Credit Card Debt Settlement Secrets You Must Know About

“Action is the antidote to despair.”
-Joan Baez

Credit card debt settlement. You see the ads everywhere and perhaps feel a surge of hope. These ads tell you credit card companies are falling all over themselves to settle your credit card debt for “pennies on the dollar.” But is it true?

With credit card debt in America at an all time high it’s little wonder that debt related scams and schemes are also at an all time high. While debt settlement is sometimes possible, it is important that you understand the facts so you don’t get taken in by an unscrupulus “professional.”

You Do Not Need A Professional

If credit card debt settlement is even a remote possibility for you, it is nothing you are not perfectly capable of doing yourself. There is no need to pay anybody a fee to try to negotiate any type of settlement. Many of those claiming they will help you tackle excessive credit card debt through settlements have no prior training in the credit and collections industry.

Quite a few of them are purchasing CDs and programs off the internet telling them how to milk a comission off of the trouble you find yourself in. They prey off of your fear and insecurity, and you end up paying more than you would have if you’d simply handled this debt settlement process yourself.

It gets worse from there. Some of these bottom feeders will tell you to quit paying your creditors and quit talking to them. They’ll handle everything from here. Then they destroy what relationships you did have with the credit card companies by ignoring them and allowing debt to rise when these companies refuse their unrealistic debt settlement offers.

Most 1st Party Creditors Do Not Settle

Credit card debt settlement almost never occurs with the original creditor. It most often occurs when the account has already been forwarded on to a collection agency. The agency needs to have had the debt for 90 days or so before they’ll even think about talking settlement with you. In the meantime, that collections item has been reported to the credit agencies and your credit score has shot down by 100 points or more.

There is absolutely no motivation for a 1st party creditor to settle your debt with you. There is also no guarantee that these companies will send your account to collections. Some credit card companies jump straight to the lawsuit option and don’t bother to get a middleman involved.

3rd Party Creditors Have Guidelines They Must Follow

Isn’t it nice to imagine calling up a collection agency and announcing that you’ll tackle a credit card debt settlement at thirty cents on the dollar and they can take it or leave it? Nice, but not very realistic. Unless the collection agency has violated the Fair Debt Collection Practices Act in a way you are capable of proving, they generally will not agree to terms this low.

In most cases the original creditor is a client of the collection agency—most agencies are actually not third party debt “buyers”. This means that credit card companies have given them a rock bottom number—often in the zone of 70%--which they can use to negotiate credit card settlements. Sometimes, if you are very lucky, they will go down to 50%.

This is why using a middleman “professional” for your credit card debt settlement is so foolish. These people usually take a 20% commission on what they save you, so if they get your 70% settlement you end up paying the 70% plus their commission, putting your pay-out closer to 90%. You’d have gotten exactly the same results all on your own, without the commission payment.

Credit Card Debt Settlement Can Wreck your Credit

Credit card debt settlement can knock you down into the lower credit score ranges. While it can legally get a collection agency off your back seeing “legally settled for less than the full debt amount” on your credit report, this is not a positive for lenders and does little to help repair your score. Seek other options whenever possible.