Credit repair and Settling a collection account for less than you owe.

With a well-organized action plan, credit repair and settling collection accounts can be accomplished without much fuss.

A friend has some heavy medical bills. While she was paying them, the hospital assigned the bills to a collection agency. This is not unusual in my experience with medical and dental bills, no matter the amount, large or small.

She is planning on offering the collection agency half the balance in order to settle the debt. It’s a great strategy, but one that requires tenacity, and extreme diligence to confirm the terms of settlement are in your favor. She was thinking of calling them everyday.

Here’s the advice I gave her:

Best path to credit repair success is to put it in writing every 30 days. 30 days is the cycle mandated by FTC. Under Fair Credit Reporting Act, the credit bureau has 30 days to investigate your dispute. While investigating, the disputed account must be removed (this is the source of the scam-artists who charge for credit repair) from your report.

In the investigation, the original creditor must PROVE the information. If they don’t, the item is removed permanently from your report. If they prove it again, the information goes back onto your report. You’ll get updated reports throughout the investigation period showing the disputed accounts and the status of same.

More on that from Uncle Sam here:

Also, advice on paying off that debt when you settle for less than full balance:
1. Always write down immediately the name of the rep. you’re speaking to.
2. Negotiate your settlement. Best tactic for this is to promise immediate, same day payment in return for favorable reduction of balance terms. Western Union QuickCollect or check by phone is best method of payment.
3. Once the rep. agrees, condition your payment upon a written confirmation via fax of the terms agreed upon. You want a fax because you want a signature on that letter. The letter should indicate the settled balance, date of payment, and that this payment settles the account completely and no further collection activity will be taken.

If they won’t send a written confirmation, you don’t make the payment. Because they can come back later and tell you you didn’t pay the full amount and they didn’t agree to a “short pay.”

4. When you have the letter of confirmation in hand, and it’s correct, send your payment immediately.

You’ll receive a satisfaction letter indicating that all three credit bureaus have been updated to show this account as paid and settled for less than full balance.

With a well-organized action plan, credit repair and settling collection accounts can be accomplished without much fuss.