Settling Debts

Settling Debts

Be careful if you are planning to negotiate a settlement with a collections company or creditor. Just
because you reach an agreement on the amount and settle the debt, your credit report will still show
derogatory information for that account.

In order to settle a debt in your favor, two big objectives must be accomplished. You must get the creditor
to make a deal with you on the amount and negotiate your credit rating in your favor. Don't worry; it's the
easiest thing when you have the knowledge.

First you must always remember that in settlement negotiations, you always have the natural advantage.
You have what the creditor wants! So the first rule of thumb is to never sound eager to settle. Regardless
of how much you owe on the debt, you want to pay what is comfortable for you. There have been
thousands of people who settled their debs for as little as 10 cents on the dollar, although 50% of what you
owe is considered good.

At first, most creditors and collection companies will try to hold their ground. Never accept their first or
even second offer. Always be calm and make them think that if they don't get something from you, they
will probably never get anything at all. Of course, the older the account the easier the negotiations will be.

Here are the keys to a successful settlement.

•     Make your first contact with the creditor or collections company by mail. This will always give
you the upper hand because they will end up calling you to settle. Remember, you want them to
come to you because you have what they want.

•     Never sound eager to settle or you will lose the upper hand. Never tell them that the reason you
need this debt settled is so you can get into your dream home or car. If you do, you can forget any
kind of deal. The creditor will now have the upper hand and insist on the full amount.

•     Don't accept their first offer, especially the first time they call you after you sent the initial letter.
Once you are able to get them down to about half of your debt. Tell them you need to sleep on it
and arrange a time for them to call you the next day.

•     Once you and the creditor agree on a mutual amount to settle the debt, you must start negotiating
your credit rating. This is the most important part of your negotiations. A "Paid Collections" on
your credit report is still very negative and a "Settled Account" is even worse.
Before you pay the debt, you must have in your hands a letter from the creditor stating that the
account will be reported to the credit bureaus and updated to "Paid as Agreed"
Remember that all your negotiations and money paid to settle will do nothing to rebuild your credit, unless
you have a guarantee in writing that the unpaid collection will be changed to "Paid as Agreed" on your
credit report. Not "Settled"