Occasional late payments may temporarily harm your credit score, but are not serious if they only happen once in awhile. However, if you reach the point where you are completely unable to make payments, reaching out to your creditor may actually help. If you're past the point where your creditor is willing and able to help you, you may need to consider other options.
Notify Your Creditor
As soon as you realize that making payments on your credit card is presenting more financial strain than you can handle, call your creditor and notify the company of the problem. Although the company would prefer if you made at least your minimum payment on time, every time, it will be more willing to negotiate with you if you take this step. If you do not notify your creditor, the company has no way of knowing what is preventing you from making payments as scheduled.
Negotiate A Plan
Your phone call to your creditor shows that you are willing to pay what you owe, but are encountering financial hardship that prevents you from meeting that obligation at the moment. Because of this, provided you have not allowed your account to become seriously delinquent, such as 90 days or more, your creditor may be willing to negotiate with you. Some credit card companies offer hardship plans, which are unadvertised, but which can be discussed if you ask about them. These plans typically reduce your interest and set your minimum payment very low for a fixed period of time, in order to give you time to get back on your feet financially. Other plans may also be available, depending on the creditor, but you will not know until you explain the situation and ask what can be done.
Be Prepared
If a creditor agrees to a hardship or other reduced payment plan, the company will likely want to take a financial statement from you. This statement documents your current income, as well as all payments for necessary bills that you make on a regular basis. You will need to make a full report of monthly expenditures for your mortgage or rent, utilities, grocery bills, car payment, insurance and any outstanding loans you are paying. Have this information handy when you call your creditor, so you can provide it when asked.
Execute Plan Faithfully
Once your creditor has agreed to a plan, the terms may be even more strict than your normal terms of credit with that creditor. For example, if your credit card payment was a day late before, you would be assessed a late fee, but things would otherwise remain normal unless you made a habit of late payments. With hardship plans, the penalty for late payment or failure to pay is often getting kicked out of the plan entirely. Depending on your creditor's terms, your entire balance may then be due in full and your account closed. Your creditor should explain all the terms in full when you set up the plan, but ask specific questions about penalties if details are not made clear.
Seek Additional Help
If your financial situation is in full-blown crisis mode, hardship plans may not be able to help. In that case, seek consultation with a certified credit counselor, preferably affiliated with the National Foundation for Credit Counseling or the Association of Independent Credit Counseling Agencies. After taking stock of your situation, a certified credit counselor will be able to offer you detailed advice regarding your available options. In some cases, a debt management plan or even bankruptcy may be better options for your particular situation.
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