Are you getting harassing phone calls or letters demanding payment from a collection agency? Do you have collections on your credit report that you would like to remove? We are going to review the 5 steps to settling a debt and how to remove collections from credit report listings with the credit bureaus.
1. Validate Debt
The very first thing, is to ask for debt validation. This is how you formally and legally ask the collection agency to prove the alleged debt is yours. The Fair Debt Collection Practices Act requires the collection agency to provide validation. You can ask for this, by sending a validation of debt letter to the collection agency.
The collection agency will have to respond with documents that show they own the debt account. You should get a response within 30 days of receipt. We recommend, you send your validation letters using certified mail and with return receipt requested.
If the collection agency does not validate your debt, then it must be removed from your credit report. And you are no longer responsible for repayment. If they do validate your debt, then you should move on to step two.
2. Check The Statute Of Limitations
The statute of limitations governs most consumer debts. It places a maximum amount of time consumers are responsible for repayment. This is most commonly around seven years for many types of debt.
You should check the dates on your account. It is common, for collection agencies to ignore the statute of limitations. There are reports of debt collectors re-aging debt accounts. In other words, continuing to try and collect payment and report negative information on your credit report, long passed the statute of limitations.
3. Negotiate A Settlement Agreement
Never pay the full amount a collection agency claims you owe. Sometimes collection agencies will even send demand letters. But, included will be a settlement offer for less than the total amount. For example, you may get a letter claiming you have a debt for $1,500.
But, the collection agency will accept 70% or $1,050 as a settlement payment. Experts, say you should begin your settlement offer at $.25 on the dollar. Using a $1500 debt, this would mean you would start your negotiations by offering $375 as a settlement.
4. Get Everything In Writing
Before you make your settlement payment, make sure to get everything in writing. It is key, that the collection agency put in writing that they will agree to send a deletion request to each credit bureau, in exchange for your payment.
5. Pay Your Settlement
We would encourage you to send a check or money order. In addition, it would be wise to write in the memo line: “In exchange for deletion from credit reports.” When the collection agency deposits your check, you’ll have a legally binding document to make sure the collection agencies delete bad credit about your account on your credit report.
It is a chess game dealing with collection agencies. Many consumers are not experts when it comes to the evolving laws of debt and credit. You do have rights and collection agencies regularly violate these rights and are fined by the Federal Trade Commission. Get a free credit consultation by calling toll-free 1-877-418-7596. For more tips and strategies with Dan Willis sign up for our free newsletter.
Get a FREE Credit Consultation 1-877-418-7596