Are you looking for solutions to help you clean up your credit? Improving your credit score may take time but it does not have to be difficult by any means. Today, I am going to take a look at how to get your accounts out of collections so you can get back on the track to building good credit.

Here is my 5 step plan for eliminating old debts and improving your credit score.

1. Make your “debt free” plan.

Write out a list of all of your creditors and the amounts that you owe. You can either list your debts in order by the amount owed or by the highest interest rate. List each creditor and how much you can realistically pay each month. This will help you determine how long before you are debt free. I am a fan of listing debts by their interest rates. It’s the best way to save money as you pay off the highest interest rate debt first.

2. Contact your creditors.

Send each creditor a letter stating that you are aware of the debt and have every intention to pay. Never reach agreements by phone. Collection agents are paid by commission so they will lie and promise you anything to get a payment out of you. Always use written correspondence so that you have documentation of your communication to refer back to.

3. Send settlement offers.

Pick an amount that is fair that you are able to pay. A good rule of thumb to follow is to offer 25% of the amount requested by a collection agency. If you owe $1,000 then you would offer $250. Collection agencies pay as little as 7% to purchase debts so a 25% settlement offer is more than fair. Make sure that you ask them to refrain from any legal proceedings and to remove any negative information from your credit report.

4. Wait for acceptance letters.

Wait to see if your settlement offer has been accepted by the creditor. They may ask for more money or threaten legal action. Many times these are bluffs to scare you into paying the full amount. Collection agencies are happy to get any payment since many debts go uncollected. If you have a debt that is 4 or 5 years old, you may just want to wait for it to drop off your credit. Most debts have to be removed from your credit after 7 years unless a legal judgment has been obtained against you.

5. Make your payments as agreed.

Now that your settlement offers have been accepted, you need to make your payments as agreed. Stick to your payment schedule. Remember that the first step to building good credit is getting rid of your bad credit.
Cleaning up your credit is a process. Individuals often want quick fixes to make their debt problems disappear overnight. Remember that you didn’t get into debt overnight so it’s unlikely that you will get out of debt overnight.