by: Michael Saunders

Don't be fooled by the come-ons. According to the Federal Trade Commission - you see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:

* Credit problems? No problem!

* We can erase your bad credit - 100% guaranteed.

* Create a new credit identity - legally.

* We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!

Do yourself a favor and save some money, too. Don't believe these promises. Only time, a conscious effort, and a personal debt repayment plan will improve your credit report.

Most of the steps for improving your credit you can do yourself. Follow this negotiation cycle when dealing with a creditor.

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.

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Did you know?  (continued...)
The Negotiation Cycle For Talking With A Creditor
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