Negotiate Your Credit Reporting
Always ask for a “Good Pay Rating”. The ideal is to get the creditor to report your account after the settlement as “Paid as Agreed” or “Account Closed – Paid as Agreed”. Some creditors may not change the status to “Paid as Agreed”. At least, get the creditor list the account as “Paid”. Since this is an accurate statement on the status of the account, many creditors will agree to this wording. Of course, insist that the account show “Paid” only, and that all other negative notations (such as “Charge-off,” “Repossession,” late payments, or “Collection”) are deleted at the same time. A simple “Paid” notation on a regular trade line is neutral and should not hurt your credit.
If they think it to their advantage to restore your rating, they will do this. For example, “I know you would like to receive the $1500 balance on the account, but it will not help my credit report if you can’t change the account reporting to ‘Paid as Agreed’. This is all I have and I will pay it to the other creditors who agree to change my credit rating in writing.” Collection agencies will more readily agree to delete the negative reporting than banks or credit card companies, since the collector can change their reporting, but you remain stuck with the original creditor’s negative reporting. Better to negotiate with the original creditor, because the reporting on your “applied for” accounts that primarily determine your credit rating.
Finally, upon settlement of the account, verify that all three of your credit reports have been correctly updated. Send a copy of the letter you received showing the account has a zero balance to the credit bureau to have the collection account removed. The Fair Credit Reporting Act requires that you have no more than one listing per delinquent account (you can have the original creditor report you late but you cannot have a collection listed for this same account).