Dealing with the Creditors: 10 steps to make the process easier

Sometimes noticing something incorrect on your credit reports can be annoying. However, in order to clear it up, sometimes you need to confront the creditors. This may not always be a pleasant situation, but there are ways to make sure you keep your cool while trying to get your credit back on track!

1. Stick to Your Story
The person on the other end doesn’t want to hear all the details about why you’re not able to pay your bills. However, they do need to know if you are in a hardship situation and what you are trying to do to get back on track. For example:
“I was very ill, and have been out of work for two months. I am trying to get caught up.”
“My wife was laid off, and I’ve taken a significant cut in pay. She’s looking for a job so we can catch up, but we don’t have any money to pay right now.”
“My interest rates have doubled and I can no longer keep up. I am meeting with a bankruptcy attorney to see whether I should file.”

Be truthful! If you tell everyone a different story, especially one that’s not true, it’s bound to backfire.

2. Stay calm, cool and collected
Try to stay calm regardless of what the person on the other end of the line says. You’ll get nowhere if you lose your temper. If you find yourself losing your cool, call back. If you need to talk with that representative again, tell them you’d like to record the conversation.

3. Ask Questions
If a collector says you’ll be sued, or that you’ll lose property if you don’t pay, just calmly ask for specifics.
“When can I expect to be notified of this lawsuit?” Or “When will you take the money from my bank account?”

4. Take Notes
Have a pen and paper handy so you can take notes of your conversations. Write down the name of the person you talked to, when you talked, and what was discussed. Not only can this help you take the emotion out of the situation, but you’ll also have a record if the creditor or collector broke the law in their attempts to collect.

5. Read (and Save) Your Mail
Don’t throw away mail from your creditors or ignore it. Open it, read it, and save it in a file.

6. Know What You Can Afford
Go over your income and expenses with a fine-tooth comb. Figure out what you can afford, and only agree to pay a realistic amount. Generally, you can negotiate the best settlement on a debt if you can come up with a lump sum amount to resolve the debt. If you agree to a payment plan, you will likely pay more over time. If you do agree to a payment plan, make sure you understand the total amount you will pay.

7. Deal with Creditors, Not Collectors
If possible, try to work out an agreement with your creditors before a bill is sent to collections. While late payments affect your credit reports and scores, collection accounts can result in even greater damage. By the way, it’s a myth that as long as you are paying something toward a debt (even $5 or $10), it can’t be turned over to a collection agency. Once a debt has been sent to collections, you may have no choice but to deal with the collector.

8. Get it in Writing
When you do come up with a payment arrangement, or a settlement agreement, get it in writing before you pay a penny. Otherwise, the terms can change and it will be your word against theirs. We’ve heard of consumers being hounded for balances they thought were resolved years before.

9. Get Help
If you are having trouble coming up with a repayment plan that works, find out whether a credit counseling agency can help you work something out with your creditors. If it is unlikely you’ll be able to pay back your debts, or if debt collectors are hounding you, request a free consultation with a bankruptcy attorney. Even if you decide not to file, the attorney can tell you what a creditor can and cannot do to collect.

10. Put the Past Behind You
Catching up on a delinquent account, or paying off a collection account, won’t improve your credit unless you can get the creditor to agree to remove the late payments. But even if that’s not possible, you can still begin to build better credit as soon as your debts are resolved.