How to Negotiate a Credit Card Debt Settlement

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Credit cards are convenient for paying bills or just covering everyday purchases but it’s easy to get in over your head if you can’t keep up with your payments. If you’ve fallen behind on your credit card bills, you could try negotiating a settlement to eliminate the debt. If you’re thinking of offering a settlement, you need to understand how the process works so you can get the best deal.

What is Debt Settlement?

When you negotiate a debt settlement, you agree to pay your creditor a lump sum towards the balance and the remaining debt is forgiven. Generally, a creditor may be willing to negotiate a settlement when your account is significantly past due or in danger of being charged off. Debt settlement may be one alternative to consider if you can’t pay your debts but you don’t want to file bankruptcy.

Preparing Your Offer

Settling a debt usually requires that you have cash on hand to pay your creditor so it’s important to go over your financials before you make an offer. Your offer should be fair to the creditor but it should also represent what you can actually afford to pay. It’s a good idea to prepare an initial offer and one or more counteroffers in case your first settlement proposal is rejected. Depending on how old the debt is, the total amount owed and the individual creditor, you may be able to settle outstanding debts for anywhere from 25 to 75 percent of the full balance.

Contacting Your Creditor

You can make a settlement offer over the phone or send your proposal via certified mail. Proposing a settlement by mail takes longer but it gives you a written record of your communications with the creditor. When you’re negotiating, it may be helpful to point out any reasons why it would benefit the creditor to accept the deal. If the creditor is willing to work with you to reach an agreement, make sure that you get the finalized terms of the settling in writing before you make a payment. When it’s time to pay, send the money via money order or wire transfer. Never give a creditor or debt collector direct access to your bank account.

Debt Settlement and Your Credit

While it’s not as damaging as bankruptcy, debt settlement does have a negative impact on your credit score. Having multiple late payments listed on your credit report can cause your score to drop by 100 to 200 points. When a debt is reported as “Settled”, rather than “Paid in Full” or “Paid as Agreed”, it can cause your score to take another hit. If you’re trying to rebuild credit after debt settlement, the following cards can help you to give your score a boost.

Fingerhut Credit Account
The Fingerhut Credit Account is designed specifically for Fingerhut shoppers who need a credit card to cover their purchases. The card is designed for consumers who are trying to reestablish their credit and your account is reported to the major credit bureaus each month. While the card does have a 24.90% APR, you have the option to make small minimum payments over time while still improving your credit score.

Conclusion

If your debt’s gotten out of control, negotiating a debt settlement can help you get back on track. While you could hire a debt settlement company to do the work for you, you could save yourself time, money and unnecessary headaches by knowing how to negotiate a settlement on your own.

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