Negotiate Away Bad Debt on Credit Reports

“[W]hat do you do to eliminate debt that went into collection years ago?”

This was a recent question on Facebook about addressing a past debt on a credit report. The bad debt was definitely impacting the poster’s credit score and potentially hindering progress toward purchasing a new home. Now that #teamdebtfree is focusing on fixing finances and cleaning up credit, there may be old debts hanging out like a bad habit. Cleaning up your credit is not hard, but does take time.

Gather your patience…and proceed.

Bad Debt Negotiate - Debt Free Living

An old debt is one that is past due and has been likely sold to a collection agency.

Let’s be clear – this post is focusing on bills that you owe and have not been sued for by a creditor. As long as there is no judgment against you, this approach should work.

A debt is sold to a third party collection agency when the original creditor decides to write the expense off as a loss. Third party collectors will purchase a group of bad debts for a fraction of the original cost with the right to pursue YOU with vigor and gusto.

Understand there are rules collections agencies must follow:

1. They cannot falsely threaten to sue.

2. They cannot verbally harass you or divulge details of the debt to anyone but you.

3. They cannot not call you before 8 am or after 9 pm (in your timezone).

4. They must be able to confirm proof of the debt owed.

5. They must refrain from calling you at work if you’ve asked them to stop.

You may receive a letter with a settlement offer or an offer for a payment plan. If not, you can contact the collection agency associated with the debt and offer a cash settlement as payment in full.

1. Get the agreement in writing. Have them email you a confirmation accepting your offer as payment in full. Make sure you keep a copy of the agreement FOREVER.

2. Negotiate the credit report notation. Request a notation of Paid or Paid as Agreed.

3. Send payment as a money order. Do not give collection agencies electronic access to your account to avoid unscrupulous actors from taking more than agreed.

You’ll want to address each bad debt individually. The settlement agreement may require a few phone calls and a conversation with collectors of various levels of “authority”.

Be patient and consistent and stand firm with what you’re able to do. It takes time, but you can clean up old debts and move forward on your debt free journey.

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