Debt Negotiation
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You've probably seen the ads that run all the time for credit counseling or debt management companies. One of the main things that credit counseling companies do is negotiate with your creditors to get your better terms or reduce your interest rate or finance charges on an existing credit account so that you can pay off the account more quickly. Many people don't know that negotiating your debts is something that you can do yourself.
Why would you want to negotiate your debts yourself when there is a company offering to do it for you for free? The answer is to protect your credit rating. Credit counseling companies will only negotiate what you will pay each month and what your interest rate will be, but will not negotiate how the item will be reported on your credit report. This means that the creditor can continue to report the account as delinquent even if you are making payments on time (because the past due amount will not have been paid up when you start making your credit counseling payments. Additionally, they can report that the account is being handled by a credit counseling service, as paid less than owed or as "account closed by credit grantor", all of which can hurt your credit score.
If, on the other hand, you negotiate your debts yourself, you can also negotiate how the item will be reported on your credit report. That means that not only will you be negotiating to save yourself money on interest and late fees, but you will also be saving your credit from additional negative reporting.
Negotiating your debt is actually a pretty simple process. Most companies will be more likely to work with you if you are either totally current or WAY behind. If you are current on the account and have never had any lates, they will see it as an opportunity to reward you. If, on the other hand, you are several months late with your payments the company may see it as their last chance to recoup any of their money before having to charge off your account as bad debt. If you are just slightly late on your account you may find that you have a harder time negotiating, however, it is possible and you shouldn't give up.
All you have to do to negotiate better terms on your credit account is call or write your creditor and ask. Sounds easy, huh? You'll need to be sure to talk with someone who has the authority to make changes to your account. Often times the people who initially answer the phone may not have the power to do anything to change your terms, so you will need to ask for a supervisor or someone higher up to talk to. If you don't have luck getting the right person the first time, try again since you'll get a different person just about every time you call the larger credit card companies and you just never know when you will get the one who will be willing to help you.
When you are able to talk with someone, explain your situation and ask for what you would like your terms changed to. If you have always been current with your payments be sure to point that out. If on the other hand, you are behind on your payments, explain your situation and tell the person how getting better terms on your account will make it so you can pay in a timely manner again. Either way, be sure that you communicate that you are serious about staying current on your account and that you plan to pay on time each month.
In addition to asking for better terms on your account, be sure that get them to agree to not only lower your interest rate, but also to report your account as "pays as agreed" on your credit report. This way your credit score won't get dinged like it would if you went with a credit counseling company.
It may seem a bit intimidating, but most companies will work with you if they believe you are sincere and that you will make your payments on time. You will likely run into a company or two who will not be willing to work with you. This is normal and if the company won't work with you they probably wouldn't have agreed to work with a credit counseling agency either so you are not out anything. Just make sure you try to pay them what you owe them, too, and if possible pay extra to that account each month to get it paid off more quickly and save yourself a little bit of money on interest.