With so many credit cards floating around, it’s no wonder that nearly as many debt settlement outfits are cropping up. But before you pick one, it’s important to understand the general steps they’ll take on your behalf. No matter what amount you owe, there may be room to negotiate – as long as you have the right people working on your behalf.
First, Negotiate Before Collections Gets Involved
Why? Because by the time a Collection agency gets called, the delinquency shows up on your credit history and you take a hit to your FICO score. This means that any future loans for which are eligible will be levied at a higher rate of interest – which shows how much risk lenders are undertaking in entrusting you with their money.
This is really important, and your best bet if you can manage it. A debt that heads over to Collections gets you TWO strikes on your credit report; you can actually expect to drop up to 65- 105 full points from your pre-debt FICO score if it progresses this far; the higher your score, the greater the amount of a drop.
Do You Have Grounds For a Claim of Financial Hardship?
All this means is, can you build your case up convincingly, to show the credit company that you truly cannot pay the debt. The person on the other side of the phone is likely a hard-charging collections specialist, so she or he will be persistent and thorough.
You’ve got to have documents and information regarding your monthly expenses and how much you money you bring in. Given that the collector likely has a computer with just about all financial information on you ever compiled on screen, it doesn’t pay to lie about what you have.
Keep in mind that the Fair Debt Collection Practices Act delineates the nature of the interaction that debt collectors can have with you, so if you’re receiving an exorbitant number of calls, at odd hours, and the collector is saying things to you that are suspicious, you may have legal recourse.
Don’t Take It Personally (On the Phone)
Remember – collectors get paid based on how much they can collect. As such, even though there are laws that restrict abusive behavior on the phone, they are most certainly not going to treat you with “kid gloves.” Quite the contrary – and, they can be persuasive in convincing you to perform actions that you really shouldn’t.
It isn’t at all unheard of for a collector to convince someone to empty their 401(k) retirement funds to pay back a debt. This is ALWAYS ill-advised, given that prices on a debt can be negotiated for a much lower price, or paid in installments.
Assume No Fair Pay – Negotiate for Lower Payments Immediately
Since the goal of a collection agency is to try and get you to pay as much as they can, they’re not above slapping on any penalties that they can think of and be presenting your total bill due as though they didn’t do that. They always receive a percentage of whatever they can manage to get from you; so clearly, it’s in their best interest to get something. If you want to learn more about the goings-on of their techniques, then the National Foundation for Credit Counseling has plenty of resources.
