Save money while resolving your credit card problems with do-it-yourself credit card debt settlement. Negotiating with creditors yourself can save you money, but it is not without potential pitfalls.
Prepare Before You Call
When you are preparing to call a creditor to make a settlement arrangement, it is important to have everything you need in front of you. This includes the following:
- A copy of your most recent bill
- Letters from the creditor offering a settlement, if any
- A specific amount you are able to pay if settlement is reached- either a lump sum or a monthly payment amount
Making the Call to a Creditor
If your account is seriously past due, such as 4 to 6 months in arrears, don't expect the collection department to immediately propose a settlement. Collectors are trained to verify your personal information, such as phone number, employment and home address, and then to get a payment from you. Occasionally these collectors are well-versed in settlement arrangements, while others will refuse any settlement agreement. Make it clear that you are willing to make a payment or are interested in a settlement at the beginning of the call.
Here are some important things to remember when you're on the phone call:
- Keep a record of all of your conversations with creditors and include the date, time and the name of the person you spoke with. It may come in handy later if there is a dispute over payment or settlement arrangements.
- Always get a letter from the creditor with the agreed upon amount of the settlement or similar payment arrangement. A verbal agreement isn't valid in many states and it would be your word against the collector. Some collectors refuse to send a letter. If this happens, say "I understand that you may not be in a position to authorize additional mailings. I'd like to speak with your manager, please." If the company already sent you a letter offering settlement, and you agree to the terms, you do not need an additional letter. This step should be taken for arrangements that have not already been communicated in writing.
- Ask to have the collection account deleted from your credit report upon full payment of the settlement. Negative account information is reported on your credit report for seven years from the date the account first became negative. There is not a statute that allows for additional time on most credit items. Creditors are not required to remove your account from your credit report before the seven years are up, but some are willing to do so if you ask. When an account is deleted from your report, it impacts your score more positively than having the balance on the account reduced to zero.
- Make payments as scheduled to the company. If you make a lump-sum payment the day of your settlement, it may be convenient to pay over the phone. If you make payment arrangements, you do not have to provide the company with account information to debit automatically. You can call in the day the payment is scheduled and make the payment over the phone. If a creditor demands that you provide bank information for automatic debit,
ask to speak with a manager. However, if you do not make payments on the scheduled dates, your settlement agreement may become void.
Speak With Someone in Charge
Talking with a collector who refuses to budge can be a very frustrating experience. If this happens to you, there are three options available to you:
- Terminate the call, but do so as politely as possible; being rude or using profane language only makes things worse. Remember, most calls are actually monitored and recorded.
- Ask to speak to a supervisor or department manager. These individuals want to make reasonable payment arrangements or settlements.
- Write a letter addressed to the department manager or the president of the company outlining your plan to pay off or settle the account. Be very specific in regards to the dollar amount you will be paying and the dates you will be making the payments.
Favorable Credit Settlements
The goal of settling an account is to get it reduced to a manageable amount. You want all late fees, finance charges and over the limit fees removed from your account. Typically, these three things will amount to 30 to 40 percent of the total balance. If a creditor is unwilling to settle within the 30 to 40 percent range, decline to make an arrangement at that time. Odds are in your favor that they will send you a settlement letter within a few weeks that is more favorable to you. While this may be aggravating, waiting out the creditor may save you money in the end.
The Federal Trade Commission (FTC) protects consumers with specific debt collection procedures. The FTC urges consumers to handle credit card debt on their own, and that debt consolidation services often can't do any more than you can do for yourself. Some of your rights include:
- Creditors may not attempt to collect a debt that is not yours, or that you dispute. If you dispute a debt, the collection agency must obtain and provide proof that the debt is yours.
- Creditors may not threaten legal action that they do not plan to take, or send forms they claim are legal that aren't. Legal forms come from a court of law.
- Creditors may not threaten you with violence or harm, nor can they state you will be thrown in jail or have committed a crime.
- Creditors may not misrepresent the amount you owe.
- Creditors may not claim they are attorneys.
- Creditors may not call you repeatedly during the day for payment. This is harassment.
- You can request that creditors stop calling you on the phone. You may have to make the request in writing. Creditors may not call you if you request that their communication be made in writing.
If a creditor violates any of your rights, obtain as much information as you can about the company, including the name of any representatives you speak with, the address and phone number of the company and the dates of your conversations. Use this information to file a complaint against the company through the FTC. You can also find additional information regarding your consumer rights on the FTC website.