I am going to stop paying my credit cards. Should I talk to the banks first?
My credit score right now is 712. I am always on time on my payment (monthly electronic payment). I will not be able to make my monthly payment after June. I know one of the drawback of debt settlement is your credit rating. I know I will be able to manage to pay cash if I don't have the debt I am carrying now.
Can you tell me if it will be to my advantage if I communicate with my creditor first? How would I approach them properly?
—Jess
Short answer
Calling the banks before you miss a payment rarely produces anything. Calling after you miss payments does, so contact each creditor about once a month, state the hardship plainly, and let each billing cycle open up better options.
Key points on this page
- Before a missed payment, the most a customer service agent usually does is refer you to a nonprofit credit counseling agency
- You do not need the bank’s permission to look into a debt management plan, so you can call a counselor about that today
- After payments stop, being proactive works: say you have a financial hardship, name it, say you are working on a plan, and say you cannot afford the payment right now
- As each billing cycle passes unpaid, those conversations change and start producing offers for lower payments or settlements for less than the balance
- There are things to do and things to avoid along the way, and knowing them ahead of time is what makes the process go smoothly
- Focusing on the debt rather than protecting the score is the right call, because credit does bounce back once the settlements are finished
Speaking with your creditors first before you miss a payment typically will not yield any result. The bank customer service agent may refer you to a consumer credit counseling agency. The purpose of that would be for you to speak with a credit counselor at a non profit agency to see if you can qualify for a debt management plan where your monthly payments on the bills in the plan can be made affordable due to the lower credit card interest rates that come with the plan. If you want to check into that, you don’t need the banks permission. You can do that now.
Speaking to your creditors AFTER you miss payments is recommended and will yield positive results. Being proactive and making calls into your credit card companies you owe at least once a month to let them know where you are at is as simple as: “I am calling to let you know I have a financial hardship (state what that is – loss of income, medical, mortgage reset, etc), I am working hard to come up with a plan to get back on track, but right now I cannot afford my payments. As soon as I can raise the additional income I will get back on track with paying you”. As each monthly billing cycle comes and goes without the credit card bill being paid the communication with the bank will take on different meaning and provide you with opportunities for lower payments or settlements for less than the balance. The whole process is pretty simple when you have a plan in place and stick to it. There are some “to do’s” and “not to do’s” along the way that, when understood and implemented or avoided, will add to your success. Consider joining our education and membership program to better prepare yourself for debt settlement if that is the direction you are going.
I am glad you have a grip on the fact that you have debt that needs your full attention, not a credit score that needs to be nursed and coddled. You are way ahead of the pack on this. Many people struggle with bills they cannot afford (some times for years) before fully understanding this. The fact is, your credit bounces back after settlements are completed. There are simple steps to take to ensure that your able to access credit products at fair rates again.
Anyone with questions or concerns about what to say to your credit card lenders, before or after your payments stop, can post in the comments below for feedback.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
Leave a Reply