Archive for the ‘Negotiating with Creditors’ Category
Thursday, October 1st, 2009 |
If you’re like most people, being on the opposite end of a collection call can be quite a defeating interaction. Collectors generally seem unforgiving and absolutely unwilling to hold a civil conversation. This all makes it very difficult to make any progress (let alone get the upper hand) during one of these calls. Nonetheless, it’s been my experience that when you equip yourself with the correct tools, controlling the outcome of a collection call can be very easy.
1. Collectors are trained to toy with your emotions for a very specific reason.
Do you ever wonder why collectors act so merciless about your situation and further, why they seem to go out of their way to embarrass and degrade you? The answer is simple, yet often overlooked. Collectors are specifically trained that the fastest way to get a person to pay is to exhibit behavior of such disgust and ruthlessness that the person simply says, “I cannot deal with this human anymore, I will pay them just to go away!”. If you keep this mind, these tactics will become transparent and ineffective.
2. Asking to speak to a manager will get you nowhere.
It’s important to realize that a “manager” at a collection agency (at least the ones that they’ll ever let you speak you), are not really there to make sure their collectors are treating customers fairly. Rather, the managers are there to make sure the collectors are getting you to pay –because, of course, that’s how they get paid. If anything, the manager will treat you even worse. Also, why do you think they are manager? Likely, they are running the show because they are very good at getting you to pay and as we have already discussed, this usually means behaving very erratic. Don’t waste your time with a manager.
3. Never make a deal without getting it in writing.
If you have been a longtime reader of this blog, you have heard this a million times. Yet, when the time comes, still some people tend to get flustered and agree to a payment plan over the phone. What do you think happens when you do this? Most of the time they will clean out your bank account and you will find there is nothing you can do because they will simply say, “Well, you owed the money”. You can’t sue them because you have no proof. Again, any agreements should be made in writing before you give a collector access to your bank account.
4. Debt collectors are more willing to negotiate on older debts
The next time a collector contacts you regarding a 10 year old debt, don’t be afraid to offer them a settlement of pennies on the dollar. Many collection agencies purchase old debts from various companies after the company has written off the debt. Therefore, even if the settlement amount may seem small, keep in mind that as long as the collection agency makes a return on their investment, they will be happy.
5. Collectors do not care about your situation
It’s difficult to make smart money decisions when you are emotionally tied to the situation. Collectors know this when they call you a “deadbeat”. You must detach your emotions from the situation and consider it in the same way collectors do: this is just a business transaction.
Come back soon for Part 2 of this series!
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Wednesday, September 9th, 2009 |
Reader’s Question
Dear Ryan,
I have a department store credit card I use occasionally. I had signed up for electronic statements which I was receiving with no issues for over a year. In April, I started getting phone calls with no messages for several days – always on my home phone while I was a work. By chance, I did a reverse phone lookup and found out it was Kohl’s collections. I called Kohl’s and found out I was near 90 days past due on a $19.23 balance that was due in February. I had not received ANY communications from Kohl’s for over 3 months.
The last statement was the month prior to this missed statement which was paid in full. They agreed to remove the late fees and finance charges and I paid the balance in full immediately. They also said this wouldn’t show up on my credit report. Well, it’s showing as a 30 days late payment. I called Kohl’s several times, and they say they have reviewed my account and will not re-age it to fix the problem. What else can I do? I’ve had PERFECT credit for 30+ years!!! I’m certainly never receiving electronic statements ever again! Help!
My Response
Hi [name removed],
Unfortunately you have learned the hard way that collectors are filthy liars and should never be trusted. Also, because you do not have this agreement in writing, there is little you can do. You could keep bugging the hell out of them (that is, call them everyday) and you might get them to budge.
Personally, however, I would not bother with this. In the long run, this is a small mistake and will only negatively affect your credit for a couple of years. I understand that it’s annoying to have this little ding on your 30+ years of perfect credit, but unless you’re in the market to purchase a home, I would brush it off and, rather, declare it as a lesson learned –the lesson being: always get agreements between you and collectors in writing before sending them any money.
Hope this helps,
Ryan
Take Home Point
I wrote an article awhile back entitled, “3 Ways to Get a Late Payment Removed From Your Credit Report“. In this article, I stated that a hiccup (i.e., a single late payment on an account with otherwise clean history), will sometimes be simply forgiven if you ask them. However, when you are dealing with a collector, you must keep in mind that any verbal agreements mean nothing because collectors are liars. If you are attempting to negotiate a late payment, make sure that any agreements are issued in writing before you pay them. Many times they will send you a letter stating the agreement and you’ll be golden.
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Sunday, May 17th, 2009 |
Reader’s Question
Dear Ryan,
I have an old Verizon bill for $44 that I didn’t know about. Verizon has sold the account to a collection agency. And the collection agency is listed on my credit report (they list Verizon as the original creditor) I have attempted to negotiate a payment in full for delete with the collection agency but they flat out refused. I have called Verizon and they informed me that the account no longer belongs to them and I should contact the collection agency.
I can still log on to the Verizon account website using my old log on. If I pay the bill on the Verizon website can I then dispute the collection account with the credit bureaus as “not my account” or “paid with original creditor”? If so will this then make Verizon add a paid collection account to my credit report?
My Response
Hi [name removed] -
While I like your creativity (which is usually required when improving your credit), I would not suggest doing this. It won’t work. The collection agency will eventually take your offer if you are persistent. Keep up the good work and don’t give up — you will eventually win
Best,
Ryan
Take Home Point
Persistence, persistence, persistence is the key to repairing bad credit! I know all too well (from experience) that dealing with collection agencies is about the most miserable activity on the planet. Nonetheless, I hope all of my readers will kindly keep in mind that being persistent is the one thing that will enable you to win!
