Refusing to answer the phone or open the mail is not going to make your bills go away. The bad news is that you owe money and will have to pay it back at some point. The good news is that you may be able to save your credit score if you negotiate with your creditors.
It gets better. There’s a remote chance that you might be able to pay less than what you owe to resolve the debt. Creditors can do this and report the debt as “paid in full” to the credit bureaus—Equifax, Experian, and TransUnion. That will stop the calls and preserve your credit score.
Negotiating a monthly payment plan
Once you get behind on your minimum monthly payments, the credit bureaus start getting reports that you’re behind. This will lower your credit score and affect your ability to qualify for new credit in the future. That’s the time when you want to open negotiations.
If you held a credit card during the 2020 pandemic, you may have received an offer from your credit card company to freeze your account and make monthly payments until you were caught up. These offers often come with a lower interest rate, making them an appealing option.
That’s just one example, but the interest component is an important piece. You can’t just send in lower payments if the interest rate remains the same. You’ll never catch up that way. Offer to close your account and agree to a small monthly payment to pay it off.
Reporting to the credit bureaus is voluntary
One little known fact about credit bureau reporting is that your creditors are not obligated to do it. This is a valuable tool in your toolbox when you begin negotiations. Remember, they want to collect at least some of the money that you owe, so they may be willing to compromise.
Ask if the creditor can forego a credit bureau report so you don’t have a negative mark that will impact your credit score. This should be a stipulation when you do a settlement, as you won’t be paying the balance in full. You really don’t want it reported that way.
The reports that you want sent to the credit bureaus after a negotiation should say “Current,” “Paid as Agreed,” or “Account Closed – Paid as Agreed.” These won’t affect your credit score. The negative reports will say “Paid – Charge Off,” “Repossession,” or “Settled.”
Negotiating a settlement offer
When you’re negotiating a debt settlement, your primary goal is to pay less than the balance owed. But you also have a secondary objective: to request a positive report to the credit bureau. The best you can usually hope for is “Account Closed – Paid as Agreed.”
Collection agents will generally balk at the prospect of giving you a positive report. Some may even refuse to do it. Hold your ground. They’ll give in before they take any legal action. Going to court is expensive and doesn’t benefit them or you in the long run.