I have $3,500 in collections from three years ago, and I now have the funds to pay it off. This debt has been a major obstacle in finding decent housing with my partner. I hope that settling this debt will help, although my credit is still in bad shape. I haven’t heard from the current owner of the debt recently. The last time I was contacted was about two years ago when I informed them I was homeless and couldn’t pay, which was true. I’m unsure if the debt is still with the same collection agency. Due to frequent moves, homelessness, and changing my phone number, I haven’t received formal notices other than that one call. I’ve used Credit Karma to find out who owns the debt now and need advice on the next steps.
Should I reach out to them to verify the debt? Can I negotiate the amount down? Is a pay-for-delete arrangement possible? What should I do next?
If you never settle the loan, it will appear as income in a few years and you will be responsible for paying taxes on it.
Run a free credit report from companies like Experian once a year. Examine your credit history and get in touch with the company to settle the balance. Always try to work things out and see if they agree. After then, you will have to wait years for it to be deleted. Anyone that tries to tell you that you can miraculously have your credit report deleted for a charge. is spreading falsehoods to you. However, it will at least appear to be paid. Your credit score will eventually rise if you simply continue to make on-time bill payments.
I’m happy to hear that things have improved in your life.
Give the collection agency a call and offer to settle the debt. Ask them what steps they’ll take to settle the debt; it’s a negotiation. Offer them something less than that, regardless of their response. Maybe settling on paying sixty percent of the total amount due.Important: They have to take the collections account off your credit as a requirement of settlement (not mark it satisfied, delete it).
Put that in writing and then settle the debt.
If your debt has been handed over to a collection agency, remember that they didn’t pay the full amount you owed, which means you can often negotiate to settle for less. For instance, I had a collection agency pursue me for $7,500 for a bill already covered by my insurance. They even agreed to accept $500 to resolve it. They typically won’t offer a discount greater than what they paid for the debt.
Be aware that some agencies might try to insist that you must allow them to automatically withdraw payments from your bank account, which is not true. Others might demand full payment upfront and refuse to set up a payment plan.
Additionally, if the debt is past the 4-5 year statute of limitations for collection in your state, they can no longer legally pursue it. However, it will still affect your credit score for 2-3 more years. Keep in mind that contacting them about the debt can reset this statute of limitations, starting from your last interaction rather than the original debt date.
Whatever you decide, ensure you get everything in writing. Confirm in writing that the debt is settled and negotiate for a reduced amount.
Of course…settle the debt.