If you have collections in your credit report, you are probably harassed by incessant phone calls and flooded with unwanted mail. Collections also lower you FICO score significantly and stay on your credit record for 7 years. What you probably don't is that collections are one of the easiest things to get rid of. The only thing you need in order to clean up credit report and remove all collections from it is credit knowledge. The more you know about how collection agencies work, the better your chances to raise you score without having to pay thousands and thousands of dollars. Here are 3 simple tips that will help you understand how fast credit repair works.
1 Don't be intimidated. Collections are more talk and less walk.
Collection agencies have one thing in common-they try to intimidate their misinformed victims. The never ending calls have to convince you that you have only one chance-paying off the amount you owe in full. In reality most bad debt companies pay literally pennies on the dollar for the debt they are trying to collect. The amount they pay depends on the type of the account and its relative age. Debts that have been recently charged off are normally sold to the collection agencies for 5-6 cents per dollar that you owe. Older accounts are sold for 1,5-2 cents. Accounts that are years old, out-of state or unable to verify are purchased for less than a penny per dollar. In other words, collection companies are making profit even if you pay a tiny portion of the amount that you owe. Use that leverage when trying to negotiate with them.
2 Learn to be a pain in the neck. In a nice way.
If the amount that you owe exceeds 1000 dollars, always try to settle for 25% or less. If the collection agencies are slow to respond or unwilling to negotiate, remind them that you can request verification of debts. Under the FDCPA (Fair Debt Collection Practices Act) collection agencies are required by law to provide documentation that the debt is valid upon the request of the consumer. Since most of your debt gets resold to carious collection agencies down the road, most of them don't have the proper documentation to prove the validity of the debt.
3 Always aim for deletion of collection accounts.
Don't pay off your debt and assume that increase in credit score will follow. Always aim to delete your negative accounts. That's a major factor when negotiating with collection agencies. Make it clear that you will pay the settlement amount ONLY after they agree to delete the account from your credit report. The reason is simple-if you pay off your collection, the account status will be upgraded to current. The negative item (albeit now paid) will have bigger influence on your overall credit score. A deleted negative item, on the other hand, will instantly raise your score.
There are different ways to deal with collection agencies and clean up credit report . The more you know about the credit system and the various loopholes in it, the better your chances to raise your credit fast. Once you start thinking outside the credit box, you will be surprised to find how easy credit repair actually is.