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Thursday, September 11th, 2008 |
Well, I messed up last month and accidentally forgot to pay one of my credit cards. It was reported on my credit and I saw a 30 point drop! Yes, late payments can be a very big deal, and they weigh significantly in your overall credit score calculation.
Although this has happened to me before, it was several years ago (before I really paid much attention to my credit score, or even knew I could get it removed). I am sure many of my readers have made the same mistake, so I’d like to show you 3 ways to get a late payment removed from your credit report. Just in case you’re wondering, I was able to get this late payment entry removed from my credit report by mailing the original creditor this goodwill letter.
In my experience, as long as you don’t have several late payments on the same account, it’s really not that difficult to get them removed. Here are three methods you can use to get them removed.
1. Request a Goodwill Adjustment from the original creditor to remove the late payment
The idea is simple and it works incredible well. Many times creditors are happy to grant “goodwill adjustments” if your previous payment history is relatively good and you have established a good relationship with the creditor. This is probably the easiest and surest way to get a late payment removed from your credit report. I wrote a whole article describing how to remove a late payment by asking. You can also use this free sample goodwill letter I created
2. Negotiate removal by offering to sign up for automatic payments.
I have never actually tried this method myself, but from what I understand creditors frequently offer to remove late payment entries if you, in exchange, agree to sign up for automatic payments. I really like this idea because it works out well for both parties: the creditor can ensure future payments will be made on time, and you don’t have to ever worry about missing another payment. I would love to hear from those of you who have succeeded with this method!
3. Dispute the late payment as inaccurate
While I certainly do not advocate fraud (that is, claiming an entry is inaccurate when you know it’s not), if you find ANY inaccuracies on the late payment entry (dates, amounts, etc), you can dispute the late payment as inaccurate.
Sometimes creditors have a difficult time verifying the exact details of your account history. Therefore, if you dispute the late payment and they are unable (or simply don’t bother) to verify it, the negative entry will be removed.
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Friday, November 16th, 2007 |
Negotiating for a creditor to completely remove a negative record on your credit report will usually increase your credit score more than if you pay the account off and the creditor changes the account status to ‘PAID IN FULL’. This is because even though your credit report may reflect that you have paid off the account, it still shows the history of the account (i.e., late payments).
Before you continue
If you have already made arrangements with a creditor or given them any money, you have lost your power to negotiate!
Negotiating a debt is intimating if you aren’t the “car salesmen type”. In fact, I am advising you against attempting to negotiate a debt over the phone. Keep in mind that debt collectors are not only well trained to get as much money from you as possible, but they also have the advantage of negotiating debts all day, everyday –that’s a lot of practice.
It’s important to remember that collectors project a hostile and very aggressive demeanor over the phone. This naturally puts you at a disadvantage because humans tend to become abrasive and on the defense when in the presence of such behavior. This means that you are more likely to let emotion skew your logic –ruining your chance to negotiate a lower debt.
Instead, I am going to discuss how to negotiate a debt by writing letters. In this situation you have the advantage. Here are a few reasons why:
- You have time to gather your thoughts and compose a letter that reflects your intention and not your defensive emotions.
- You are not being rushed and lied to by an aggressive debt collector.
- Most important: A written correspondence offers you legal protections. On the other hand, if you come to an agreement over the phone and they fail to honor the agreement (it happens a lot), it’s difficult to prove.
There are also disadvantages (or minor inconveniences, rather) to negotiating via mail. Corresponding with creditors through the mail can be an exhaustingly long process –often it can take several months to receive a response. You have to decide if you’re willing (or if it’s worth it) to wait for the peace of mind that a negotiation can provide. I say go for it if you are the type of person that can mail a letter and forget about it. However, if you are the obsessive, nervous type, the waiting period can be stressful.
Your best chances for a successful negotiation
If you haven’t yet made any agreements with the creditor, you have a very good chance. This is because you still have the upper hand –they want something from you, not the other way around. Nonetheless, I have found that some types of accounts can be very difficult to get removed completely from your credit report.
Accounts and success rates
- Closed accounts (ex: Charge off) that have been since paid are extremely difficult to get removed. If you still carry a balance and the creditor is actively attempting to collect, getting a complete removal will have about a 1 in 3 chance of success.
- Open accounts, regardless of the account type (i.e., installment, revolving), that are delinquent have a marginal success rate of complete removal if you offer to pay the balance in full.
- Open/Active accounts that are reported as ‘LATE’ have a very high success rate of complete removal. This is particularly true if the account is in Collections.
Creditors often claim that they cannot remove records from credit reports. This is false. Creditors absolutely have the ability to completely remove a record.
Shooting for the stars
Keep in mind that getting a creditor to completely remove a negative record from your credit report is the best case scenario so try not to get your hopes up too much. However don’t let this bring you down, because you have nothing to lose by attempting to negotiate a complete removal. Also, don’t trick yourself into believing that you can negotiate a complete removal by promising to pay a small amount of the debt. In most cases, the creditor will only consider a complete removal if you offer to pay off the debt in full (or very close), in a short period of time.
To give you an example
I was able to get a $2000 credit card debt in ‘charge off’ status completely removed from my credit report by proposing to pay the creditor IN FULL over a 3 month period.
I hope I have provided you with an informative overview of the negotiation process. Take note that I cannot get too specific on this topic because individual situation are so widely varied. And ultimately your individual situation will determine your chances of getting a complete removal.
One last note: The success rates I have stated in this article are from my own personal experience. Your success might be different. Nevertheless, I’d love to hear how it works out for you, so drop me a line with your story
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