Don’t be Afraid to Negotiate with Your Creditor

Millions of Americans are becoming anxious because they now realize how important it is to reduce their credit card debt. Minimum monthly credit card payments total in the hundreds and consumers just don’t earn enough money to meet those financial requirements. Some people panic and stop making payments because they’re not sure of what else to do – they need to pay their mortgage, car payment or other payments and the credit card bills don’t seem as important. They’re wrong.

If your creditors stop receiving payments they will most likely contact the three major Credit Bureaus — Experian, Equifax and TransUnion – and your credit report will reflect these past due items. That is something you want to avoid at all costs because your credit report will be negatively affected and in this tumultuous financial environment, your chances of receiving any credit or a loan in the near future will be extremely difficult. In fact, 35% of your credit score is payment history so late or missed payments can really damage a good score. So what are the alternatives?

You can negotiate a lower payment plan. Many creditors will jump at the chance work with you rather than having to go through the expense of court costs and using collection agencies. Before you contact your creditors there are a variety of things to consider. If you have been late with payments in the past it won’t be as easy as one phone call. It may take some work to restore the trust between you and your creditors. And there’s one very important factor to remember – don’t lose your temper. Creditors deal with angry and frustrated customers on a daily basis. They’re less likely to take your request seriously if you’re yelling or making accusations.

The Art of Negotiation

• The first thing you should do is gather all your bills and get organized. Don’t contact your creditors until you have the proper bills and paperwork in front of you. Be confident and prepared and the creditor will appreciate your efforts and take it as a sign that you are serious about reducing your debt.

• Then, with confidence, look at your credit card bill and call the customer service number and select the option to speak with a representative. Lay out in detail what your financial situation is and make certain that you tell the representative that you want to stay in good standings with them. If you have been a long time card holder with them let them know. Be sure to tell them that you have made many payments on time and have been a good customer. Ask them to remove any damaging entries on your credit report so you will be able to negotiate a better rate on the credit card, which in turn will allow you to make your payments on time in the future.

• If the representative will not cooperate then ask to speak with a manager or supervisor. Many representatives don’t want to take on the work of getting you a better payment plan or lower interest rate. Don’t take no for an answer. Just politely ask them to contact their supervisor. Be persistent!

• If for some reason the supervisor is not being cooperative ask her or him why. If it’s because you have been making late payments or stopped paying all together then ask them what you need to do to get the lower interest rate. Explain that you are in financial distress and could really use their assistance. Offer to immediately start making payments. Make a promise to pay your bills on time provided they put your payments at a rate that you can afford.

• If that doesn’t work then start making your payments on time and call back in a few months. Let them know that you are making your payments but may be in jeopardy of not being able to make them in the near future. Keep calling every month and don’t give up. Be persistent!

• Most people don’t have a large sum of money that they can drop on their credit card bill. If that’s the case then negotiate a new payment plan that is more reasonable and allows you to make the payment in full until the bill is completely paid off. Again, once the bill is paid off make certain that the creditor removes the black marks off your credit report. And don’t take their word on it, get everything in writing.

• When you are negotiating a new payment plan always tell the creditor up front how much you can pay. Don’t let them dictate the terms because they will always want more than you can afford. If you don’t stick to your guns then you will be in the same predicament that you were in before.

• Don’t wait to call your creditor. This is very important because if you wait too long then they may sell this off to a collection agency. Negotiating with your creditor is much better than negotiating with an agency. If they have charged off your account (sold off the debt) to an agency then get the name and number of the agency and try to make a deal with them.

• Tell your creditor in a respectful manner that you are looking into a zero percent or lower interest rate card to transfer your money to. This may rub them the wrong way but it will also let them know that you are totally serious about paying off your debt. Also, tell them that you would prefer to keep the money on their card and make the monthly payments but at a rate that is conducive to successfully paying off the bill within a reasonable amount of time.

• If you have more than one credit card that you are struggling to pay start by contacting the creditor that you owe the least amount of money to. You can build momentum by paying off card after card and by getting the negative comments removed from your credit report. This will not only make you look good in the eyes of your creditors but it will make you feel good, like you are accomplishing your goal of becoming debt free.

• Be positive with your creditor. Let them know that you are trying everything to make your payments on time and if they reduce your monthly payments then it will be beneficial to you and them. Creditors don’t want to charge off debt or go to court. It’s really not in their best interest and it certainly isn’t in your best interest.

About the Author

The following blog post is from April Lewis-Parks, the director of education for Consolidated Credit She is a certified credit counselor and a consumer affairs advocate who is dedicated to generating awareness about personal finance issues. She is on the education advisory committee of the JumpStart Coalition, which is dedicated to furthering financial literacy for the youth and she is active in the South Florida chapter of Junior Achievement which promotes entrepreneurship and financial literacy through hands-on programs.