Some people have expressed skepticism that you can actually negotiate with creditors using our strategy or other creative methods of reducing debts. Read letters from readers who were highly successful.

You could try to use debt settlement methods with a collection agency, but you might want to try debt validation first. Why? Because they may not even be legally entitled to collect the debt from you.

Points to remember: Collection agencies. Always insist on complete removal of a listing from a collection agency. I mean really, who cares if you have a "Paid As Agreed" collection account: no matter what the rating, every collection account is a negative mark. It's no skin off their nose to change it, and of no use to your credit. If you do pay the collection agency, you can contact the original creditor and tell them the debt was "settled" and they need to update your account to reflect this. Technically, they are obligated to do this, as this is the truth. For the creditor to NOT do this is a violation of the FCRA. Don't do this, though, if you plan on disputing the whole listing later, though, through the Method of Verification. In some cases, you can get the collection agency to change your listing with the original creditor. I wouldn't count on it, though. Some collection agencies will tell you they have no power over what the original creditor will do regarding your credit. To some extent, this is true. However, both the collection agency and the creditor want their money. If collection agency gets paid, so does the creditor, therefore it is to their advantage to cooperate. Remember, though, not all collections result from credit cards. Doctor's bills cannot appear on your report. But collections resulting from these accounts can. In the case of such collections, there is no duplicate negative listing, since the original creditor is not allowed to put a listing on your account, so this collection may legally remain on your report.

Tips on Paying Never disclose where you work or bank. If you are asked, simply say "no comment". The reason for this: If your settlement falls through, and the creditor gets a judgment against you, knowing where you bank or work will make it easy to collect the judgement. Never pay your settlements with a personal check How you make payments is very important, as it protects you from other creditors learning about your financial status and bank account numbers. For this reason, never send a personal check. Get a cashier's check or money order. Make sure you get the money order or cashier's check from a different bank than your own bank or the post office. Make sure you keep a copy of your money order or cashier's check and put it in a safe place! Collection agencies keep notoriously bad records and it's your word against theirs if you say you paid and they said you didn't...unless you have the copy of the money order or cashier's check. I negotiated a settlement with a creditor for less than I owed. The creditor is now suing me for the balance. Is this legal?

Unfortunately, the answer is no. If you are unable to negotiate the way the account will appear on your credit report, what will happen is that the debt will appear on your credit report as "Paid", or "Paid Collection". This will help your credit score only marginally, but having this collection paid is definitely better than unpaid. So why would someone want to pay off a debt, then?

If your credit problems have progressed to the point where your creditors have turned your case over to collection agencies, it is important to know your legal rights.

Below are the State Statutes of Limitations for various kinds of agreements. All figures are in years

Find Out the Statute of limitations in your State for ordinary types of debts: oral, written, promissary notes, and open-ended accounts by going here. A judgement occurs when a creditor takes you to court and sues you for money you owe them. They must do this before the statute of limitations has expired for the original debt. Typically, the court will try and contact you via mail, but they do not need proof that you were contacted, and you do not have to be present in order for your creditor to win. The creditor only has to provide proof the debt is owed. You want to avoid this at all costs, for it is after a judgement is issued that a creditor can seize bank accounts, assets or garnish wages. In addition, it is easy to renew a judgement once its SOL has past. In effect, if the creditor is viligient about his renewals, you could find yourself in the position where a judgement against you never expires. A judgement will drop off your credit report after 7 years, but your creditor can hound you until the debt is paid.

Credit, second only to your family and your time, is the most important asset you possess. The difference between having credit or not can be the difference between freedom and oppression, between opportunity taken and opportunity denied.

It is important that you act quickly if you suspect you are a victim of identity fraud. In addition to reporting your identity theft to the following agencies, you may want to start a log of your efforts to protect yourself. This information could prove invaluable later in proving you are not responsible for false debts or even crimes associated with the identity theft. Suggested items to record: Record all conversations with your creditors, the authorities, etc. Send correspondence by certified mail or registered mail. Keep copies of all letters and documents. In cases where you may actually collect damages in a lawsuit, you might also want to jot down the lengths of time you spent and any money you spent clearing your identity.