Disclaimer: this advice is not intended to be used to get out of debt for free or to game the system. If you have a legitimate debt, pay it!
First, the best piece of advice here is obvious: pay your bills and don't get involved with collections. Occasionally things can happen though, and you can find one of your debts in collections either due to difficult financial times, or due to various mix-ups or miscommunications. I see it all the time on here. Rarely (but it DOES happen), a derogatory item can appear on your credit report that legitimately isn't yours, but due to a case of mistaken or stolen identity. The point is, it's not always due to negligence on your part, but whether it is or not, I want to tell you how to handle the situation.
First, ignoring it is the worst thing you can do. Sure, it'll drop off automatically after 7 years. That's a long time. There are things you can do about it though, even if you can't afford to pay it, and you should try everything on this list until one of them works.
Also of note: once a debt is turned over to collections, the collection agency has purchased your debt from the original company. Paying the collection agency will not result in the original company making any more money, they only get whatever the agency paid for it in the beginning, and have washed their hands of it completely henceforth.
Dispute it with the credit bureaus
This may or may not be a moral gray area if the debt actually belongs to you, but what happens when you dispute an item is that the credit bureau requests verification from the collection agency proving that the debt belongs to you. They only have a short window to respond to this request, and all of the information the debt collector sends back must exactly match all of the information the credit bureau has on file for you. If they fail to respond within the window, or they have incomplete or mismatched information, the credit bureau will remove it automatically, and no further action is required on your part.
One thing that makes it difficult for collection agencies once the debt is turned over to them is that there is usually no contract or signed documents between you and the collection agency where they have provided you with an actual service that you requested or agreed to pay them for. While the debt with the original company may be legitimate, you have never agreed to pay the debt collector anything (although this is not always the case; some companies add a clause in their paperwork that you agree to pay the debt collector if it's turned over to collections, and in this case, you will not have the best chance at getting these removed).
In your dispute message, you can say something to the effect of: "I don't know who [collection_agency] is, and I have never agreed to pay [collection_agency] anything or entered into any contract with them." If the debt is validated, you will be notified within 30 days, and move on to the next step.
Call or email the collection agency
Their name and phone number will be in your credit report (just search for their name online if you don't feel like calling them, and see if there's an email address or contact form on their website). This is where it can get slightly tricky, because your goal here is to get the item deleted from your credit report, not marked "Paid As Agreed" or anything else -- you need it removed. Derogatory items marked "Paid As Agreed" DO NOT help your credit score whatsoever, they are confirmed not to even be part of the FICO score algorithm, they are still considered the same derogatory marks that they were before, and they still will not fall off until the end of the 7 years after their opening date. "Pay for delete" is what you want under no uncertain terms.
Most people would probably think they need to pay off the whole amount of the collection in exchange for deletion. This isn't usually the case. You are now dealing with a collection agency, who purchased this debt from the original creditor for literally pennies on the dollar. Probably like 10% of the amount, give or take. If you offer just 20% of the amount listed, you're probably offering to double their investment. Always have the upper hand, because you do have the upper hand in these negotiations. Figure out what 20% of the amount is, let's say the original debt was $100, and come to them with an offer to pay $20. Tell them this is your only offer, and let them think you are willing to let the item drop off if they don't accept it, so essentially you're offering to double their investment or they can walk away with nothing. 9 times out of 10, this will work.
Make two things clear in your communication with them: 1.) This is not an acknowledgement that the debt belongs to you, and 2.) This is a "pay for delete" request, and by accepting payment they are agreeing to delete the item.
They didn't accept the offer for 20%. What now?
It's up to you where to go from here. If the amount isn't that much and/or it's a few years old, either just leave it like you said you would, or negotiate further. Ask them what's the least they'll take. They'll probably say "all of it", but that's BS. Maybe counter-offer an answer like that with 50% and tell them that's your absolute limit. You have to go into this point knowing what your "walk away point" is; that is, what's the max that you'll pay for having this deleted? If you're desperate to get it removed and willing to pay the whole amount, it's probably beneficial to dicker with them all the way up until that's the only option.
We made an agreement, it's been over 30 days, and the item is still on my report. It looks like they reneged on their end of the bargain. What can I do?
- Contact them again and plead your case. Tell them they agreed to remove it and never did, and allow them to correct the error.
- If that doesn't work, file a complaint with the BBB against them online. They'll probably want to get this resolved and removed from their BBB page.
- If none of the above works, file another dispute with the credit bureaus. If you have an evidence (such as email correspondence) where you can prove they agreed to remove the item, submit it. At the very least, the collection agency probably won't make an attempt to revalidate the debt at this point and it'll probably be removed anyway, but any evidence to support your case will help in case they do.
During negotiations, they said they cannot or will not delete the item even if I pay. Is there anything I can do now?
It's up to you at this point whether to pay it or not. Know that the original company that was owed is not getting anything regardless, so this decision is completely between you and the collection agency. It will also neither help nor hurt your credit score any further whether you pay or not. The only one with anything to gain is the collection agency themselves. As a last resort, you might try paying it anyway and then disputing it with the bureaus after it isn't removed, and hope since you paid the collection company, they simply won't re-validate it and it'll be removed that way. I have also seen the steps outlined above in the section labeled "We made an agreement, it's been over 30 days, and the item is still on my report..." used to get a removal after the collection agency explicitly told them that paying will not result in removal. Here's an actual instance from the BBB site:
I found a $59 collections balance on my credit report from [collection_agency]. To be honest, I don't even know if it is a valid debt. Since it's such a small amount I was willing to pay it immediately if they would delete it from my credit report. I talked to two people there who insisted they could not delete it from my report. I am waiting to hear from a supervisor on this issue. From other reviews I read it looks like they can and do delete from the credit report. I hope to hear back with the response I am looking for. It seems quite unfair that they can't just delete it if I pay it in full. I don't even think they had a correct address for me.
Response from collection agency:
Consumer paid her bill on 12/19/17 and received removal from her credit report. She also received a faxed letter confirming paid in full and deletion from credit report the same day.
So yes, it's still possible even if they tell you it isn't. Start posting things publicly and they will probably respond.
If you have anything to add or correct, let me know in the comments. I hope this helps someone.
Submitted March 04, 2018 at 01:37AM by _JimboSlyce_ http://ift.tt/2oNudVr
