Tips How To Negotiate With Your Creditors

Monday, April 4, 2011, 2:00 AM | 1 Comment

We all know that every month, creditors and lenders send our credit report to the credit agencies.

But, this process of reporting is voluntary by the creditors. They don’t have to send our credit information to these agencies.

That means, by default, it opens up a window, no matter how small, for the consumers to be able to ask the creditors to make some changes in their favor.

Therefore, any information that a creditor or lender adds to your credit reports can theoretically be removed or modified to be less negative, if you can convince the creditor/lender to take this action.

If it has come to the point that the creditor has given control over to a collection agency to get the money out of your pocket, by that time, I am afraid it’s a lot later than sooner. You have to talk to the creditors and try to convince them to take action in your favor before the collection agency comes into the picture.

At that stage of the game, negotiating will be more difficult, but certainly not impossible, especially if the account is seriously past due and you are interested in negotiating a full payoff plus the fee the collection agency charges. The collection agency’s job is to collect the debt. That’s their job. That’s how they make the bulk of their money.

When a creditor or lender needs to report negative information to the credit reporting agencies, they have some discretion about how negative that information actually is. So depending on your financial and credit situation, if you take a proactive role in working with your creditors/lenders to pay off your debts, you can sometimes get them to work with you financially.

Get them to show mercy when recording information with the credit reporting agencies that won’t have such a negative impact on your credit score. This is something you will need to negotiate, however. It’s never something a creditor, lender, or collection agency will do automatically.

According to the historical attitude of the creditors, they can give you some options to be able to come to some sort of a middle ground.

They may be willing to:

  • lower your monthly payments,
  • defer one or more payments,
  • waive late fees and penalties,
  • lower your interest rate, or
  • somehow restructure the loan

to make paying it off more achievable based on your current financial situation.

In a Nutshell
As for actually making payments or paying off a debt, you might be able to schedule a long-term payment plan that you can afford, or settle the account for up to 50 percent less than the original debt.

This will be based on your situation, how well you are able to negotiate, as well as your ability to pay off your debt(s) in a lump sum or via multiple payments.

The key here is to be proactive. Keep channels of communication open with your creditors. Talk to them. Try to convince them. You would be pleasantly surprised – some of them actually listen.

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  1. One Response to “Tips How To Negotiate With Your Creditors”

  2. By Kevin Yu on Apr 5, 2011, 10:29 am | Reply

    If you are already behind on your accounts, the best time to settle with your creditor is right before charge off, this can be about at the 6 month mark. I have seen better settlement rates with the original creditor compared to settling with a collection agency.

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