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Credit Repair Tips

Credit Repair Also Requires Ditching Debt

As the economy continues to sink into a deep recession and other sources of available credit have all but dried up, defaults on credit card debts are expected to soar to unprecedented heights in 2009. For decades credit issuers have ferociously competed to be the first card in your wallet, and now they are just competing to be the first paid back. Although they won’t admit it publicly, lenders and their collectors are beginning to realize they need to round up whatever money they can before things get even worse. In some cases that could mean agreeing to longer payment plans or even accepting pennies on the dollar as payment in full.

The first thing you need to remember is even if you feel your debt is manageable it may still be affecting your credit score, especially revolving (credit card) debt. Paying down your revolving debt is a sound credit repair strategy. If you are using over 50% of your available revolving credit you will be able to raise your scores considerably just by paying it down to under 30%. This is one of the easiest credit repair fixes there is.

If your credit card debt is getting out of hand there may be no time better than now to negotiate in your favor. You may even be flirting with the idea of bankruptcy right now, but that should only be the last resort. If you are not sure seek the assistance of a Credit Counselor or Bankruptcy Attorney to help make the correct decision.

If you plan on trying to negotiate with your creditors here is some advice to help you get started. Please be patient, this will not be done overnight, make a plan and stick to it.

Plan a Strategy

The first thing you need to find out is whether you are dealing with the original creditor or a collection agency. Your negotiation strategy will be quite different for each. For example; working with the original credit card company over the phone is actually the preferred method; however, it’s often best to keep communications with a collection agency to writing. If your debt is still with the credit issuer do everything you can to keep it there. They are generally much easier to work with.

Start With a Low Offer

Don’t be afraid to make the first offer and decide up front what amount that will be. Most collection agencies have paid cents on the dollar to buy your debt, and as previously mentioned, even original creditors are willing to wheel and deal these days. If you’re negotiating with a collection agency, 25% or less of the total balance is a good place to start. With the original creditor you will want to make a better offer somewhere between 25% and 50%. Of course, every situation is different, so be sure to make an offer you feel you can defend.
Keep a Record of Everything

Keep this principle in mind, your organization of records from day one can really make the difference between a good and bad settlement.  Now that you understand who you are dealing with and where you will begin, record every phone call, take names of who you spoke with, make copies of every letter, and don’t expect anyone to remember who you are or what was agreed to at an earlier time. Keep this principle in mind, and you will save yourself a great deal of headaches along the way.

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