Because their business is loaning money to their customers, all banks aggressively report credit items when they are found. The credit reporting industry was created in large part to aid banks in making lending decisions. Although banks often grant "secured credit" - meaning that they can attach specific items such as your house or car to a loan agreement - they are still vulnerable to your failure to keep a payment promise.
Credit reporting is an important tool that banks use to ensure they get paid. Banking is also a highly regulated industry. For these reasons, it is often very difficult to negotiate with a bank. It's much harder for a bank to cut an individual a break, because they are required to treat customers equally.
Bank negotiations are difficult. Except in cases where you have absolute proof that the bank is in error, you are better off disputing a bad bank-credit item with a credit bureau. Nevertheless, there is some wiggle room for a negotiation. If you can, build a relationship with an individual who can help you. Polite pestering can get you far with banks, at least to the point where it's easier for them to clear your credit than answer your calls.
Banks sometimes agree to remove bad credit in exchange for payment of past due money, especially if you can demonstrate, to some degree, that there was a problem in the billing. Maybe they weren't notifying you at your correct address or at least the one you asked them to change billing to. Sticking to your story will go a long way toward getting a bank, or any credit department for that matter, to see your side and fix the offending credit item.
Basic Bank Negotiation Steps
a. If you're fully paid up on the loan, with no remaining payments, forget about disputing with the bank; do a basic credit bureau dispute. You will want to include a copy of a "restrictively endorsed" settlement letter if you included one with your final payment.
b. If you owe money that you are willing to repay, ask the bank to clear your credit upon repayment. If they really want the money, they'll cut this deal. Include a "restrictively endorsed" settlement letter with your check, and modify the letter to the specific terms you've negotiated with the bank.
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