To repair your credit after your debt settlement, it’s important that your settlement is accurately listed on your credit report. Soon after you settle your accounts, check your credit report to make sure your accounts are reported correctly. Handle discrepancies as soon as possible either with the credit bureau or with the business who settled your account.
Each account status should show settled or something similar. If your accounts continue to be reported late every month, they’ll keep affecting your credit score. Give the creditors and collectors 30 to 60 days to update your account status, then check your credit report to be sure the account status shows “Settled in Full” or just “Settled.”
Balance due reported as $0. Your credit report should not show that you owe a balance on your account. If it does, it could mean something went wrong with the actual settlement. When your account shows you have a balance owing, there could be a chance the creditor or a collector will come after you later on for the rest of the balance.
Get a paid in full letter. After you settle your accounts, try to get a paid in full or a zero balance letter from the creditor. You should keep this record in your file and use it to dispute errors with the credit bureau. The letter should be on company letterhead and include your name, account number, and a statement that the account balance is now $0.
Dispute errors with the credit bureaus. If you see errors in the way your settlements are reported, you can dispute them with the credit bureau. Along with your dispute, send a copy of any proof you have that the account was actually settled. This is where a paid in full or zero balance letter could prove to be useful. If you don’t have a zero balance letter, send a copy of the settlement agreement and the cancelled check or money order receipt showing that the settlement took place. Remember to always send copies, not originals, of your correspondence.
Call the creditor or collector. You’re also allowed to dispute credit report errors with the creditor or collector, rather than (or in addition to) the credit bureau. You can skip the credit bureau and go straight to the business that you settled with. Let them know that the settlement isn’t being reported accurately on your credit report and ask them to update your record with the credit bureau.
Once you settle your accounts, they won’t be removed from your credit report unless this is part of your negotiation with the creditor or collector. Otherwise, the account will continue to be reported. It’s your responsibility to verify that settled accounts, if they remain on your credit report, show up correctly. A settlement that doesn’t show up right – for example, a balance due still appears – will likely hurt your ability to get credit cards and loans in the future. Don’t wait until it’s time to put in a mortgage application. Take care of all debt settlement credit report issues sooner rather than later.
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