Things You'll Need:
- debt and a willness to take care of it
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Step 1
Tip# 1-- Settlements. Got some extra cash but can’t just payoff the whole balance, not a problem. Settlements-- Yes, they affect your credit in some ways but its heck of a lot better than just letting the account charge off. Charge off is basically recorded as bad debt on your credit report only thing worse than that is a bankruptcy. Depends on how far you’re willing to let the account go delinquent and usually offers starts at 3 months past due or later, wait no later than 6 months. After the 7 month it is consider the account to be charged off. 2nd you may have to ask more than once to get them to agree to one. It is not all that strange especially today to get 50% or more off the debt if you just ask and not afraid of your negotiation skills. The collectors are supposed to be trained to tell you on how they report their settlements to your credit report. Of course make sure all offers are given to you in writing. If it’s not on paper, be aware of that settlement offer! (Paper makes great documents).
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Step 2
Tip #2--Negotiating. (Hardship programs)..When negotiating with a debt collector, keep in mind what your real budget is. If all you can do is monthly payments ask them about their hardship programs. Also keep in mind of your account, if not already closed this will close it for good and will save you some money in the long run, actually quite a bit of money. You do have to ask; they will not just offer one up, since they are more often than not they work on commission and get a percentage of how much they collect from you. This is not very profitable for the collector and you should ask them for one without hesitation. Hardship programs can generally reduce your interest and monthly payments if you have the high 25-30%+ interest rate the programs can generally knock it down to 10% or less.(Settlements) Be sure you have the money up front or you can make at least make two payments in full for the settlement that you request. For the average rule for companies is, now keep in mind they do not have to offer one, but it is in their best interest to do so. They need to get something instead of nothing. Rules are not set in stone, but if it’s three months past due ask about roughly 60-70% of the balance to be paid. If your 4-5 months usually it would be around 60% of the balance, but not uncommon to get 50% and 6 months usually can get 50% or more, more often than not even if it is still with the original creditor. Also settlements are usually reported to your credit report as settled in full which is a lot better than having it charged off or filing bankruptcy. Settlement are generally not offered if it is just one to two months past due. Also one last thing to remember about settlements is that it is consider taxable income and more likely than not you will receive a tax form to fill out and have to pay taxes on it which usually it not very much as the settlement offer is usually well worth it.
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Step 3
Tip# 3--closing the account. How do you close the deal and your account properly? Again make sure everything that was discussed over the phone is documented either by recording the call, writing the information down and asking the collector first and last name or there Id number. Usually they will either give their employee id number to identify themselves when you call back or give you there first and last name. If you arranged for a hardship program make sure you get the new terms in writing or of course it did not happen and same goes for the settlement process as well. The key is keeping good records in case later on they decided or have error in record keeping that you have something to go back and show the documentation that it was already taking care of.
