There are a variety of methods to repair bad credit. One of the most sought after methods is to offer a reduced settlement to pay off a debt. Many people have been able to repair their credit at a significantly reduced cost with settlement offers. Obtaining a settlement agreement with a creditor requires a thorough understanding of the type of debt you have and a willingness to negotiate to obtain a settlement agreement that is beneficial to you.
When looking to repair your credit through settlement payments, first make sure you’re prepared to pay off your debts in one lump sum. Many people enter debt settlement unprepared. Before contacting the companies to begin negotiating a settlement, set aside a specific amount of money to pay off the debt. Having this money ready and available will give anyone the upper hand when trading. Letting the creditor know that you are willing to pay off the debt up front and that the money is immediately available will be a huge advantage when seeking credit repair.
Understanding that you, the debtor, have the upper hand in debt settlement is also essential when beginning credit repair. When a creditor has a bill that hasn’t been paid in a long time, he really wants to pay the bill. Receiving half the amount of the debt is better than receiving nothing. Many creditors are aware of the statute of limitations that limits the amount of time a creditor can collect a debt from an individual. You can use this to your advantage to get the settlement amount and terms you want. Most companies are willing to accept between 30% and 50% of the debt amount as settlement.
To avoid any confusion about the terms of a settlement, it is always preferable to have a written settlement agreement that includes the amount of the settlement and whether or not the debt will be marked as paid as agreed on a credit report. Arranging to have your debt marked “paid as agreed” after settlement will ensure that you receive full credit for paying the debt just as you would if you did in fact pay the debt in full. Try to avoid having your debt recorded as discharged, as this can affect your credit rating and hinder your efforts to improve your credit.
Finally, be sure to follow up with all creditors who have accepted a settlement offer. Keep all settlement agreements in writing for your personal reference. Check your credit report to make sure the creditor has complied with reporting that the debt was “paid as agreed.” If you find that the creditor has not confirmed their part of the settlement agreement, you can contact the major credit reporting agencies and initiate a dispute regarding the particular debt. When you do, be sure to include a copy of the settlement agreement as proof of agreement.