Lesson 8 – Negotiating with Collection Agents to Delete Collections

Lesson Materials


About This Lesson

Before you read this. Do not ever call or pay off a collection without calling or emailing me first. Unless they offer you a DELETE LETTER. See the attachment on what to say

Most collections unless they are brand new will lower your score if you pay them. Negotiating with these collection agents is very important sometimes though especially when you are in the buying process. You see there is a maximum amount of collections that you can have now. But you want to raise the score first before you do this. I went and found all the best articles on this when you are ready and here they are: Don’t pay anything without letting me know. It may not help the score. Here are several tips you might find helpful:


  • Review Your Credit to Determine Which Collections to Work On
  • Call Collection Agents With A Script
  • Obtain Delete Letters and Send into All Three Credit Bureaus
  • Rescore Your Credit

This Lesson will which collections affect your scores and how to negotiate to have them completely removed.

Duration: 10 Minutes

Progress  60%

It is common for creditors to open a debt negotiation with the line, “We do not negotiate debt, and require you to pay the balance in full.” In my experience, this statement is simply untrue. I surmise the customer-center people who repeat this refrain do so because enough consumers wishing to negotiate their debt believe the statement. This opening tactic allows the creditors to extract the highest recovery from the debtor.

It is also common for debtors who are negotiating with a creditor to find the creditor attempt to enroll the debtor in a “debt management plan” (DMP). A DMP is simply a plan where the creditor makes a small concession on the interest rate while requiring the debtor to repay the entire balance over time. The creditor will offer this as a “compromise,” and promise the DMP will result in a lesser negative impact on the debtor’s credit rating. The fact is for a creditor who has defaulted, there is no difference in a credit score between a DMP and a debt negotiation strategy.

Start your negotiations with a lump-sum of 40 cents on the dollar. Some will expect that much, and others will want more. When you reach an agreement, get it in writing, and be prepared to send the creditor a check for a lump-sum settlement immediately.

You may find that your original creditors have sold your account(s) to collection agents. If you do not know who owns your collection account simply get a copy of your credit report from AnnualCreditReport.com and contact the collection agent listed for the account(s) in question. Be aware that collection agents will buy collection accounts for pennies on the dollar, so your offer of 40 cents on the dollar will offer the collection agent fair return on their investment.

If you insist on negotiating yourself, here’s a primer to get you started:

  • DO have a story explaining specifically why you are having trouble paying the debt. Maybe you had a period of unemployment; maybe you went through a divorce or had a significant illness. These are all reasons to get a lower settlement amount.
  • Do NOT call the company and immediately offer a settlement amount. You have no idea what they are going to offer you. It could be much less than you are willing to pay. Let them make the first offer.
  • Do NOT call the company unless you have the money. Sometimes they will accept a payment plan, but that will cost you more. A lump-sum payment will always be your cheapest option.
  • Do NOT give the agency any more information than your name and account number. Don’t tell them where you work; don’t tell them your current address. They can ask … and you can ignore them and go back to negotiating. If they press you, simply say, “I don’t want to waste your time. Please don’t waste mine.”
  • Do NOT let them report this account as settled on your credit report. A settled collection account is as harmful to your credit score as a delinquent account. Offer your payment in full (and be willing to pay a little more) if they will remove the negative mark. Many collection agencies will do this because they want to be paid. If you cannot get the account removed, then try to get them to report the account “paid as agreed.”
  • Do NOT act timid. Believe it or not, you are in the power position, because most people do not proactively contact collection agencies to pay their debt. You are making their job easier. That gives you the right to demand a better deal.

Before you start negotiations, understand these key points: The collection agency didn’t lend you the money or extend you credit initially. It doesn’t care if you owe $250 or $2,500. It just wants to maximize its return, which may be a percentage of what it collects or whatever it can collect over the pennies on the dollar it paid for the debt. Time is money. Every time the collection agency writes or calls you, it spends money. The agency has a strong interest in getting you to pay as much as you can as fast as possible. It has less interest in collecting 100% over five years. Review your debt priorites. In addition it’s important that before you start negotiations, you review your debt priorities. If you don’t have the cash to make a realistic lump sum offer or to propose a payment plan, don’t even talk to the collector—you may make promises you can’t keep or give the agency more information than it already has. Or, worse, you may say something that turns an old time-barred debt into a brand-new debt.

Options for Debt Settlement

Here are some of your options when you negotiate with the collector on an unsecured debt.

Offer a Lump Sum Settlement

If you decide to offer a lump sum, understand that no general rule applies to all collection agencies. Some want 75%–80% of what you owe. Others will take 50%. Those that have given up on you may settle for one-third or less. Before you make an offer, however, decide your top amount and stick to it. Once the collector sees you will pay something, it will try to talk you into paying more. Don’t agree to pay more than you can afford. A collection agency will have more incentive to settle with you if you can pay all at once. If you owe $500 and offer $300 on the spot to settle the matter, the agency can take its fee, pay the balance to the original creditor (who treats the amount you don’t pay as a business loss), and close its books. If the collector owns the debt, it keeps the money, which usually ends up being a profit. For help in crafting a settlement offer, get Nolo’s eForm Offer to Settle Debt With a Reduced Lump Sum Payment.

Negotiate Improvement to Your Credit Report

Don’t forgot that while you negotiate settlement of the amount you owe, you can also ask the collector to agree to report your debt a certain way on your credit report. (To learn more, see Getting Debt Collectors to Remove Negative Information From Your Credit Report.) If you are negotiating with a collection agency on payment of a debt, consider making your credit report part of the negotiations as well. You can try to get the collector to remove negative information from your credit report, perhaps in return for paying more on the debt. And if you get the collector to agree to accept less than the full amount to settle the debt, be sure the collector also agrees to report the debt as “paid in full” on your report. Read on to learn how delinquent debts are reported and strategies for negotiating with collectors regarding information on your credit report. (For more on negotiating with debt collectors, see Debt Collectors & Collection Agencies.)

