Tips on Debt Settlement

While settling any outstanding debt is a good place to start when trying to improve your credit this in and of itself will not necessarily do what you think it may. If you have a debt outstanding and you are likely unable to pay it off due to low financial resources, you can attempt to deal with our creditors. There is actually big business with debt settlement. There are companies willing to go up to bat for you with attorneys or just qualified people who can help settle on a lesser amount than what you would otherwise need to pay. Whether you decide to deal with your creditors yourself of hire a professional service is up to you but if you do it yourself you need to take into consideration this important point.

Settling your debt will not naturally improve your credit rating. This is because just because you have come to a deal with your creditors doesn’t mean that they will not give you a negative point on your credit report. After all, you just caused the to lose money on you. What could be achieved however is that in your dealings with your credits you make part of your terms that a negative point is not placed on your report.

Debt settlement is a practice mostly used when someone cannot pay back what they own on any unsecured debt. For example, if you went to a department store, signed up for their credit card and purchased something and then when you received your bill a month later realized you could not pay for it, well you cannot squeeze water from a stone. Or in this case pay back something if you don’t actually have the money. What can be done in these situations is to reason with the creditor that you can only pay back whatever percentage.

In this case let say 50%. The reason is simple in that if the creditor realizes you may go bankrupt then there is no way they will get any money back so making amends on certain amount is better than nothing. The practice of debt settlement is a bit of an art because you are really just trying to reach a deal. If you are good at dealing than you will reach a better deal than someone who is not. One also better understand the various laws and acts surrounding this before they try to deal because you don’t want to end up getting trapped.

If you want some debt settlement tips, here are a few:

– Don’t take their first offer, be persistent and patient with them, if you really cannot afford something you really have to push this across to them.

– The older the account is usually allows for more bargaining room. The newer ones are more difficult.

– First contact your creditor with a letter in the mail. Allow them then to phone you in response to your letter.

– Never get too eager or thrilled to be settling your debt, in doing so they will know you will settle at a greater amount.

– Do not provide other financial information they may ask you about, stick to the topic.

– Try to get them down to close to 50% then give them a day where you can think it over before you call them back. It is then during this call the next day where you insist your credit report is not touched. A settled payment on your credit report looks really bad.

Get them to provide a written letter that your account is reported as paid as agreed so that you have proof that nothing negative was added.

Budget realistically and repair debt