So like a lot of other Americans, you have overspent and gotten way behind on your credit card debt, and you see no way of ever getting out. The paychecks are still coming in, but your credit is still shot.Well in this case, your bad credit score can work to your advantage. It did for me. Your goal at this point is to pay off those nagging credit cards.Negotiating a lower payoff will still put another ding on your credit, but in the long run settling the debt is better than completely ignoring it. I have settled some credit card debt for as much as 80% discount. Here are some simple steps that I have used.
First thing you need to do is to quit stressing. Those collection letters threatening to report you to credit bureau take collection action, take your first born child. They used to really stress me out. At this point in the game them reporting you to a credit beau should be something you laugh about on the phone.Your phone will be ringing off the hook, when you are behind in your payments..These credit card companies invest a lot of money in there collection department. At one point in my financial crisis, I would receive up to 10 calls a day from the same debt collector. There is a way to stop this. When you are speaking to them on the phone simply ask for the fax number to the customer service department. Actually the best thing to do is to say "I am going to fax a cease and desist order to stop all phone calls from your location." They may hesitate about giving you the fax number, but legally they have to. Simply remind them that the call is being recorded for customer service reasons, and ask them for the fax number again. I have never not been able to get the fax number.
Then take action, fax the letter and make sure it is worded something like this. Example: I Tom Jones am demanding that company ABC cease and desist all calls from any phone at there location to the telephone number 123-456-7890 (your number). It is important that you specify any number from the company location, because if you specify a specific company number they will simply use another line. Also include any alternate numbers you have listed as well as your work number on the cease and desist letter.
It can take up to two weeks for the calls to stop. So ignore the calls or simply pick up and as they are trying to give you there spill about how this is a collection call and it may be recorded blah,blah, blah. Say in a clear direct and firm voice. "Mam or Sir I have to say something before this conversation continues. I have faxed a cease and desist letter to your company, please do not call me anymore." This speeds up there process a little faster of getting things on the computer screen for the collection people to see. A side note: You will probably have to talk right over the talk of them, as these people are trained that they have to say there spill on the phone no matter what. Now you are in control, the only way they will be able to communicate with you is through written correspondence. We have already covered not getting stressed about that. Credit card companies can damage your credit for non-payment, but if its already shot beyond repair then your next goal is to settle the debt for as low as you can
The next thing, Crazy as it may sound, you need to quit paying your bill for at least 3 months. Three months is when the negotiating starts, but the real negotiating really gets going at about month 6 of missing a payment. Hold out be patient, just tell them "You are the one that holds the debt you need to tell me what is the lowest amount you can take to settle this debt." Stick to your guns and do not get intimidated by there threats.
Often after 3 months of non-payment you will get a settlement letter for about 30% off the balance if you can make one lump payment. Well this is not good enough yet. Call them up and say I have received your letter. Then say "is that the best you can do" In my experience the hourly employee on the phone can give you many times a 50% discount. The only time I will ever suggest a pay off myself is if I make a ridiculous offer of an 80% discount. I have done this. I once had to settle a Home Depot Account. The total on the card was $4,800 and by the time I was done I paid $1,200 total. I paid exactly $200.00 a month for six months and cleared the debt. You can set the terms with these credit card companies, you don't have to be at there mercy. If you ever get a chance listen to Dave Ramsey, he has much the same opinion as me I believe. I have never taken any of his courses but I found out I was using many of his practices.
If they are not willing to negotiate with you then calmly reply, "well my intention is to clear these debts, I only have so much money to work with. I am placing you at the bottom of the pile and I will call you in another month". Then hang up the phone. This is where the 6 month thing comes into play. By that time most all revolving department stores accounts and credit card companies are ready to deal. After you have made your deal and negotiated as far down as you can do this.
Listen closely, this is the most important part of the negotiation. Tell them you have to have everything in writing and mailed to you. You do not want an e-mail you want a signed hard copy coming to you snail mail. This is so critical. Even after you have negotiated things on the phone often they will say, as soon as we receive your first payment on this contract we will mail out the contract. This is a ploy by them because once you have mailed them a payment without a contract, all your negotiations have failed and you will have to play the waiting game again.
Often these companies will say if you are going to negotiate a pay-off we need it all at once. That is non-sense. I told you what I did on my Home depot account. They may say after you have negotiated the deal, well if you can afford to pay $200.00 on this account why can't you just start making your payment again. Remember what to say? "Mam or Sir my credit is already shot, my intention now is to clear this debt. " I am not interested in paying interest on this account for the rest of my life"
Don't stress yourself out, set up only as much pay-off payments as you can handle, but do make it a focus and suspend all other frivolous spending until these crazy debts are resolved. Be aware that any of these companies are allowed by law to send you a 1099 for the difference in what you paid and total amount owed. In all the accounts I have settled I have only had one company do that. Basically you can be held liable for paying taxes on the difference. This is trivial compared to all the money you will save on not paying interest on credit cards for the rest of your life. Even tho settling a debt still makes a ding on your credit, this is a better solution than ignoring the problem and to just keep getting farther behind.
On a positive note, even tho you may be thinking that oh my gosh my credit score is getting dinged again over and over each month I don't make a payment. This is true but it is much smarter to clear this debt completely In the long run your score will come back faster if you get rid of these delinquent accounts, When I started my process of clearing up about $15,000 dollars debt I only paid about $5,000.00 total. When I started of that my credit score was around 480.. Today it is close to 630. It has been just over a year. So as you can see, your already destroyed credit score can be a powerful negotiator in getting rid of these already delinquent accounts. You can take control back from these savage credit card companies.