Negotiating with Creditors


Deal with Collections Debt

Paying off debt and collections, while often necessary and important, is not a credit building strategy in and of itself. However, paying collections can be essential to financial stability and peace of mind. Despite the potential negative effects of paying collection accounts, negotiating settlements can be done with credit building goals in mind.


What to Avoid

Avoid establishing a payment plan with a Collection Agency. If a client negotiates a payment plan and then misses a payment, the collections agency can accuse the consumer of being in default of the deal and change the negotiated financing agreement – often increasing the total amount due.

When establishing a payment plan is the only option… In certain instances, such as when a civil judgement is present, a payment plan may be the best option to avoid wage garnishment. In these cases:

  • Try to establish a payment plan with the original creditor and not the collection agency.
  • Negotiate the total amount before negotiating the monthly payments.
  • Get an agreement in writing before making the first payment, and request a receipt for each payment made according to the agreement.
  • Make all payments on time.

Don’t let a Collection Agency know how important or urgent it is to improve credit. Try to avoid providing information such as:

  • “I am working on improving my credit.”
  • “I am in the process of buying a house.”

Don’t let Collection Agencies know if funds are available to pay the full mount. Try to avoid providing information such as:

  • “I came into a substantial amount of money.”
  • “I just received an EITC tax refund.”

Avoid getting into a debate or argument with the Collection Agent. For example, don’t say:

  • “I don’t agree with the balance…the original debt was only…”

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