How Delinquent Debts Are Reported on Your Credit Report

After your debt has been transferred or sold to a debt collector it will probably appear twice in your credit history. According to the credit reporting agency Experian, this is how it works: The debt starts as a current, never late account. As you get behind on the payments, it is typically reported as being 30, 60, 90, and then 120 days late. At that point the creditor is likely to charge off the debt. Its status will be changed to “charged off” and “sold to collections.” “Charged off” and “sold to collections” are both considered a final status. Although the account is no longer active, it stays on your credit report. When the debt is sold or transferred to a debt collector, a new collection account is added to your credit history. It appears as an active account, showing that the debt collector bought the debt from the original creditor. If the debt is sold again to another collection agency, the status of the first collection account is changed to show that it was sold or transferred. Once again, the final status shows that the first collection account is no longer active, but that status continues to appear as part of the account’s history. All of the accounts—the original account and any subsequent collection accounts—will ordinarily be deleted at the same time, which is seven years from the original delinquency.(To learn more about how long negative information can remain on your credit report, see Credit Report Basics.)

Getting Collectors to Remove Negative Information

However, because creditors are not required to report information to a credit reporting agency, when you negotiate a debt settlement, ask to have any negative information about the debt removed from your credit files. The collection agency may tell you that this is not its decision—that only the original creditor can remove the information. Ask for the name and phone number of the person with the original creditor who has authority to make this decision. Call that person and plead. Explain that you are taking steps to repay your debts, clean up your credit, and be more responsible. Emphasize that a clean credit report will help you achieve your goals. Be honest, but paint the bleakest possible picture of your finances. Explain illnesses and accidents, job layoffs, car repossessions, major back taxes that you owe, and the like.

Getting a “Satisfied In Full” Reporting

If the collection agency agrees to settle for less than you owe, be sure it also agrees to report the debt it holds as “satisfied in full” to the credit bureaus. Be sure to get written confirmation from the creditor and the collector. The debt collector’s confirmation should say that it will acknowledge the debt as paid in full when you pay the agreed amount. If the creditor (or the debt collector if it has the authority) agrees to delete the original account line, get confirmation that it will submit a Universal Data Form to the three major credit reporting agencies deleting the account/trade line. If the debt collector does not have authority to act for the original creditor to delete the account information on the original debt, you may need to write separate letters to the creditor and the debt collector.

9 Tips to Successfully Negotiate With Collection Agencies

There is really nothing fun about debt collectors. They are persistent, aggravating, and after your money. But, debt collectors do have one redeeming quality: they aren’t above negotiations. Like so many things in life, debt can be negotiated. However, going in blind can leave you blindsided. Instead, consider the following, before the negotiations even begin. Do Your Homework: You don’t have to have a law degree to argue successfully. Instead, simply being prepared, knowing the ins and outs of the issues at hand can help you formulate a strong negotiation plan. Learn about debt collection practices, know what is legal and what is not, and research your debt to make sure it is indeed valid. The more knowledge you have, the more power you’re granted. Know What you Want: It’s hard to negotiate unless you actually know what you are negotiating for. Before even speaking to a collection agency, figure out what you want the outcome to be. Do you want the debt drastically reduced, or just reduced a little? Do you want late fees wiped out? Do you want to receive a time extension? By knowing what you want, you are better able to fight for it. Have a Legitimate Argument: It’s hard to argue when you don’t have a valid point. This makes getting all your ducks in a row very important. If you are requesting a time extension, for example, you best have a valid argument why you deserve one. If you provide the collection agency with rational and logical arguments, they just might surprise you by actually listening. Threaten Bankruptcy: To the collection agency, bankruptcy is the mortal enemy. If you file, they will get nothing. This makes bankruptcy your ace in the hole. Even if you have no plans to file for bankruptcy, act like you do. The collection agency, in order to keep you from filing, will jump into negotiation mode. They would rather get something, instead of nothing at all. Use Sympathy to Your Advantage: Collection agencies are made up of people just like you. They are filled with human emotions and understanding. Use this to your advantage. Though you shouldn’t lie, you should provide them with a poor looking picture. If your finances are in trouble because of loss of a job, a death in the family, or an illness, let them know this. They just might know where you are coming from. Don’t Tell Them More Than They Need to Know: A collection agency will have information on you, but they won’t know everything. Where you work and where you bank, for instance, may be a mystery to them. Keep it this way. If they ask you your place of employment or place of banking, simply refuse to answer. If they do know where you work and bank, it makes it very easy for them to collect the money owed. Don’t Be Pushed Around: Collection agencies often get their way by wearing people down. They call constantly, they bother, they annoy. Don’t let their persistence push you around. Instead, stand your ground. Keep Track of the Collection Agencies Calling: If you receive calls from different collection agencies concerning the same debt, it means that your original creditor has given up on collecting from you: they are desperate. You can use this to your advantage by settling the debt for far less than you owe. Do Things in Writing: When it comes to negotiation, know that oral promises hold no water: get everything in writing. This is particularly important when the collection agency agrees to settle: no matter what they settle for, be sure you receive a satisfied in full report. When it comes to debt collectors, negotiating is always a good idea. But, the above points need to be heeded in order for success to be granted. If you, yourself, are unable or feel uncomfortable negotiating, debt management and debt settlement companies can help. They are filled with professional negotiators who know how to beat creditors at their own game.