How to Offer a Settlement on a Charged-Off Credit Card

How to Offer a Settlement on a Charged-Off Credit Card
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If a credit card account reaches the point of “charged-off” status, this means the bank has written your debt off as a loss and turned it over to a collection agency working on behalf of the company or working on its own behalf. As serious as charge-off status is, you still have an obligation to repay your debt, and it’s not too late to try to negotiate a settlement with your creditor. Your efforts, even this late in the game, should help minimize the damage to your credit score.

Contact the original creditor, the credit card company, and ask for contact information for the company or party you need to speak with about the debt. This could be a collection department within the credit card company or a separate collection agency.

Call the collection agency regarding the debt to offer a settlement for the debt. Offer a lump sum payment, if possible. The lump sum you offer doesn’t need to amount to the entire debt; you might succeed in offering a percentage of it, such as 50 or 75 percent. If you can’t afford a lump sum, offer a monthly payment that you can afford to pay until you finish paying off the debt. The negotiation process may involve some offers and counteroffers before you reach an agreement.

Negotiate how the collection agency will report the charged-off debt to the credit bureaus as a part of the settlement agreement. Aim for the collection agency deleting any reporting of the debt completely from your credit report. If the collection agency refuses to do this, back up and request a “paid” notation. You want to have any notation of a charge-off removed from your credit report after you finish paying off the debt because of the potential damage this can do to your credit score. If you can’t get a “paid” notation, try asking for a “settled” notation to indicate that you settled your debt.

Request a written copy of the settlement agreement, signed by all parties. The settlement agreement should include the repayment provisions as well as the agreed-upon report to the credit bureaus.

Return to the original creditor after you finish repaying the debt to request an adjustment to the notation on your credit report. At the time the credit card company charged off your debt, the company reported the charge-off to the credit bureaus. After satisfying the debt, the original creditor needs to update its notation on your credit report to show that you paid or settled the charge-off.