Creditors don’t necessarily want to settle your accounts. There’s probably nothing exciting to them about getting just $5,000 when they actually loaned you $10,000. So don’t be surprised if you hear some objections from them when you make a settlement offer. Here are some of the things a creditor might say when you mention that you want to settle your account.
“We don’t do settlements.”
For many creditors, this is just a bluff. Creditors may say they don’t do settlements to get you to pay the account in full or enter some type of payment arrangement that would make your account ineligible for settlements. You’ll commonly hear this the first time you mention settlement, especially if your account is only a few months past due. As your account gets more delinquent, the creditor may stop saying “We don’t do settlements” and start saying “We only settle for 80% of the amount due.”
“But you’re making your mortgage payments on time.”
Creditors have access to your credit report if they use the information in your report to evaluate your credit applications. If true, then they can look at your credit report when you mention settlement to see if you’re a good candidate. They’ll probably be looking to see if you’re behind on all your payments and use any timely payments as a reason that you can afford to pay them all of what you owe.
“A debt settlement will hurt your credit score.”
You’re probably already aware that settling your debts will probably hurt your credit score. Not just because of the settlement itself, but also because of months of late payments that happened before the settlement. In fact, by the time you talk settlement with your creditors, much of the damage to your credit score has likely already been done. If the creditor says this to talk you out of settling, you could just say, if true, you’re aware of the consequences of settlement and that they’re less severe than bankruptcy, which is your only other option at this point.
“We can set you up on a hardship payment arrangement.”
A hardship payment arrangement can be a temporary reduction of your interest rate and monthly payment. It can be similar to the payment you’d receive if you went through consumer credit counseling. While it may sound tempting to get back on good terms with your creditor through a hardship agreement, remember the reason you’re considering debt settlement in the first place. If you could afford to make consistent payments on your debt, then you probably wouldn’t have to settle your accounts. Plus, timely payments on an account may make it harder to settle other accounts. Remember that creditors who use the information in your credit report to evaluate your credit applications can see your credit report.
“I have to get permission from my supervisor.”
Sometimes, customer service representatives don’t have the authority to extend a settlement offer to you. Other times, they could be hoping that creating more red tape will get you to back off the settlement idea. It doesn’t hurt you if the customer service representative has to talk to a supervisor. Your goal is to settle the account, no matter who has to give the go-ahead.
Your creditors may have some objections that aren’t on this list. Be prepared for objections and remember your desired goal when creditors try to talk you into something else.