What percentage should I settle with the collection agency?
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I have a one year old unpaid rent from an apartment complex for around $3000.
I’d like to pay it, but have no idea as to what percentage I should offer them?Probably 25%, but how good are you at negotiating?
The collection agency will probably ask for 75% to 50% on a 1 year old defaulted debt. You may be able to get it down to 25% in a lump sum. Forget any payment plan.
When negotiating a settlement, it’s important to know how much the collection agency has paid for your debt, and just how much they stand to gain by agreeing to your offer:
- Recently charged-off debts – around 7 cents on the dollar.
- Older accounts or accounts sold a second time – around 2 cents on the dollar.
- Years-old debts – less than a penny on the dollar.
So even of you agree to pay “only” $750 on a $3,000 debt, they still make a profit of $540.
Collectors have quotas, so the end of the month would be a good time to get lowball settlement offers accepted. Just tell the collector that your grandmother has agreed to loan you $750 to settle this debt and that’s all you have. They may accept it.
Make sure you get a signed settlement in writing before you make any payment. Pay only with money order or cashier’s check. See how-to-pay-off-debt.html for more information.
Paying off debt does NOT improve your score. The damage is done and will remain for 7-1/2 years on your report, although its effect on your credit score will diminish with time. Settling will look better to future creditors reviewing your credit report. It will also stop collection calls and prevent lawsuits. See why-pay-off-debts.html for more information.
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