I have heard this question on the BP podcasts a few times now and it always made me think. "Pay off debt or work around it"? Then the answer would come,"It depends on the person".
I would quickly think about the debt that i have and say to myself," It's not that much, I will just let it fall off, and then it will be gone for good". But that's not the case. 9 months after working on my credit score, being pre-qualified for a home loan, putting in offers on multiple houses and saving all my money for a down payment, i was finally told that i could not get financed until i have taken care of my debt. "But my credit score isn't that bad", i thought.
The finance company will not loan you the money until the debt collectors stop calling, and you either pay it all off and receive a deletion letter and a paid in full letter from them, or you set up a payment plan. And going through this process is not a easy task,"let me tell you".Your finance company should provide you a full credit report with all the names, numbers and amounts in which you owe. This is how you can hit the debt head on;
#1:Staring the process: Once you have this list, you want to start with taking all the amounts and adding them up on a separate piece of paper. This way you can see the amount and know what you owe. I then grabbed a few sheets of scratch paper and some sticky notes to write down everything that the debt collectors tell you, that way when you speak with multiple collectors in that company, and they tell you different things, you will have your notes. "Trust me, they will tell you different things and you will talk to more then one person".
#2: Know your rights when it comes to credit: know what you can and cannot do. I searched Google for ;" The best way to pay off debt collectors". I did about 30-45 minutes of research on laws and steps to paying down debt and working with debt collectors, "This will help you more than you realize". The collectors will begin to take control of the conversation by asking you to update your information. ex. phone number, address and job location ect.
#3: Making the calls: When you first call, you should know what your calling about, Knowing your account number and the amount due is very helpful when they start adding all these,"fees". You want to sound like you have done this a million times before even if you haven't. Because if you don't, they will begin to tell you that you owe on this and that, that there is a lot of interest on top of the amount you owe, and it will all seem overwhelming. You will either want to curse, yell or hang up on them and then your situation isn't getting fixed.
#4: Interest: Most collectors will tell you that they cannot lower the amount you owe because it's owed to the state or that their company,"doesn't do that",but they all will lower it in time. They will tell you that you owed a higher amount at one point and that they have already discounted it so they won't lower it anymore. But if you look on your credit report, you can see how much the amount was picked up for. Take the amount they are charging you, and subtract that from the amount your report shows, and what is left is the interest they are trying to add on top. When you ask if they will settle the amount you owe, they tell you that they will take off the interest and that it's as low as they can go. " I spoke with 3 different people before i got them to drop the amount i owed". So don't pay interest and ask to speak to another person if they tell you they wont work with you on the price.
#5: Settle / Pay in full / Payment plan: These are all choices you have to pay your debt off. If you decide to "Settle", The amount that is owed to them is lowered but you will not get a "Paid in Full", letter sent to you nor will you get a "Deletion Letter". The deletion letter is what your really looking for. It is what's provided to the credit bureau. You can set up a payment plan to settle the amount but it makes more sense to make a payment plan when paying in full.(Details on setting up payment plans below)
If you decide to "Pay in full", You will pay the total balance due all at once, plus or minus the interest, (Depending on how well you negotiate), or pay the full amount in a payment plan. You want to ask first if they will provide you a, "Validation Notice". A Validation Notice is a invoice of the total amount in which you owe, total amount of interest,and to whom you owe and which collection service you are being collected from. Upon which you set up a payment plan, they will ask you to submit to them a statement of your total income per month and the amount of each bill you pay during that month to,"Qualify", you for their payment plan. They will require you to pay at least 10% of the initial amount due for the first payment. When you make a payment whether it being paid in full, settled or payment plan, you must first ask them if you can pay online and if you can get a confirmation number. Paying online insures that they will not be charging your account for a higher price then negotiated, plus you get a automatic confirmation number and printable receipt for your records. (DO NOT PAY OVER THE PHONE!!!) Let me say that again, (DO NOT PAY OVER THE PHONE!!!)
#6: Contacting the credit Bureau: You want to contact the credit bureau and provide them with all the necessary information to clear up your credit report. Do not wait for the debt collectors to do this because they will take as long as they can to report that you have taken care of the debt. "So do it yourself!"
Hopefully this will be all you need to get your credit back on the right track. None of this information is guaranteed but it is 99% that it will work for you as it has for me and many others. That's why it is in your best interest to do your due diligence! Good luck!
- Brett -
