- 1). Verify the validity of the charge-off by pulling a recent copy of your credit report at AnnualCreditReport.com. This site offers free credit reports to all consumers. Find the account on your report and compare it to your records. If the account is inaccurate, you have the right to dispute the account with the credit bureaus (see Resources for the contact information).
- 2). Draft a letter to the lender or collection agency handling the account. All negotiations and correspondence must be handled in writing to create a paper trail. This will hold the company accountable for any promises made. In the letter, include your name, address, Social Security number, account number and indicate your willingness to honor the obligation.
- 3). Decide whether to settle the account. Settling the account will force you to pay less than is owed, but it will further damage your credit score. Regardless of how you pay the account, you must pay it to have any chance of removing the stain from your report.
- 4). Counter any settlement offer presented by the collection company. Make sure you have a reason for your counter-offer. This can be due to economic difficulties (unemployment, disability, ect.). Send documents supporting your economic hardship (Social Security payments, disability payments, ect.).
- 5). Agree to a settlement or repayment plan. Get the agreement in writing from your collection company. Review the agreement with a trusted adviser (family attorney or accountant) before signing it. Photocopy the agreement for your records.
- 6). Pay the charge-off as agreed. Obtain a paid-in-full letter from the lender or collection agency once the account is fully satisfied.
- 7). Draft a goodwill letter to all three credit bureaus. This is essentially a plea to change the way your paid charge-off is reporting. You must have a good reason to change the status of the account--disability or other economic hardship. Include any documents that support your argument. Photocopy this letter for your records and send it to all three credit bureaus--TransUnion, Experian, Equifax (see Resources).
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