How to Negotiate with Creditors


Managing financial troubles can be complicated. Unemployment, unforeseen medical expenses, and unexpected increases in living expenses are just a few of the factors that cause many people get in over their heads. When you don’t know what to do, credit solutions can be hard to find. However, there are ways to negotiate with creditors before your situation gets worse. Contact your creditor immediately and ask about the following credit solutions. The answer may be simpler than you think.  This piece is focused on older debt but realize, you don’t need to wait for debt to be old.

    • Remember, you have all the power in most cases.  The best way to facilitate credit solutions is to make sure you understand that “they want your money”. When you are negotiating an old debt, remember, you have all of the power.  They have already damaged your credit so they really do not have anything else they can do to you. You on the other hand, have what they want. They want your money. It does not cost them anything to take less money, as they don’t have any money up to this point.   It does not cost them anything to remove the negative line from your credit report. You have the power, don’t negotiate as if they have the power. If they say no, it hurts them more than you. Time heals your credit but it makes the money you give them worth less. Time is on your side if they want to play hard ball.


  • Know the Statute of Limitations in your state.  Minnesota 541.053 LIMITATION OF ACTIONS BASED ON CONSUMER DEBT  Notwithstanding section 541.31, subdivision 1, actions upon an obligation arising out of a consumer debt primarily for personal, family, or household purposes shall be commenced within six years. After its expiration, the statute of limitations is not revived by the collection of a payment on an account, a discharge in a bankruptcy proceeding, or an oral or written reaffirmation of the debt.


  • Be prepared, broke and on your last leg(at least know that part of your story). Your creditors will ask for an explanation regarding your financial troubles, so understand that they will use any information that you give them. You are under no agreement that says you have to tell them everything, anything or anything that you do not think will help you negotiate.  This is the time you talk about everything bad, and not anything good. Don’t talk about how you are back on track or how you just got a raise or if you have paid down other debts.  None of those things help in your negotiations. Creditors will be more willing to work with you if they believe you do not have any other options to get money on your own. If the only way you can pay a collection or bill is if your “Dad” or “Uncle” or “Brother” borrow you the money, make sure you tell them that you only get the money if you the creditor accepts the terms your “Dad” is offering.  If a creditor realizes that you are not getting any money from Dad unless the collection is marked paid in full and removed from all three credit bureaus, then they are more willing to do that for you.
  • Write down your plan of action. If the debt is over a year old since the last time a payment was made, realize that you should plan on paying around 20% of the debt if possible.  The older the debt, the closer to 20% you should negotiate towards. Search the internet for things like: How much will Capital one settle for on an old collection?  Will Comcast take less than you owe on a collection, etc, etc. Once you have an idea of what your story is and what you want to accomplish, then it is time to call and negotiate.  Remember, the plan must include a written letter from them agreeing to remove the entire account from your credit bureau.
  • Don’t be in a hurry. If you don’t have the money, you need to use time as your most useful weapon.  Don’t be the person that everyone talks about behind their back.  The person that ruined their own credit, does not have the money to fix it and demands instant results and is always impatient.  No one will want to work with you and anyone that does, will not work very hard to help you.  If the creditor is not willing to accept your settlement offer, don’t rush to make a different offer.  Tell them that you don’t have any more money but you will see if anyone else will borrow you money other than your Dad, etc.  Wait 3-7 days and call them back. If you offered them 200 dollars(that your dad was willing to borrower you if you get a paid in full and removal of the account from the credit bureaus) on a $2,000 dollar collection and they said no, tell them that your brother said he would borrower you an extra 50 dollars so now you can give them 250 dollars on your 2,000 dollar debt.  If that still does not work, wait another week and offer them 35 dollars more. Never make a payment agreement on a debt unless they give you an agreement in writing that says that the debt will be considered paid with no money owed and that it will be removed from all three credit bureaus or all the bureaus that they report to.
  • What if you have the money.  If you have the money, you can agree to pay your creditor but you need to make sure that you are keeping your eye on the most important piece, you want to make sure they are going to remove the entire negative line of credit from your credit report.  In most cases this is the most important thing you can do to raise your credit. If you make it too easy, they might not be willing to negotiate to remove the negative from your credit report. It might make sense to inform them that you can’t get the money from your(Dad) unless the creditor is willing to remove the negative completely from your credit report.
  • What if you can’t find the money to negotiate. If your credit woes are more permanent, be sure to let your creditor know. Inform them that while you wish you could pay, it may not be a possibility. If you have reached the point of ruin, mention bankruptcy protection. Your creditor does not want to lose your business to bankruptcy, and they may be willing to settle for a partial payment. Offer what you can afford to pay, but be aware that creditors can be tough negotiators.  Remember, the day you pay a collection renews the seven year negative reporting on your credit bureaus and shows a collection that has it’s last activity the day you pay. If you pay a collection that is not removed, it could actually hurt and lower your credit score. Never make a payment unless you have “in writing” that they will take a certain amount as payment in full and that they will remove the negative from your credit reports(in writing).
  • Practice follow-through. Credit solutions are based on actions and their results. When negotiating with creditors, be prepared to follow through with everything you offer. Don’t set up a payment plan you cannot honor simply to pacify the problem. If you mention a balance transfer, make sure you are pre-approved by another creditor before making insinuations. Finally, state your case productively with a goal in mind. Creditors work with financially burdened clients every day, and they are more apt to help those who are willing to help themselves as well.
  • Write everything down.  Keep a online record of everything that you do if possible.  If you start a draft email or a google doc, etc, it will allow you to get your notes no matter where you are when a creditor calls you back.  Write down everything you do, the time you did it, who you talked to. What you told them and what they told you. Make sure you know where you told them the money was coming from.  Don’t fly by the seat of your pants on this one. The creditor will be writing everything you told them down, if you change your story, it can cost you the entire negotiation. If they think you are being untrue, they may refuse to negotiate at all with you.  

Finding credit solutions may be challenging, but it is possible. Before reacting badly to a difficult situation, take time to plan and work with your creditor. The gravity of your troubles may be less extreme in the end.