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7 tactics for success in collection agency battles

You can get caught in an ugly trap if you let unpaid accounts go to a collection agency.

Federal laws don’t protect you much from the ways collection agencies can affect your credit.

A few war stories will make that very clear.

I’ve heard from a battalion’s worth of people who tell stories of paying the same collection company two, three, even four times for the same debt, with the collection company breaking its promise each time that “this will be the end of it.”

A division’s worth of people have told me their collection companies failed to report a collection as paid on credit reports.

Still more people are getting hounded for old collections that are illegally returned to credit reports. Collections that are no longer legally collectable, according to state law, just come alive and haunt you.

The obvious way to prevent these disasters is to pay what you owe. But that doesn’t help when a collection agency is waging war on you and your credit because of what you’ve done in the past or something that was beyond your control. So how do you fight back and win?

Keep in mind that when I say “win,” it won’t be a bloodless battle. It’s hard, nasty, ugly work dealing with collectors. Uncle Sam already trained you for that against the nation’s enemies. Now I’ll train you to fight the collection agencies.

Here are seven tactics you should use:

1. Assume everything you are told by the collector is a lie. If you don’t believe anything you were told, you won’t go very wrong.

2. When you first speak with someone from the agency, get their name, then tell them you want to pay. Be sure to stay calm and be polite. Collectors deal with angry people all day. They can be very nasty themselves. Don’t get into it with them.

3. Always get any agreements in writing. Why? See tactic No. 1 and my war stories. The agency may not correct your credit, and you will need proof of your agreement if they don’t follow through.

4. Never send money until you have a written agreement on company letterhead. Ensure that it includes your name, address, account number and the name of the company for which they are collecting. In my career, I have seen only one exception. Once you give them money, you have no power. None, zip, zero. Would you drop your weapon on the battlefield? They want the money, period.

5. If you don’t get what you want when you call, ask to speak with the supervisor, who may have more power to give you what you want. Often, the person you’re speaking with won’t let you talk to a supervisor. That’s what everyone asks for. Just thank the person and call back later — see tactic No. 2.

By the way, collection amounts of more than a few hundred dollars are negotiable. If you want to negotiate a lower amount, you must use tactics No. 3, 6 and 7 or you’ll have no agreement at all. If the debt is $500 plus $100 in fees, and you get them to agree to accept $300 if you pay within two days, get it in writing.

6. If the collection account is more than six months old, they must agree to completely delete the collection account from all major credit reporting agencies after you’ve paid. Paying off a collection that is more than six months old will actually harm your credit scores for a year or even longer.

Another platoon-sized war story: Some people, good and responsible souls they are, decide to pay off all their old bad debts. The result on their credit scores is either a small drop or a slight increase. All that money paid, all that responsible behavior, and they are rewarded in no way on their credit scores.

7. If the collection is less than six months old, you simply want a written agreement that the collection agency will report to the credit agencies that you have a dollar balance of zero.

If they won’t agree in writing to delete the collection on an older account or report a zero balance on new collection accounts, the only good thing you’ll get out of paying what you owe is your honor. And I strongly believe in honorable behavior. But your scores won’t change very much.

Do it my way — be honorable and win, too.

Dave Peters is a semiretired loan officer and credit repair specialist. He is a trustee of the nonprofit organization Credit Learning Systems, which teaches college students about credit and debt. He’s author of the book “How Credit REALLY Works” and is a guest on radio shows nationwide. E-mail him at creditmatters@atpco.com.