This naturally puts you at a disadvantage because humans tend to become abrasive and on the defense when in the presence of such behavior. This means that you are more likely to let emotion skew your logic –ruining your chance to negotiate a lower debt.

Instead, I am going to discuss how to negotiate a debt by writing letters. In this situation you have the advantage. Here are a few reasons why:

1. You have time to gather your thoughts and compose a letter that reflects your intention and not your defensive emotions.
2. You are not being rushed and lied to by an aggressive debt collector.
3. Most important: A written correspondence offers you legal protections. On the other hand, if you come to an agreement over the phone and they fail to honor the agreement (it happens a lot), it’s difficult to prove.

There are also disadvantages (or minor inconveniences, rather) to negotiating via mail. Corresponding with creditors through the mail can be an exhaustingly long process –often it can take several months to receive a response. You have to decide if you’re willing (or if it’s worth it) to wait for the peace of mind that a negotiation can provide. I say go for it if you are the type of person that can mail a letter and forget about it. However, if you are the obsessive, nervous type, the waiting period can be stressful.

Your best chances for a successful negotiation

If you haven’t yet made any agreements with the creditor, you have a very good chance. This is because you still have the upper hand –they want something from you, not the other way around. Nonetheless, I have found that some types of accounts can be very difficult to get removed completely from your credit report.

Accounts and success rates

• Closed accounts (ex: Charge off) that have been since paid are extremely difficult to get removed. If you still carry a balance and the creditor is actively attempting to collect, getting a complete removal will have about a 1 in 3 chance of success.
• Open accounts, regardless of the account type (i.e., installment, revolving), that are delinquent have a marginal success rate of complete removal if you offer to pay the balance in full.
• Open/Active accounts that are reported as ‘LATE’ have a very high success rate of complete removal. This is particularly true if the account is in Collections.

Creditors often claim that they cannot remove records from credit reports. This is false. Creditors absolutely have the ability to completely remove a record.

Shooting for the stars

Keep in mind that getting a creditor to completely remove a negative record from your credit report is the best case scenario so try not to get your hopes up too much. However don’t let this bring you down, because you have nothing to lose by attempting to negotiate a complete removal. Also, don’t trick yourself into believing that you can negotiate a complete removal by promising to pay a small amount of the debt. In most cases, the creditor will only consider a complete removal if you offer to pay off the debt in full (or very close), in a short period of time.

To give you an example

A client had a debt for 13,000 and offered to settle for $8,000 when it first went into collections. The creditor declined. I was able to get a the debt settled for roughly $1,500 and the credit card debt in ‘charge off’ status completely removed from his credit report.

Disputing Credit Report Inaccuracies

The fastest and easiest way to increase your credit score is to dispute any negative items on your credit report that are incorrect or not yours. If you haven’t checked your credit report in a couple of years, there are likely incorrect items that are hurting your credit. This is another reason to check your credit report every six months or so. When I checked my credit report after letting it go a couple of years I found two debts marked as CHARGE OFF that weren’t even mine. After disputing these items my credit score increased 70+ points.

Items that may have a negative impact on your credit score

Don’t forget to look over the “Personal Information” section of your credit report. This is the section that lists your current and previous employer(s) and address(es). Both of these can impact your credit score and they are often inaccurate. The calculation of your credit score takes into account how stable you appear to be. Therefore, if your credit report shows 15 previous addresses and 5 employers in the past 2 years it will lower your score by a dozen or so points. While personal details such as address and employer do have some impact, it’s not very much, so this should be the least of your worries if you have debt. Nonetheless, just double check for small inaccuracies such as multiple listings of the same address (this is very common).

How to dispute credit report inaccuracies

The credit reporting agencies have made the process of disputing an inaccurate item manageably simple. In most cases, however, it has been my experience that after you file a dispute, it can take them a couple of months to investigate and correct the error (don’t get freaked out if you haven’t heard anything in a month). It can be a particularly lengthy process if the item in question involves identity theft.

There are generally 3 ways to dispute an inaccuracy: online, by phone, or by mail. Do it online, because otherwise it will take forever. All 3 of the credit reporting agencies have online forms you can fill out to file a dispute. Very easy. Keep in mind, however, online disputes may take away some of your rights. This is why you should let me do the hard work for you.

Here are links to the credit reporting agency’s dispute centers

• Equifax Online Dispute
• Experian Online Dispute
• TransUnion Online Dispute

Keep in mind: If an inaccuracy is listed on all three credit reports, you must dispute it with all three credit agencies.

Don’t dispute accurate entries

Some people will claim that you should dispute items even if they are completely accurate in hopes that the creditor will be unable (or unwilling) to verify the disputed item. I am advising you against this for a few reasons.
First, it’s against the law. Second, if the debt is a large amount you can bet your ass the creditor will take the time to prove it’s yours and it’s accurate. Third, if you attempt to file multiple disputes at once, the credit agency will lock you from filing a dispute for awhile.

Once the investigation is complete

Once the investigation is complete you will receive an email (if you filed online) that the correction has been made. Also, you will receive a free copy of your corrected credit report (this is required by law). Note: this does not count towards your free annual credit report. Depending on the item that was corrected your credit score will also change to reflect the correction. Again, getting inaccuracies corrected can greatly improve your score and in most cases it’s an easy process.