How to Negotiate My Credit Card Debt Prior to Paying Off My Balance

Some Americans struggle with overwhelming credit card debt. If you have a large amount of credit card debt, you must make repayment a priority before it consumes you--financially and psychologically. One of the ways you can relieve some pressure is by negotiating with your lenders. There are several strategies, but you must pick the one that best helps you get out of debt.

Instructions

1

Pull your credit report prior to approaching your credit card companies. You'll want to be well-armed and well-informed before arguing your case. You can get a free copy of your report at AnnualCreditReport.com. You should also pay for a copy of your FICO score--a three-digit number that represents your total credit profile. Scores over 720 are great; scores below 600 are very poor.

2

Calculate your own debt-to-income ratio (DIR). This is the percentage lenders use to determine your ability to repay any loan. To find your DIR, divide the sum of all monthly bill payments by your total gross income. Now multiply this figure by 100. Most lenders will be unwilling to negotiate any debts unless your DIR is well over 50 percent.

3

Review your credit report for delinquencies and other negative marks (charge-offs, judgments). These will need to be explained. Make sure you can both explain what led up to the negative credit marks and provide any documentation to support your argument (medical bills, unemployment stubs).

4

Contact your credit card companies with settlement offers in mind. You will have to open the negotiations--not the lenders. For example, if you owe $5,000 on a credit card, ask for a 35 percent reduction--leaving you with a balance of $3,250. Lenders will be more willing to negotiate if you give a promise to repay huge chunks of the loan in lump-sum payments.

5

Counter the credit card company's counter-offer. You are looking for the best deal for you; the companies are looking for the best deal for them. You'll need to compromise, but don't back down right away. Impress upon the representatives the problems you are facing, and that the best way for them to get a percentage of their money back is to reach a settlement.

6

Get the settlement offer agreement in writing before signing or agreeing to it. Review the agreement and make sure the terms are correct and fair.