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What Are Some Common Strategies to Pay Off Derogatory Accounts?

Posted on May 23, 2011

The path to credit repair might require you to pay off some (or all) of your past due accounts. You could easily feel overwhelmed by the amount of your past due accounts, but don’t let this discourage you or cause you to delay your credit repair. You can pay off these accounts one at a time.

Figure Out What You Owe

Make a list of all the negative accounts on your credit report that have outstanding balances. Your credit repair agency may not be able to get these removed these from your credit report unless you can pay off the balance. If you put together a list of the accounts you owe, you can better come up with a plan to pay off all the accounts.

Your accounts may have different levels of delinquencies. Some may be late, but not yet charged-off. Others may be charged-off. And you may have some accounts that are with collection agencies. How you pay your accounts depends on how delinquent they are. For example, if you have accounts that are late, but not charged-off, you might pay them to keep them from becoming charged-off, especially if you don’t have any other charge-offs on your report.

Pay for Delete

You may be able to talk the creditor into removing the negative item from your report in exchange for payment. The pay for delete strategy can be difficult because you need to send your letter or get your phone call to someone a little higher up in the company who has the authority to change your credit report entry. Customer service representatives rarely have any say so as to what goes on your credit report.

Debt Settlement

If you can’t afford to pay the balances in full, consider offering a settlement for the balance. With a settlement, you ask the creditor to accept partial payment on the account and cancel the rest of the balance. Creditors that agree to settlements, only agree on accounts that have already defaulted or at risk of being defaulted. Once your account is settled, your credit report is updated to show that a settlement has been done and you’re finished with that account.

Paying Accounts

The hardest part about paying off your derogatory accounts is coming up with the money. Approach debt pay off as you would any other goal – by saving up for it if necessary. You may have some smaller balances that you can easily pay off with one or two paychecks. On the other hand, you’ll have to save up enough money to pay larger balances that need to be paid in a lump-sum, even settlement payments. Put as much money as you can in a savings account every month. Then, when you’ve accumulated enough money to pay off an account, use one of the strategies mentioned above – pay the account in full, negotiate a pay for delete, or offer a settlement payment. Keep saving up and continue paying off your accounts one by one until they’ve all been taken care of.

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