First, know your foe! By that I mean you must understand who you will be talking to. There are two types of people that creditors will hire to deal with their clients. The first is for customer service, to help handle problems and answer questions for account holders. These folks are nice, kind and patient. Thats why they are hired.

The other type is hired for the collection department. They are hired because they are heartless, dont care about you in any way and are ruthless in getting the money. Once you fall into a collection account, the creditor doesnt care if you like then any more... they just want their money back.

So when you call in to negotiate terms, you must be aware that you will be talking to the jerk that wants your money, not the sweet lady that wants to help you.

Now that you are mentally prepared for battle, there are some very simple techniques to employ that will help and protect you.

When you talk to anyone, and I mean anyone, make sure you get their name (full name preferably), their direct line or extension, and any other pertinent information they give you. Write this down! That way if you ever need to do follow up, you can get back to the same person and not start all over from the beginning again. (Trust me; you will thank me for this one!)

When you talk to the collector, let them know that you are calling because you want to make arrangements to settle the account. Do not worry about telling them why, how or what about the account and what is going on in your life They wont care at all. You have to understand that there are so many people out there that just dont want to pay their bills and lie about horrible things. The collector has heard all the stories and will automatically assume that what you are telling them too. (Again, thats why they are hired for the job!) So, honestly, dont waste your time. Keep it business like and calm.

Right off the bat they will want to collect the entire amount right now. Dont go for that at all. Ask the collector what they will accept for a settlement. (Again, be sure to write this stuff down.) They will either come back stating they cannot offer anything lower, or that they can take something like 10% off. You should already have a goal in mind (a reasonable goal) and should continue on your path towards that goal.. get as close as you feel you can.

If after you have spent some time with the collector and they cannot or will not offer something close to what you are willing to settle for, ask for their boss or supervisor. Do not allow them to tell you the boss is not there. Call centers ALWAYS have a supervisor there if for no other reason to make sure the people are on the phone!

When you talk to the boss, get their info and then negotiate with them. Stay at it until you get a fair settlement offer (Fair for both you and the creditor remember, you most likely do owe them the money!)

Now lets assume you finally got a decent settlement offer. Before you send them any money, demand an agreement in writing. Have them fax (or mail) the agreement to you before you give them any financial or payment info. Once you have the agreement stating they will settle for a certain amount, make sure that you pay them in such a way that you can prove you have made that payment (personal check, copy of cashier's check, etc.)

A word of caution here most skilled collection agents will assure you that they will update the credit bureaus for you... no need to wait for an agreement. They may also tell you that the only way to get the settlement offer is to pay right away without the agreement in writing. DO NOT FALL FOR THIS! If you ask for this agreement in writing, they must send it to you. If they wont them inform them that the agreement is not acceptable and that they will get not one penny from you. (This will make them stop a second and rethink their position as the collector get s paid when they collect!) Do not get angry or blow up. Even though this can be frustrating, the calmer head wins.

Once you have the agreement in writing and have made payment in a way that is traceable, you will now be able to show that you paid according to the agreement, even if the creditor never sends you a "paid in full" statement. (MOST WONT SEND IT!) Then all you have to do is send that info to the credit bureaus for an update. You now have all the proof you need to prove that the account is paid, and that the credit bureaus must update it.

Remember to always keep a copy for your records, just in case the creditor still sends the account to collections (which can happen, even if by mistake.)

Once these collections are paid and updated on credit, it will take some time for your scores to rebound... typically 6 months. But once they are settled, you should not really have to worry about them again and your credit should get mush better over the long term.