When it comes to credit card debt, creditors, of course, have their own agenda. They want to get as much of your balance from you as possible. It’s even better if they can collect interest on your balance by letting you pay it over time. But, when you’re thinking about going the debt settlement route, it could help to know the creditor’s point of view. If you’re doing settlements on your own, then this knowledge will likely help you in the process.
Timely Payments Are Best
If you’re on time with all your payments, creditors likely aren’t interested in settling. Even if you tell them you’re struggling to make ends meet, the most they’ll probably offer is a temporary reduced hardship repayment plan, if that. They may instead refer you to a credit counseling agency. Credit card issuers would love it if you paid the minimum payment for decades until you finally paid off the balance. That would mean they get the maximum amount of interest from you.
Are You Really Having Payment Trouble?
Creditors will also likely look for signs that you’re not really having a hard time making your payments. For example, while you’re on the phone with a creditor, they may simultaneously view your credit report (they can do that without getting your permission first). They’ll look at your credit report to see if you’ve been keeping up with payments on your other debt obligations. If you’re current on any other debt payments, your pleas for a reduced payment or even settlement may go unheard because the creditor thinks you’re able to make your payments.
Not only do you need to stop making payments on your account if you want to get a settlement, you also probably need to stop using your credit card, too. It could be considered credit card fraud if you use a credit card knowing you can’t afford to pay back the balance. Plus, the creditor could use recent credit card purchases as a reason not to let you settle on your account.
Past Due Accounts Are Risky
Once you start missing payments, the creditor gets concerned about your account. Once your account goes into charge-off status, the creditor will have to write your account off as a loss. Creditors generally don’t want to charge off accounts because it makes their investors nervous. So, if they can get some money from your account before it gets written off, it could be better than getting nothing at all.
Your account typically becomes most at-risk for charge-off once it gets 90 days past due. At that point, many creditors realize it’s in their best interest to offer you a deal. So, they may make an automatic settlement offer to you, either by mail or over the phone. At this point, it’s up to you to look at your settlement funds to decide whether you can afford this settlement. It’s also ok to negotiate a lower settlement – the creditor may accept if they think it’s all you can pay and that it’s worth it to accept the settlement. The more past due your account becomes, the more likely the creditor wants to settle on it. Use that to your advantage to get the best settlement deal.
Other articles you may like
