Negotiating Secrets: How to Convince Creditors Not to Ruin Your Credit Score Not everything in your credit history has to show up on your credit report. Here's how to convince your creditors to remove or modify negative information.

In his book Dirty Little Secrets, personal finance expert Jason R. Rich reveals the secrets of credit reports and ratings and explains what you can do to improve both. In this edited excerpt, the author reveals what you can say and do to get your creditors to remove negative information from your credit reports.

The process of creditors and lenders reporting information on an ongoing monthly basis to the credit reporting agencies is purely voluntary. Any information that a creditor or lender adds to your credit reports can theoretically be removed or modified to be less negative, if you can convince the creditor/lender to take this action.

And you have a wide range of options when negotiating with your creditors and lenders. They may be willing to lower your monthly payments, defer one or more payments, waive late fees and penalties, lower your interest rate, or somehow restructure the loan to make paying it off more achievable. You might also be able to schedule a long-term payment plan that you can afford, or settle the account for up to 50 percent less than the original debt. This will be based on your situation, how well you're able to negotiate, as well as your ability to pay off your debt(s) in a lump sum or via multiple payments.

An alternative to restructuring a payment schedule is to offer a settlement to the creditor. This is a legally binding agreement that allows you to renegotiate the amount owed. In many cases, this will stop interest, late fees, and other charges from accruing as you pay off the amount due, which can often be reduced.

Any settlements need to be negotiated with the creditor or collection agency. You'll negotiate how much is owed, how the repayment plan will be structured, and what the outcome on your credit reports will be once the debt is paid off. Ultimately, the creditor or lender should put all settlements in writing.

Typically, if you're offering to settle an account for significantly less than what's owed, the creditor, lender, or collection agency will insist that the entire negotiated amount be paid in full or in two installments. If you can come up with the lump sum, you'll potentially save a lot of money.

However, if you're looking for a long-term payment plan, you can often negotiate to pay a very low (and affordable) amount per month, but you'll be required to pay off the entire amount owed. In this situation, however, you can sometimes get them to waive late fees and/or interest charges.

When negotiating with a creditor, lender or collection agency, your ultimate objective is to convince them to list the account as "Paid as Agreed," "Current," or "Account Closed -- Paid as Agreed" with each of the credit reporting agencies. Anything other than that, such as "Paid," "Paid -- Charge Off," "Settled," "Repossession," and "Paid -- [insert number of days] Days Late," will negatively impact your credit scores. Your willingness to negotiate and a demonstration of good faith with proper follow-through will help you achieve this objective. Realistically, however, you should be willing to settle for something a little less positive being reported to the credit reporting agencies.

Some creditors will agree to alter how your account is being reported to the credit reporting agencies if the settlement involves you paying at least 70 percent of the amount due and you meet the obligations of the settlement with no further delays.

The decision to negotiate with a consumer is made on a case-by-case basis and will depend on your ability to negotiate with the creditor, lender or collection agency. It is not normal policy for a creditor or lender to delete negative information from a consumer's credit report just because the debt is paid after it has been late or has gone to collections.

These tips will help you negotiate with a creditor or collection agency:

• If you make a request that's denied for whatever reason, ask to speak with a supervisor.
  
• Don't agree to pay more than you can afford when negotiating. Know in advance what your financial situation is, then work within those confines.
  
• During your negotiating process, figure out what the creditor is willing to accept as a settlement. Offering between 50 and 70 percent of what's owed, either as a lump sum or through a payment plan, isn't unreasonable.
  
• Try to avoid becoming intimidated by the person you're negotiating with, even if they make threats about lawsuits.
  
• Keep in mind, most successful negotiations require several rounds of offers and counteroffers. The process could take weeks.
  
• If you can afford to settle an account by paying one lump sum (as opposed to using a payment plan), you'll have more negotiating leverage.
  
• The person you're negotiating with is a trained professional when it comes to debt collection. For them to use legal terminology during a conversation or in writing is a common tactic to confuse or intimidate you. Listen carefully to what's being said, and make sure you understand exactly what you're committing to. Consult with a lawyer or credit counselor if you have questions.
  
• Make sure everything you ultimately agree to is put in writing, signed and dated by both parties.