Timing Is Everything: When to Make a Settlement Offer

The timing of your settlement could be the difference between a successful settlement negotiation and having your account sent to the legal department. If you mention debt settlement too early, your creditor could get the idea that you never intend to pay your account in full and instead send your account to their legal team or to a collection attorney. For that reason, it could be important that you wait until the right time to even bring up your intent to settle.

You Have Enough Money

It may not matter if the creditor brings up settlement first. If you don’t have the money to make a settlement payment and you can’t get the money to make the settlement, there’s no use negotiating a payment. Because settlement offers usually move fast when negotiating starts, you should have the money easily accessible before you start talking settlement.

If the creditor mentions a settlement offer and you don’t have the money, you could tell them that you can’t afford to make a settlement at the moment. You could make a counteroffer that’s equal to whatever you have saved up, but if that amount is far less than the creditor’s initial offer, then you probably will have to wait until you have more money.

The Creditor Brings It Up First

Accounts that are still with the original creditor typically have to become a few months delinquent before the creditors are willing to talk about a settlement. For some creditors this is between 90 to 120 days, but it could be sooner than that. The best way to handle a settlement offer probably is not to bring it up before 90 days unless the creditor brings it up first either through a settlement letter or in a phone call. The first time you mention a settlement to the creditor, you should probably casually mention it as something you’re considering if the creditor is willing to agree. You could say something like “If I could come up with $3,000, would you accept that as settlement for the debt?”

The Account is Getting Close to Charge-Off

The closer your account gets to charge-off, the more likely creditors are to take a settlement on the account. Accounts charge-off once they become 180 days late, so as you approach that mark, you could mention settlement if the creditor hasn’t done it already. By settling before the account goes to charge-off, you would avoid the awful charge-off status going on your credit report. But you should only mention settlement before charge-off if you have the money available to make the full settlement payment before charge-off.

The Debt is With a Collection Agency

With a collection agency, you can generally mention a settlement at anytime as long as you have the money to pay the settlement when you reach an agreement. Accounts usually stay with a collection agency for three to six months before it’s passed on to another agency. So, if one agency doesn’t agree to a settlement, you could wait until it’s moved to another agency. Once your account is with a collection agency, the worst damage has probably already been done to your credit, so, if true, you could wait for the best offer without worrying about further damaging your credit score.

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Timing Is Everything: When to Make a Settlement Offer

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