Can I Talk My Credit Card Companies Into Lowering My Balance?
It is possible to talk your credit card companies into lowering your balance. However, whether you decide you can live with the potential consequences will largely depend on your individual financial situation. An alternative option may be a better fit for you, unless your credit history is already in serious trouble.
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Function
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Getting creditors to lower your balance means you owe creditors less money. Whether your payment plan involves paying that balance in full or paying monthly for a set period of time, it may also result in lowered monthly payments on your end. If you are currently in the midst of financial hardship, this can give you some breathing room to pay your other bills and keep financially afloat.
Effects
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Creditors who lower your balance typically refer to such action as debt settlement and will usually only consider this as an option if you, as their customer, have otherwise had a stellar credit history with that company. If you have paid on time, as agreed in the past, but recently had a reasonably explicable life-changing event that impacted your ability to pay (job loss, pay reduction, sudden medical bill), creditors will be more willing to work with you. Also, in order to lower your balance, creditors are more likely to try to take what they can get from you moneywise if you are more than 90 days delinquent on your last payment.
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Considerations
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Debt settlement will be reflected in your credit history for up to seven years. In most cases, creditors will require you to close your accounts with them in exchange for lowering your balance to something you can more easily pay off. Whether this hit to your credit history is worth it to you will probably depend on your other financial circumstances and how good your credit history is at the time.
Warning
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If you currently have a lot of outstanding debt, closing accounts that you settled with lenders will drive your debt to existing credit ratio up, which will negatively impact your credit score. Additionally, closing credit accounts that are particularly long-standing can hurt your credit score in another way, too, by impacting the age of your existing accounts. Reflecting a long and prosperous relationship with a creditor helps to boost your credit score. Cutting that credit relationship off shortens the average age of your accounts. Finally, you may still owe taxes on any debt that is forgiven.
Prevention/Solution
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Rather than talking credit card companies into lowering your balance, try instead to negotiate with them on the terms of your agreement. If you have had a long and positive relationship with your creditors, call them politely and explain that you just got a credit card offer from a competitor for a significantly lower interest rate than the one you are currently being charged by your existing creditor. Tell them that you really love their service and have enjoyed how well they treat their customers, but you are hoping they can lower your interest rate so you don't even have to consider their competitor's offer. If you are succesful, your finances will still improve, but your credit history and score will not take such a big hit.
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