There are books and blogs about how to fix your own credit problems. And while there’s some merit to the information they provide, the one issue that they dance away from is the fact that most people are not qualified to fix their own credit problems.
This is usually the result of a complex mix of lack of knowledge, emotions, dealing from a position of weakness, and not having the necessary skills to go toe-to-toe with seasoned collection agents.
If that describes you, it’s best to turn the job of fixing your credit problems over to professionals who know how to do it right. It doesn’t mean that you are incompetent – it just means that credit negotiations are very specialized, and only a select few people know how it works. (By the way, few people working in this industry are qualified to help you. Just because someone calls themselves professional doesn’t mean they are. More on that later.)
Here are some examples of why you may not be the best person to fix your own credit problems.
You Probably Don’t Have the Skills to Deal with Creditors, Let Alone Collection Agents
For most people, dealing with creditors is an occasional event. And an intense time of dealing with several creditors is probably a once-in-a-lifetime occurrence. But the people who you are dealing with on the other side – the lenders, collection agencies, and attorneys, do this for a living, and many of them are very good at it.
You will be attempting to match your limited credit negotiation skills with people who are trained professionals. It’s an unbalanced arrangement from the very start.
In order to have any chance of being successful negotiating with creditors, you have to be comfortable with serious discussions by phone. Most people don’t have the skill. You have to be persuasive, which is to say that you need to be tough but not abrasive. The idea is always to improve your position with the creditor, while not causing them to cut off negotiations and referring your case to a higher level.
Apart from phone contact, you will also need to be very fluid when it comes to both email and regular mail. Phone conversations will need to be followed up with written confirmation, and you must be able to craft letters that are both convincing and concise. Once again, this is a weak spot for a lot of people, but it’s absolutely necessary when dealing with creditors.
It’s Hard to Deal From a Position of Strength When You Have Bad Credit
When it reaches the point where you need to make direct contact with your creditors, it’s usually because you have credit problems. This is another situation that creates a fundamental imbalance. Your credit problems make it very difficult for you to ask for better terms, and virtually impossible to demand them.
If your account is past due by more than a month or two, it’s probably already been forwarded to either the lender’s collection department, or to a collection agency. When that happens, you are no longer a customer, but a reclamation project. Employees at this level will be concerned with getting money out of you, and not at all in keeping you satisfied as a valued customer.
Whether it’s justified or not, people with bad credit are seen as damaged goods, and not always treated with respect – particularly when interacting with the very people they owe money to.
You Could End Up Making Matters Worse
There are important tactics that you need to use if you’re trying to fix your own credit problems, and a lot of people don’t bother to use them. I’ve already covered the importance of following up phone conversations by either email or written mail, but it’s very easy to get lazy about this, and that can lead to misunderstandings.
It’s also important to understand that collection agencies frequently record phone conversations. Should you promise to pay a certain amount of money by a certain date on a recorded phone call, and not make the payment, the collection agency could elevate the collection account to a judgment. The recorded phone call will represent evidence that you are not dealing in good faith.
There are also important protocols when it comes to sending money to a creditor. If you send money based on a verbal agreement alone, the creditor can take the money and then disavow the verbal agreement. For this reason, it’s always important to get a signed letter confirming an agreement before sending in any payments. But not everyone knows to do that, or to do it on a consistent basis.
The outcome of each of these events could easily leave you in a worse position than you were at the beginning.
“He who represents himself has a fool for a client” – Abraham Lincoln
One of the biggest reasons why this is true is because of emotions. When you are negotiating with creditors, it is purely a business transaction. When you bring emotion in the picture – and it’s almost impossible not to when your financial survival is hanging in the balance – you may get burned.
Emotions have a way of making you come across as being either wounded or desperate or both. That will never serve you well when negotiating with creditors. After all, your objective is to keep your financial ship from sinking; the collection agent’s only interest is to get some money out of you today.
Tomorrow he will try again. And then the next day, and the day after that, and so on. Part of what collection agents do is try to wear you down. That’s much easier to do when you’re in an emotional state.
What a Law Firm Can Do That You Can’t
Many collection agencies are either law firms, or law firm subsidiaries. That puts you at a decided disadvantage. But you can level the playing field by bringing your own attorney. The key is to work with a law firm that specializes in credit issues. You’re far more likely to get an equitable settlement when your attorney is speaking with the legal experts in a collection agency.
A credit attorney has the advantage of knowing the law regarding collection practices. The collection agency knows these too, and is banking on the fact that you don’t. Sure, you can familiarize yourself with the Fair Debt Collection Practices Act (FDCPA), but knowing what it is, and knowing how to use it effectively are two very different things.
If you’re having problems with a single creditor, then try the do-it-yourself route. But if you have serious credit problems, and you need to deal with several creditors, you’ll need professional help. The fees that you will pay to the law firm may be more than offset by the amounts of debt that they will be able to negotiate away in your behalf.