If you are looking to improve your credit, you are not alone.  Research from Encore Capital Group and the Urban Institute show that about 77 million Americans have debt in collections. That’s a whopping 35% of American consumers who have credit files with any of the three major bureaus.

Having an account in collections can do serious damage to your credit report and rating. If an agency is trying to collect money from you, it’s nearly impossible to secure low-interest credit or qualify for loans. Bad credit also increases the amount that consumers pay for:

• Car insurance
• Rent
• Utilities
• Cell phone service
• Elective medical procedures

Some employers even check credit reports to determine whether applicants are responsible enough to hire. These employers must ask permission to view your credit history, but refusing doesn’t look good for applicants.

Pay for deletion creates an opportunity for consumers to eliminate unwanted information from their credit reports. It can also help them save considerable amounts of money while repaying debts. In many cases, collection agencies will accept an amount lower than your actual debt. That helps you save money. It also helps them recoup as much as possible instead of wasting time and money pursuing the account.

Before you can take advantage of this option, though, you need to understand the process.

Check Your Credit Report Regularly If You Want To Improve Your Credit

If you want to improve your credit, you need to know what is on your credit report first.  According to the Fair Credit Reporting Act, every consumer can get a free copy of his or her credit report from each of the three major bureaus. That means you can get an annual report from Equifax, TransUnion, and Experian. If you spread out your requests, you can view a version of your history every four months.

This is the best way to know whether debt collection agencies have contacted the credit bureaus about your outstanding debts. If you do not pursue this information, it could take you years to learn why you keep getting turned down for loans and other forms of credit.

Contact the Collection Agency

Your credit report should list the collection agency. You will want to contact them by phone and letter. Have your account number ready so you are prepared to negotiate.

When you call the agency, explain that you are willing to pay a percentage of the debt to have it removed from your file. Do not admit that you actually owe the money. Doing so will give the collection agency more leverage to get the full amount from you. In fact, you should question the authenticity of the debt, but accept that you will pay some of it so it does not harm your credit.

Some companies will insist that you pay the full amount. If the representative does this, ask to speak with his or her supervisor, who often has more authority to negotiate. Keep in mind that this is a negotiation. Few companies will immediately accept a partial repayment. The better you can negotiate, the less you will end up paying.  Eventually you will improve your credit.

After reaching an agreement, send a letter outlying the specifics of the deal. This pay for delete sample letter should help. It’s best to send the letter by certified mail. Don’t sign it. Just type your name. You also need to keep a copy of the letter.

Request a Letter Outlining the Deal

Do not repay any money until the collection agency sends you a signed letter outlining the deal you reached. Without this letter, you have no legal standing. The company could take your partial payment and demand more without removing any information from your credit report.  Make sure the letter includes your account number and repayment offer.

Send a Money Order

Once you receive the letter, you need to pay the agreed upon amount. Pay it immediately. Any time between receiving the letter and sending the money could invalidate your deal.

Only send money orders. Do not send a check. Sending a check will give the collection agency your bank account number and signature. It’s possible they could use this information to pursue full repayment by proving the original debt was valid. You do not want to go to court over this.

Before sending the payment, make a copy of every document. Again, use certified mail. Regular post is unreliable. You need proof that the agency received your payment.

Watch Your Credit Reports

The collection agency should remove the harmful information from your credit report within two months. Get a copy of the report from all three credit bureaus. If the information hasn’t been removed after two months, send dispute letters to the credit bureaus. You can file your dispute online, but it is safer to use certified mail.  Once the incorrect information is removed from your credit report, you will be on the road to improved credit.

Now that you have improved your credit, you can reap the benefits.