by: Michael Saunders

1. Contact the creditor by phone and reach a tentative agreement.

2. Send the creditor a settlement agreement, requesting return of a signed copy.

3. Upon receipt of a signed copy, send a money order marked "Full Payment."

4. Order a credit report from the credit bureau to ensure the item is changed or deleted as agreed.

5. If your credit report is unchanged, send the creditor a letter demanding compliance with the agreement.

Your bargaining power in this technique is your willingness to repay your creditor the money that you owe him. If the account has already been charged off or discharged in bankruptcy, your leverage will be even greater. At this point, the creditor has already accepted a loss on your account, and he does not expect to ever see or hear from you again. When he hears that you are now willing to repay the debt (or even a percentage of the debt), he'll be anxious to work with you.

You should expect to repay your creditor from 70 percent to the full amount to have it removed or to change the negative credit rating. However, if you expect to settle at 70 percent or less, you should start by offering around 40 percent. You will also lose some of your bargaining power if the balance on the account is under $200, as the creditor may not even want to waste his time with it.

In many cases, the initial person with whom you begin negotiating does not have the authority to enter into a settlement agreement, especially since it involves changing your credit rating. It is important, therefore, that you talk directly to someone who is in a position to authorize the final agreement.  (continued...)
The 5 Steps Of The Negotiation Cycle When Talking With A Creditor
  Page 2