Asking Creditors to Remove Settled Debts from Your Business Credit Report[yoast-breadcrumb]
Asking Creditors to Remove Settled Debts from Your Business Credit Report
Having negative items on your business credit report can really hurt your chances of getting approved for new credit. So if you’ve settled some old business debts, you may want to ask the creditors to remove those accounts from your report. Here’s what you need to know about getting settled debts deleted.
Why Settled Debts Hurt Your Credit
When an account shows up as “settled” on your business credit report, it basically means you didn’t fully pay back the debt. You settled for less than you owed. Creditors don’t like to see that, so it drags down your credit score.
Settled accounts stay on your report for seven years from the date the debt was settled. That’s a long time for an ugly blemish to keep hurting your credit! Having settled debts on your report can make it really hard to get approved for new financing.
Negotiating Removal When Settling Debts
The best way to handle settled accounts is to negotiate removal from your credit report upfront, before paying the settlement amount. This gives you leverage in the negotiation. Simply make removal a condition of your settlement payment.
For example, you could say something like, “I can settle this debt today for 40% of the balance if you agree to delete it from my credit report.” Make sure to get the agreement in writing!
Asking for Removal After Settling
If you already settled some debts without negotiating removal from your credit report, don’t panic. You can still ask creditors to delete settled accounts. But you’ll have less leverage since you already paid them.
To increase your chances, wait at least 30-60 days after settling to make removal requests. Be polite and appeal to the creditor’s goodwill. Emphasize that you acted responsibly by paying your obligation, even if it was for less than the full balance.
You may need to try asking more than once. Be persistent, but also patient. Removal requests can take 30-45 days to process.
Strategies for Asking Creditors
Here are some tips on how to effectively ask creditors to remove settled accounts from your business credit report:
- Send requests in writing – This creates a paper trail in case you need to dispute.
- Highlight your on-time payments – If you paid reliably before settling, point that out.
- Note your years as a customer – Long relationships can help.
- Explain why removal would be mutually beneficial – Better credit means you can borrow again in the future.
- Be concise and polite – Long emotional appeals usually don’t work.
- Follow up if you don’t get a response – Don’t just assume it was denied.
Sample Removal Request Letter
Here’s an example letter you can adapt to request deletion of settled accounts:
As you know, on [date] I settled my account with your company for less than the full outstanding balance. I upheld my end of the agreement by making the negotiated payment promptly.
I am writing to request that you remove any record of this settled account from my business credit report. As a long-time customer who acted in good faith to resolve my obligation, I would greatly appreciate this consideration.
Having settled accounts on my credit report severely hurts my ability to obtain new financing. Removal of this item would benefit my business going forward. In turn, that will allow me to potentially borrow from your company again someday.
Please let me know if you are willing to delete the settled account as a courtesy. I can be reached at [phone] or [email] if you need any additional information from me. Thank you for your time.
Disputing Settled Accounts
If a creditor won’t remove a settled account voluntarily, you can try disputing it with the business credit bureaus. This involves sending a formal letter identifying the error on your report.
The credit bureau then contacts the creditor to investigate. If the creditor can’t verify the settled account is accurate, the bureau may remove it from your report.
Disputes don’t always work, but it’s worth trying if the creditor refuses your removal request. Be sure to include documentation like settlement agreements and bank records proving you paid.
How Settled Accounts Affect Your Score
Having settled accounts removed from your business credit reports will help boost your scores. Here are some key ways it helps:
- Eliminates a “negative item” – Settled debts are seen negatively.
- Increases credit utilization ratio – Lowers your overall debt-to-limit ratio.
- Shows you pay obligations – Reinforces you meet financial commitments.
- Removes a “red flag” – Settlements can be seen as a warning sign by lenders.
Any black marks that get deleted will stop dragging your score down. Just keep in mind that closed accounts remain on your reports for 10 years. So you’ll still have those, even if the settled status gets removed.
Alternatives to Removal Requests
Asking for removal should be your first option. But if that fails, here are some other ways to deal with settled accounts on a business credit report:
- Wait for them to fall off – Accounts drop off your report after 7 years.
- Improve other areas – Boosting good credit can offset settled debts.
- Explain circumstances – Context about why you settled can help.
- Highlight recent good credit – Emphasize your current responsibility.
While waiting for settled debts to expire or become less significant may work, removal requests give you more control. And there are no negatives to asking, as long as your requests are professional.
The Bottom Line
Having settled accounts removed from your business credit reports is well worth the effort. Those negative items can really drag down your credit standing for years. While creditors aren’t required to delete settled debts, many will if you make a polite and compelling request. Just be sure to negotiate removals upfront whenever possible in the future.