Settling credit card debt can help alleviate the strains of having a huge mountain of debt hanging on your shoulders. Typically, if an account is with the original creditor (the credit card company) and still in good standing, the credit card company will not settle with you. Accounts that have been charged off and are with a collection agency are, many times, able to be settled much of the time. Collection agencies purchase accounts for pennies on the dollar and then try to collect the full amount from you, making huge profits. Settling these debts is something that can be done with a little time and patience.
Step 1
Examine each credit report for collection accounts that you may be able to settle. Look for accounts that are still within the statute of limitations (SOL) for your state. These are the accounts that you could still be sued for.
Step 2
Write a letter to the collection agency, offering no more than 25 percent of the balance. You may start as low as 10 percent if you wish. Even at these low percentages, the collection agency is still making a profit. Do not call the collection agency to offer the settlement. Collectors often get angry and will tell you anything to get you to make a payment to them, so rely on writing letters. Add a stipulation to your letter that the settlement will only be made if the agency agrees to delete the account from your reports entirely. A paid collection does absolutely nothing to increase your credit score.
Step 3
Mail all letters certified mail, return receipt requested. Keep the return receipt when it is mailed to you. This method gives you proof that the letter was mailed and that they received it. Keep copies of every letter you send as well as every letter you receive.
Step 4
Negotiate the settlement if the collection agency responds with a higher offer. If they do not respond at all after 30 days, send another letter. They should eventually respond when they see you are serious about settling the account. As time goes by, the SOL will expire and the debt becomes noncollectable. It is in the company's best interest to accept your settlement.
Step 5
Mail your payment to the collection agency only after you receive written confirmation from the collection agency. Only send payment in the form of a cashier's check or money order. Never send a personal check, bank card or credit card number. Keep a copy of the payment for your records. Mail the payment certified mail, return receipt requested.
Tips and Warnings
- Keep copies of all correspondence, return receipts and your receipt of payment in your records indefinitely.
Things You'll Need
- Credit reports from Equifax, Experian and TransUnion
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