If I Negotiate With Credit Card Companies Myself, Will It Negatively Affect My Credit Score?

If you lose your income, you may find yourself with credit card accounts that you are having trouble paying. As these balances become past due and move further into delinquency, account holders may try to negotiate with the credit card companies for lower interest rates, reduced balances or other more favorable terms. Negotiations that change the agreed payment of the account can have an effect on your credit score.

Types

There are three primary types of concessions that people look for with credit cards. You can negotiate for a reduced or deferred payment for a short time or a lower interest rate. There can be a significant savings even with an interest rate cut of a few points. As a last resort, you can negotiate with a credit card company for a lump sum reduced payment.

Significance

Not being able to honor your word about debt repayment is serious when it comes to your credit score. Banks and other companies loan money based on your ability to pay. Problems paying your bills in the past may carry on into the future. In a negotiation, the bank may view you as someone who has not kept your word.

Considerations

You can still be current on your account and receive a reduced monthly payment or a reduction in interest rate. The most important thing to do is to ask for it. Call customer service for your credit card. The card company may ask that you close your account and convert it to a fixed-term loan. To negotiate a lower balance payoff, you will usually need to be delinquent, sometimes by several months. The credit card company has no reason to negotiate a lower balance when it is getting paid as agreed. The lender will also expect a lump sum payoff, so you will need to have the money in hand when negotiating.

Effects

If you negotiate a reduced interest rate with your credit card company, it will probably not affect your credit. Card companies and banks do this routinely to try to keep customers who may otherwise leave them. This is less expensive for them than getting a new customer. If you negotiate a reduced payoff amount on a past due balance, it will have a serious effect on your credit score. The lender will view payment of anything less than the full balance as a negative. The effects of this negative reporting will lessen with time.

Benefits

The biggest benefit of negotiating with credit card companies is that you could save money. With a reduced interest rate you could save thousands of dollars and shorten the amount of time it takes you to pay off your debt. Negotiating a reduced balance payoff could eliminate a debt that is in collections. This could also save you from further collection action.

Warning

Be careful when using a debt settlement company. Many of them have extremely high fees, and you must pay them before they pay off any of the debt. In addition, you will generally not receive any more favorable terms using a debt settlement company than you will by working with the credit card company on your own.