Contact Your Creditors

Once you’ve made a budget and started paying down your debt, your next step is to contact your creditors, preferably in writing.

Explain your situation. Your creditors’ response probably will not sound terribly sympathetic, because they hear stories like yours all the time. But don’t let that trouble you.

Your goal is not to gain their sympathy, but to negotiate a modified payment plan that will reduce your monthly payments. Obviously, you’ll want to reduce them to an amount you can realistically pay each month, based on your budget.

You also want each creditor to continue reporting your accounts as “current,” so as not to affect your credit score. Many will agree to do this; but you usually have to ask…and have to keep a schedule of payments that you set.

Bear in mind that you will have to pay more in interest if you extend your repayment schedule, but this technique will allow you to stay current and maintain your credit rating.

Another option is to have creditors change the due date on your payments in order to balance out your monthly expenses—so you don’t have most of your bills due on the first of the month, for example.

The sooner you can negotiate with your creditors about modifying your payment schedule, the better for you and your credit ratings.

Make the telephone calls as soon as you see hard times coming. Don’t wait until you’ve missed a payment, or until your accounts have been sent to collections.

Next: Late Payments