STEP 3: FILLING OUT YOUR DISPUTE LETTERS
Welcome to Step 3 of the Credit Enhancement Formula. You will find all our training below, just click the links to access the videos. This is the Most IMPORTANT step. Take your time and don’t rush!
Click here to access the Section 609 Dispute letter templates
Now that you have gone through each of your credit reports, disputed inaccurate information (if applicable) and listed all of your negative accounts in one, easy to manage form, you’re now ready to deal with and have these negative accounts removed. Keep in mind, this is probably the longest and hardest step, but it’s one of the most important. Even if you could get approved, you’re score will not reach it’s maximum potential unless you have no negative accounts, and by not having the best score possible, you’ll be paying higher fees, higher rates, and shabby terms.
Editing Your Letters without Microsoft Word
Click here to access Google Docs
Mailing Your Letters
Bonus Download: Section 609 Credit Dispute Instructions
“Pay for delete method”
The common description is Pay for Delete, which means you pay a settled amount (agreed by both you and the collection agency) or you pay the entire account off. Just offering this over the phone is not an option! Just like anything else, if it’s not on paper, signed and agreed upon – then there is no agreement. By sending a “Pay for Delete Letter” to the collection agency, having them sign the agreement and returning it to you is when you officially have an agreement. No matter what they tell you, remember: if you don’t have a signed agreement, you don’t have an agreement!
Collection agencies didn’t start collecting bad debt last night! They know what their legal limits are and some will even go beyond what’s legal. Collection agencies are pushy, even border-line harassment, but they all have one common interest – money! By dangling money over them in return for a permanent deletion of your negative account, you may just get them to agree to your terms. So what terms should you seek?
In order to get the best terms, you must first do a little private investigating… There are different types of collection agencies, and knowing which one you’re dealing with will be beneficial. Some collection agencies are third party agencies hired by the original debt holder. These types of agencies usually split a percentage with the original creditor once they collect. Some collection agencies buy the bad debt outright. They pay the original creditor upfront, usually pennies on the dollar (the national average is around 3 cents on the dollar), and when they collect, they keep everything collected. Some collection agencies are nothing more than a different branch of the original creditor. This is usually the case for new bad debt. The originally creditor will send the case to an internal collection department, which trys to collect on the debt. If they are unsuccessful, they will then usually write off the debt and sell it to a collection agency. So why is this important to know?
Typically speaking, by knowing who the collection agency is and how they obtained the debt, you have a leg up on negotiating. For example, if you know this agency paid 3 cents on the dollar, you’re likely to settle for much less than a collection agency who bought the debt for 30 cents on the dollar. The only way to know how much they paid for the debt is if they are a publically traded company. If they are, you can look up the value of the bad debt (if paid in full) and how much they paid for it by going to SECFilings.com. So if you see they paid 1 million dollars for 20 million dollars worth of bad debt, you’ll know they paid 5 cents on the dollar. If you owed 500 dollars to them, you now know they’re in it for 25 dollars, plus a little extra for commissions, overhead, payroll and other various expenses. It’s important to note, they do not collect on all bad debt, so you’ll never get them to settle for exactly what they paid for it. Otherwise, they wouldn’t last long as a collection agency, if all they can do is break even.
A good start to the negotiation process is around 30% of the amount you owe. This probably will not be agreed upon by them, but the true goal is to get in or around 50% – though the lower the better. Ultimately, the negotiation process starts off at whatever you first offer and can afford. You’re free to go lower or higher, as it really depends on your situation and your willingness to go back and forth when negotiating. Though, just to be as helpful and informative as possible, starting around 30% and in a worse case scenario, ending up at 60-70% of what’s owed is typical. So there’s nothing wrong with your negotiating if that’s where you end up when it’s agreed upon by you and the collection agency.
If you have some questions or doubt about a collection account, for example: you know you owe something, but you feel the amount they’re claiming is high, you’ll want to first find out if the account is legitimate. The first thing you will want to know is: Does the source reporting the information have the legal right to do so? To get this answer, you must send the collection agency (or negative account holder) a certified letter requesting validation of the debt, or in other words, proof they have the legal right to report this debt and/or collect on it, as well as proof that what they claim is legitimate. If they cannot come up with the needed proof within a certain amount of time, (usually 30 days, but the actual law doesn’t state an exact amount of time, just as long as it is delivered in an acceptable amount of time – so there is some grey areas with validations) the account must be deleted from your credit report(s). While no debt disappears in reality, they can disappear from your credit file. There are time limits on how long a bad debt can be reported in your credit file. Just because a debt can’t be reported in your credit file, doesn’t mean you still do not owe this debt. Typically, the time limit is seven years from the date the account became delinquent, but there are some accounts (example: a bankruptcy or tax lien) that could be reported longer then 7 years. There’s also loopholes that collection agencies like to use, like an admittance to the debt, which could (possibly) be used to extend the limit. This gets into technical and complications that we’ll avoid in this section in an effort to keep this as easy and simple as possible. However, this information is invaluable to any consumer, so to read more about it, check out Collection Agency Guidelines.Under Collection Agency Guidelines, we’ll go over requesting a full validation of a debt, things a collection agency can and can’t do, and other guidelines and information about collection agencies.
That’s pretty much the best way to get negative accounts legally removed from your credit reports. Offer a Pay for Deletion, negotiate the total amount, get everything signed and agreed upon, and pay using a money order. It’s absolutely important not to pay using a credit card, debit card or personal check. The information given to them will be retained by them and they could use it if another bad debt owed by you comes their way. So always pay with something that doesn’t hold your personal information, like a certified check or money order! Remember not to pay a dime until you have a pay for delete letter signed by them. If they don’t follow through on the agreement, you’ll have a case if you have a signed agreement. Otherwise it’s your word against theirs, and often, you’ll lose that case.