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the natural advantage in debt settlement, because you have 
something the creditor wants. You must hold out for your 
terms until the creditor gives you what you want. Once 
you've written that settlement check, your advantage 
disappears. So, get your term s in writing before you even 
open your checkbook.  
Using Settlements to Restore Your Credit 
The credit reporting system gives consumers very little 
reason to pay their debts. If the debt were ignored, the 
consumer would have a good chance at never hearing from the 
creditor again, and, after seven years from the date the 
debt was written off, the negative credit listing would 
disappear. If the consumer were to pay the debt, then that 
seven year period would begin all over again. A paid 
collection or charge off will trigger credit denial as 
quickly as an unpaid collection or charge off. It's like 
getting time added to your sentence for good behavior.  
Fortunately, creditors make their profits by collecting from 
their customers, not reporting negative credit information. 
Because creditors can see this "catch-22" situation, they 
will often agree to delete any negative listing upon 
settlement of the debt. Collection agencies will always 
agree more readily to delete the negative listing than banks 
or credit cards. The only case where you should have a real 
problem with collection agencies is when they represent a 
larger, institutionalized creditor. Many creditors, though, 
have an agreement with the credit bureaus that they will not 
allow a negative listing to be deleted upon settlement.  
Larger creditors, such as huge credit cards or banks will 
require more pressure before they will agree to delete a 
negative listing, but virtually every creditor will give in 
with the right amount of convincing. Every creditor who 
reports to the credit bureaus can also change the 
information they report. In most credit organizations, there 
are dozens of people with the authority to make changes on 
the credit report. Anything a creditor reports, a creditor 
can change.  
You may take two approaches to having the negative 
information deleted upon settlement of a debt: 
pre-notification of terms and post-notification of terms. 
Pre-notification of terms: you tell the creditor up-front 
that you will require the deletion of the entire negative 
listing as a part of the payoff. The agreement to delete the 
listing and consider the debt settled is documented in 
writing and signed before the payoff takes place.  
Advantage: Time will be saved and you wont be disappointed 
at the last moment. It is also less likely that you will 
have to fight the creditor later to actually delete the 
negative listing.  
Disadvantage: When the creditor discovers that your credit 
is important to you, he will usually ask for a larger 
settlement amount - sometimes full balance - to meet your 
terms.  
Post-notification of terms: once settlement negotiations are 
complete, the creditor receives the agreed payment with the 
requirement that the negative listing be deleted attached to 
the check. This approach requires use of a "conditional 
endorsement" document (drafted by your attorney) notifying 
the creditor of your terms.  
Advantage: You will almost always get a better settlement 
amount. The creditor will often be tempted by the payoff 
when the terms arrive and will deposit the check without 
blinking at the new terms.  
Disadvantage: The creditor often hangs up on the new term 
and might send the settlement check back. The creditor might 
still ask for more money, or reject on the deal altogether. 
If the creditor simply deposits the check without intending 
to follow through with your new term, you will have to fight 
the creditor later and force him to delete the negative 
listing. Never expect a creditor to meet an agreement that 
was made verbally.  
Everything must be in writing and, even then, you will 
probably have to fight to make the creditor live up to his 
end of the bargain. You may find that some of your creditors 
are willing to hold out longer than you are willing to hold 
out before agreeing to delete the negative listing from your 
file. In other words, they will not agree to delete the 
negative listing under any circumstance. Once again, let it 
be said that every creditor will give you what you want if 
you speak to the right person long enough and you make the 
right offer.  
But if you are on a time-line, and your attorney can't get 
them to agree to full deletion, you have a couple of other 
options: List the Account as "Paid" only. You may 
counter-offer that the creditor simply list the account as 
"Paid" rather than delete it altogether. This is a true 
indication of the status of the account and many creditors 
will concede and agree to this wording. A "Paid" status is 
still very negative for a collection account or an account 
that will show "Paid Charge-off" or "Paid repossession." You 
should only agree that the account show "Paid" if all other 
negative notations, such as "Charge-off," "Repossession," 
late notations, and "Collection," are deleted at the same 
time. A simple "Paid" notation on a regular trade line is 
neutral and should not hurt your credit. List the Account as 
"Settled" only. You may counter-offer that the creditor 
simply list the account as "Settled" rather than delete it 
altogether. "Settled" is an inherently negative listing but 
not as negative as "Paid charge-off." Don't agree to a 
"Settled" listing until you have exhausted all other 
possibilities. "Settled" will still trigger a credit denial. 
You should only agree that the account show "Settled" if all 
other negative notations, such as "Charge-off," 
"Repossession," late notations, and "Collection," are 
deleted at the same time. If you agree to a "Settled" 
notation, you must continue to work hard to delete the 
notation through the credit bureau dispute process. List the 
Account as "Paid Charge-off" or "Paid Collection" or "Paid 
was 30, 60, or 90 days late." This will be the creditor's 
first choice, and your last choice, of what to place on your 
credit report once you have paid. These notations are almost 
as damaging as showing the same debt unpaid. It is very 
common, though, for an account to be deleted (through credit