Credit Report Settlement

Many consumers are not aware of programs and practices that allow them to pursue a credit settlement of the balance that is owed on a credit-related debt. In credit settlement, the person owing the debt negotiates a lower payoff than what is owed to the creditor. Many wonder why a creditor would take a lower payoff and the answer is simple. If they feel they are in danger of not getting paid anything on the debt, or very little, if the consumer files for bankruptcy, they may be eager to settle and get what they can. In another scenario, the creditor would rather settle than have the consumer default on the debt, at which point the creditor may sell the debt to a collection agency for typically less than 40% of what is owed. So the first thing a consumer should keep in mind is that a creditor may be more open to negotiating credit settlement than one might expect.

Credit settlement can be negotiated on credit card debt, hospital bills and many other forms of unsecured debt. The key is to approach the creditor with a settlement figure, and somewhere in the range of 40% to 55% is advisable. If you have been making payments on your account then they are unlikely to be willing to negotiate a settlement. If you are behind in your payments at least 3 months, then a settlement may become an option as the creditor gets concerned about whether or not they will see any of the money.

If you decide to pursue credit settlement, it is important to get any agreed upon settlement in writing. Ask the creditor to report the credit settlement to the credit bureaus as debt “paid as agreed” or something to that effect so that the negative impact on your credit score is minimized. Even if the process does lower your credit score, realize that the negative impact will be less than that caused by continued missed payments and the eventual sending of your debt to a collection agency. Most financial experts advise that it is better to get the debt settlement behind you, with the debt paid off and no longer depleting your resources, so that you can go about rebuilding your credit.

While seeking credit settlement of debt on your own is possible, credit experts often suggest using a settlement agency that specializes in credit settlement issues to handle the negotiations for you. These professionals will usually achieve a lower settlement figure because the creditor recognizes that you are committed to settling and will take the offer more seriously. They will also know how to negotiate the settlement being reported to the credit agencies in the way that will produce the least amount of damage to your credit score.

The best approach is to contact several credit settlement agencies and discuss your options with them. Their experience and expertise may save you money and your credit score, and help you get back on track financially more quickly and successfully.