Credit Repair Kit For Dummies, 4th Edition
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If you’re in trouble, try contacting the creditor to avoid collections altogether. When dealing with creditors, communication can be difficult because of the associated guilt, anger, and other emotions; basically, conflict is likely.

From your end of the phone line, the situation looks like this: You’re a responsible adult who has been a good customer for a long time. A series of unfortunate, unexpected, and undeserved events has descended upon you. You’ve tried for months to overcome your payment problems before asking for help. But with some time, you know that you can pull yourself out.

From the customer service rep’s point of view, the scenario looks like this: You made a promise and broke it. Everyone else is required to pay bills on time, so why shouldn’t you? You may be overspending. If you don’t come through, the collector’s job performance and business will suffer, and if the collector gets fired, he or she will be unable to pay his or her own bills.

See how different people can see the same scenario so differently? You’ll be more successful in getting the outcome you want if you’re able to see the situation from both perspectives. For whatever reason, you haven’t been able to keep all the promises you made. Although this doesn’t mean that you’re a bad person, it does indicate that doing business with you may be risky.

So now it’s your job to explain why the customer service rep should accommodate you. Is resolution possible here? Yes — if you do your homework, offer a solution, and follow through on your promises. Where do you start? What do you say? To minimize negative perceptions, be proactive from the start.

Contact your creditor promptly

Putting off unpleasant tasks is human nature. However, when it comes to requesting assistance from your creditors, the earlier you make the request, the better. From the creditor’s point of view, three types of customers exist:

  • Good customers who pay as agreed

  • Good customers with temporary problems who are willing to work things out

  • Bad customers who have to be chased

You’d like to be the first type of customer, but sometimes life pushes you into the second category. What’s really important, however, is not to be classed in the third group.

The best time to let your creditors know that you’re in trouble is as soon as you know and have a solution to offer. Don’t wait until you’ve missed a payment on that credit card or auto loan. Get in touch before the payment is late. By preempting the bad-news announcement, you increase the odds that your negative event won’t show up on your credit report!

Explain your situation

You may contact customer service by phone, in writing, via e-mail, or through the creditor’s website. In some cases, you can even communicate through an intermediary like an attorney or a credit counselor. Whatever method you use, you need to explain your situation as clearly and effectively as possible, assuring the creditor that, despite your temporary difficulties, you intend to get back on financial track as quickly as possible.

Here are some elements to communicate (using a phone conversation as an example):

  • Introduce yourself and ask for the person’s name. Why? Because doing so adds a human dimension to the dialogue and may help personalize your call. Don’t say “you” or “you people.” Write the name down, because you’re probably stressed out and may forget it easily. Plus, when you call again, you’ll have a name to refer to.

  • Begin the conversation on a positive note. Say something nice about the company and your relationship with it. For example, “I’ve been a customer for years, and I’ve always had great products/service from you.”

  • Briefly (in a minute or so) present the facts. For example, you lost your job, you have no savings, and you have only unemployment insurance for income. Skip the gory details and the emotional commentary.

Offer a solution

After you’ve succinctly laid out the situation, propose a solution that works for you, before you turn control of the conversation over to the customer service representative. Your goal is to make it as easy as possible for the rep to agree to what you need.

Doing so not only increases the chance that you’ll get what you want, but may also shorten the call if the rep can agree to your request, thereby making the rep look like a very productive employee. Plus, by keeping more control over the outcome, you have a much better chance of getting a repayment plan that actually works for you.

Whatever your proposed plan, be sure to cover these bases:

  • Assure the rep that you’re already taking steps to resolve the problem now.

  • Offer a realistic estimate of how long you need to rectify the situation.

  • Propose a specific payment amount and plan that you can manage.

  • Offer specifics. Avoid saying, “I can’t afford the $300-a-month payment right now. You’re going to have to accept less.” That’s not a plan. Instead, say, “I need to reduce the monthly payment to $150 for the next four months. I could even pay $75 twice a month. Then, in four months, I believe I can return to $300, which only extends the length of the loan by two months.”

    Now that’s a plan. It shows that you’re sensitive to the creditor’s situation and that you’re making a fair effort to make good.

  • Don’t overpromise.

Cover all the bases

After you propose your plan and agree to terms, ask for a letter outlining the new agreement to be mailed or e-mailed to you so that there’s no chance for a misunderstanding. If that doesn’t seem to be forthcoming from your contact, or if you don’t receive written documentation of the new terms within a few days, follow up yourself, stating the agreement in writing.

About This Article

This article is from the book:

About the book author:

Steve Bucci, BA, MA, is a personal finance expert and a nationally syndicated columnist whose column is carried by the financial megasite Bankrate.com and the Scripps Howard News Service.

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