How to negotiate with a creditor to settle your credit card debt

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Have you fallen behind on your credit card payments? Do you have old credit card debts that haven’t been serviced for a while? Then you may be able to create a settlement plan with your creditors to help you to avoid bankruptcy and put a plan in place that is both affordable for you and ensures repayment to those you owe.

7 tips for negotiating with creditors

It’s important, though, to handle creditor negotiations in a way that will allow you the most progress. Here are seven tips for negotiating with creditors so that you can work to get your debts paid off and start rebuilding your credit.

Have the facts in place before you call

Before you call the creditors you owe, it’s important to get a copy of your credit report or have a current letter in hand from your creditor verifying the amount of money that you owe. Proper settlement of credit card debt can more easily occur if you have your facts straight.

Reach out to creditors before they sell your outstanding debt to collectors

The earlier you call a creditor to settle your credit card debt, the better. If you wait too long, a creditor may sell your credit card debt balance to a collection agency for mere pennies on the dollar, meaning the debt is out of their hands.

*Exception: If your credit card debt is older than your state’s statute of limitations on credit card debt, it is considered to be “zombie debt” and legally does not have to be paid. If you haven’t paid anything on your debt in a while, you may want to check and see if the collection amount is past the statute of limitations. It’s important to do this before you call any creditors so that you do not accidentally reactivate the account and start the statute of limitations timeline over again.

Have a plan in place before you call

Before you call any creditors, it’s important to have a clear understanding of your financial situation and to have some ideas in place about what you can pay.

When you call your creditors, tell them exactly how much you can afford to pay them and ask them how you can negotiate with them to get to that amount. Be sure they understand that you’re eager to pay them but that the current amount due isn’t affordable for you right now.

Stay calm, be honest and avoid drama

Most creditor representatives aren’t interested in hearing a sob story. For this reason, it’s important to make them aware of the situation in a calm and honest manner. Be clear and concise as you explain your predicament. Explain calmly that because of your financial situation you can’t afford to pay them the full amount due and ask them who you can talk with to figure out a plan that will benefit both them and you.

If the customer service representative can’t or won’t help you, calmly ask if there is a supervisor or crisis specialist that you can talk to. Professionalism is important in creditor negotiations, so no matter how frustrated you might become during the call, it’s vital to remain cool and calm during negotiations.

Offer to pay in a lump sum

Creditors are more interested in cutting a deal on debt settlements if they know they’ll get the full balance agreed to right away. Figure out a plan for saving up enough to pay the full amount you can afford to pay and let them know that if they will agree to “X” dollar amount that you can send them the money within a certain number of days.


Ask for specific credit card reporting

After you’ve settled on a specific dollar amount for the debt to be considered paid in full, it’s important to also ask for a specific reporting status to the credit bureau. Ask the creditor if they will report your agreement as “Paid as agreed upon” instead of “Settled” because the former is more favorable on your report than the latter.

Also, ask if they’re willing to erase the account payment history — or “tradeline” as it’s called — on your report in order to avoid history of non-payment showing up on your report.

Getting the creditor to agree to these two reporting standards will help your credit score rise faster.

Get any agreements in writing

Once a credit card company has agreed to a specific plan for settling your credit card debt, it’s vital to get the terms in writing from the creditor before you send them any money. Once you’ve got the written agreement in hand, go ahead and send them a check.

A note about debt settlement companies

It might be tempting to work with a debt settlement company instead of working to settle your debt on your own. It’s important that you understand exactly what you’re signing up for before working with a debt settlement company. Most debt settlement companies charge fees to the debtor for the service of negotiating a debt.

In my personal opinion, it’s better to settle with creditors on your own if possible. Most creditors are eager to work with a past due customer if they know they’ll get some money out of the deal.

Have you ever worked to settle debt with a creditor? Share your experience in the comments below.

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