There will be times that information reported by the three credit bureaus is incorrect. But it is also possible that the bad records on our credit reports are completely accurate. Since negative information may stay on our reports for seven to 10 years, the ideal way to deal with these accounts is to clean them up.
Contact the creditor
We should try talking with our creditors to see if they would be willing to work out a payment plan. It is better to try to work these out before they end up going to court. A judgment on a credit report is much worse than a late account or a collection account.
Even if the account has been sent to a collection agency, we should still try to start with the creditor. Sometimes, they may be willing to negotiate. Other times, their contracts with the collection agencies won’t allow them to discuss the account further.
Aim for a win-win situation
Regardless of whom we end up negotiating with, we must make sure that we have a win-win offer. We must work out a payment amount that makes both parties happy. We should ask the collector to give us a more favorable note on our credit report in exchange for making the payment. There are two timeframes to look at.
First, we want to ask to have the account reopened during the payment process. This is not so that we are able to use the account. This is only to help the account reflect better on our credit report. If the account is extremely delinquent, this may not happen. However, it never hurts to ask.
Second, once the payments have been completed and the account is paid in full, we would like the report to reflect that. We should ask that the report show “paid in full”, not “settled” or “paid collection.”
Get it in writing
These negotiations should all take place prior to making the first payment. We should ask that the creditor or collector put the agreement in writing before making any payment as well.
There have been numerous times that creditors or collectors have reneged on verbal agreements. Sometimes, the representative making the arrangement is not authorized to make changes to the account. Other times, the representative may not properly note the account so that other representatives looking up the account information will know what has been going on.
Stick to the plan
Once negotiations are complete and the agreement is in writing, it is absolutely imperative that we stick to the agreement. One mistake can void the whole thing and put us right back where we started.
We should only agree to what we know we are able to handle. If a problem does arise that might cause us to miss a planned payment, we absolutely must call the creditor in advance to forewarn them of the situation. If we are honest and upfront, it may be easier to keep the agreement intact.
After payments are completed, give the creditor time to correct things with the bureaus. It may take a month or so to see the changes, but stay on top of it.
The most important thing moving forward is staying disciplined. Once old accounts are cleaned up, we cannot start the cycle over with our current accounts. Being careful from the beginning makes credit management so much easier.
Ozeme J. Bonnette is a financial coach, speaker, and author of Get What Belongs to You: A Christian Guide to Managing Your Finances. Her focus is on increasing financial literacy among adults and youth around the U.S. She earned 3 Bachelor’s degrees at Fresno State, and her MBA at UCLA’s Anderson School. Her blog is http://www.povertynorriches.com. Reach her at ozeme@thechristianmoneycoach.com.
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