Your creditors only make money if you pay them, so they’ll often try to work with you to help you avoid becoming delinquent on your bills. Call your creditors before you miss a payment. Waiting until your account is already delinquent will hurt your credit score and your credibility. The creditor may not be as willing to work with you and may turn your account over to a debt collector. Creditors are also quicker than ever to report late payments to collection agencies because more and more people are filing for bankruptcy and walking away from their debts. If you make arrangements with the creditors ahead of time, they may agree to not report your delinquency to the credit bureau.
Make a Plan with a Budget
When negotiating with creditors, don’t agree to a plan that you’re not sure you can stick to. Look at your budget and figure out how much money you can squeeze out of it each month to apply to the account in question before committing to a payment plan.
If you talk to a creditor over the phone, take good notes, including the name of the person you spoke to, the date and time you spoke, and what arrangements were made. It’s a good idea to then follow up with a letter outlining the key elements of your discussion, and to ask that they send you something in writing as well. If you’re not successful in getting the creditor to work with you, hang up and try calling again. Sometimes one customer service representative or credit manager will be more helpful or flexible than another.
Debt collectors are third parties hired by a lender to attempt to collect amounts you owe when you’re late with your payments; they can be lawyers or companies in the business of collecting unpaid accounts. If your account gets turned over to a debt collector, you can save yourself a lot of grief if you’re familiar with your rights under the Fair Debt Collection Practices Act, the federal law that specifies what third-party debt collectors can and cannot do. Collectors:
When you get a call or a letter from a debt collector, your instincts will probably tell you to either respond or ignore it. Both of those options are mistakes and can come back around to hurt you. If you communicate at all with the collector about the debt or if you pay any amount toward the debt, you have officially acknowledged the debt. If you ignore every communication, which may include court summons, you could end up with a judgment against you that allows the collector to garnish your wages.
The right way to handle collections is to start by requesting a validation letter, which must be provided within five business days of the first contact. That letter must include full details on the debt, complete contact information for the collections company, and an explanation of how you can challenge the debt.
Collectors may have incorrect information. Collectors also may lie (there are many scammers in this space). Demand proof of the debt they’re trying to collect, and make sure it is both legitimately yours and correct. Once you’ve asked them to verify the debt, they have to leave you alone until they provide the information you requested. If they don’t send you proof of the debt, you can demand that they stop contacting you with a cease and desist letter.
If it really is your debt, find your records from the original creditor (whoever you owed the money to initially) along with proof of any payments you made. You can use this information to help negotiate a settlement or payment plan if you can’t pay the debt in full right away.
If the debt isn’t yours or isn’t 100 percent correct, dispute it. If you challenge the claim within thirty days of the collector’s first contact, they must stop asking for payment until the dispute has been settled. If you file the challenge after that thirty days is up, they can keep contacting you during the investigation period.
Any time you communicate with the debt collector, keep a full record. Keep copies of everything you send to them, and only send written communications through certified mail (so you have proof they received it). When you speak with them, either record the call (with their knowledge) or take detailed notes during the conversation. Document the date and time of the call, the collector’s name, and everything you discuss.
Be careful what you say to them. They will use anything you say to help them collect. Don’t talk with them about your paycheck, your budget, or other bills you have to pay. Keep the conversation focused on the specific debt they’re collecting, but do not accept responsibility for the debt until you have verified that it’s real and correct.