Learn How to Negotiate With Debt Collectors—and Win

by John Stapel

Your credit score is a number between 300 and 850 that credit bureaus assign to you to indicate your creditworthiness. Not paying back what you owe damages your credit score and could eventually lead to debt collectors chasing you for money, making your life very stressful. It also makes it much more difficult and expensive to get credit or a loan in the future.

It’s not always possible to avoid debt collectors. If you have multiple credit cards and loans, you might forget to make a payment or fall behind on repayments for one reason or another. And organizations may mistakenly contact you about a debt that isn’t yours. Should this happen, our tips in this article show you how to negotiate with debt collectors successfully. 

Why Are Debt Collectors Contacting Me?

Debt collectors might contact you if you owe money on a loan, bill, or credit card that you haven’t repaid on time. You might also hear from them if your creditors haven’t been able to contact you about your outstanding debts and have passed your details to debt collectors.

Although it can feel intimidating, debt collection is a legitimate part of the process of recovering money. Many organizations have employees or departments whose job is to collect on the debts people owe them. There are also third-party individuals and businesses that do this work on behalf of creditors.

Genuine debt collectors don’t threaten or harass the people they contact. Of course, there are scams and individuals who may use illegal or underhanded methods to try to intimidate you or access your personal information for fraudulent purposes. This is where knowledge is your friend. Know your rights, be aware of your financial situation, and try to keep a calm, level head.

Whether the debt is legitimate or not, there are steps you can take to deal with the collector.

What Happens to Your Debt When You Default?

If you fail to make repayment after borrowing money, your lender or creditor will usually write to you or call to ask you to pay. If this doesn’t work, they may then use private debt collectors to do this for them.

As far as your credit is concerned, making payments late or not paying at all will damage your score. It signals to other businesses that you may not be financially trustworthy. This could result in you being able to get loans or credit cards only with higher interest rates and less favorable terms in the future. And if you want to mortgage a house or finance a car, you might find you can’t get approval at all.

The Role of Debt Collectors

Creditors may hire money collectors to chase you for the debt on their behalf. Or they might sell the debt completely to a specialist agency for a much lower amount than you originally owed. The collection agency will want to recover as much of the original debt as possible to make a profit.

If the creditor has hired the collector to work on its behalf, the original company you owed money to will probably still be making the decisions about that debt. For example, you might be able to negotiate paying back a lower amount than you previously owed or different repayment terms.

But if the debt collector has bought the debt from your original creditor, it will want to get as much money from you as possible using the least amount of effort. Every time it writes, texts, or calls you, it loses money. The amount of acceptable expense varies from company to company. Some will aim for 80% or 50% of the original debt value, while others might accept even less.

Debt collectors are more likely to accept a lower amount than you originally owed the older your debt is. This is because it’s harder for companies and debt collectors to sue you over older debts.

Before Negotiating With a Collection Agency

If a debt collector contacts you, it’s important not to ignore it. Even if the debt isn’t yours, it won’t fix itself. If the debt does belong to you, you can take steps to minimize the inconvenience and damage to your credit rating.

Check That The Agency Is Legitimate

Research the collection agency to make sure it’s not a scam. Fraudsters will sometimes contact people claiming to be debt collectors, trying to get personal details like your social security number or date of birth. They may then use this information to run up debts in your name.

If you do recognize the debt, contact your original creditors to ask them whether they’ve hired the collection agency to chase the debt or sold the debt to the agency. While you’re talking to them, you could ask to deal directly with them rather than with the collector. If you’re in a position to make a payment, offer to pay a lower amount than what you actually owe right away—some money there and then may be better for them than none at all.

Debt collectors must tell you how much they think you owe, who the original creditor was, and what you can do about it. You then have 30 days to send a debt validation letter asking the collector for proof of the debt. They can’t continue to chase you for the debt until they have given you this proof. This step is especially important when you don’t recognize the debt.

Most debts are enforceable only for a certain period of time, known as a statute of limitations. The length of the relevant statute of limitations and the types of debt it applies to varies by state. Once this period has passed, the debt doesn’t disappear, but a creditor can no longer take you to court to force you to pay them. This period starts on the date of your last activity on the relevant account. So, you could inadvertently restart this period by admitting to that debt or making a payment on it.

Know Your Rights

The Fair Debt Collection Practices Act (FDCPA) protects you from harassment and illegal behavior by debt collectors. As some debt collectors may try to bully or intimidate you into making payments, it’s important for you to know what they can and can’t do by law.

Here are some of its rules that can help you:

  • Debt collectors can contact you only between 8 a.m. and 9 p.m.
  • They can’t contact you at work if you ask them not to.
  • You have the option to communicate with them only in writing.
  • You can tell them to stop contacting you completely. This won’t make the debt go away though—you will still need to deal with it.
  • They can’t contact others about your debt, such as your employer or family members.
  • You can tell collectors to deal only with your attorney.
  • Agencies can’t repeatedly pester or threaten you, use bad language, or try to intimidate you by suggesting they’ll do something they can’t or don’t intend to do.

You can take legal action against debt collectors if they don’t follow the FDCPA. You’ll need to tell them in writing about how you’d like them to communicate with you. Here are several sample letters to creditors that can help you.

Consider Your Options

If you’re overwhelmed and struggling to pay your debts, you could look into debt consolidation —where you merge multiple repayments into one. One way of doing this is to take out a personal loan, also known as a debt consolidation loan , from a reputable lender.

Consolidating isn’t the right move in every situation. You’ll need to investigate the pros and cons to see if it could work for you. In more serious situations, bankruptcy may be something that you have to consider.

Have a Plan

Before dealing with a debt collector, work out what you can afford to pay right now. Of course, repaying the total amount will get rid of the collection agency quickly. But it’s worth negotiating to pay a little less if you can’t afford to pay all of it.

Don’t overstretch yourself. There’s no point agreeing to pay back more than you’re able to as this will just push the problem down the road. Be aware of all your financial commitments and stick firmly to your budget.

Remember, a debt collector wants to get as much money from you as soon as possible. So, offering to pay a small amount over months or years likely won’t appeal to them. For example, they’d usually rather get $2,000 of a $3,000 debt now than have you repay the full amount over five years.

Keep in mind that paying less than the total amount of debt will appear on your credit file as a “debt settlement”. This doesn’t look as good on your report as “paid in full,” but paying something looks better than not paying at all.

Whatever agreement you make with a debt collector, make sure you get it in writing before you pay them anything. Keep copies of any written contact you have with them and make notes every time you speak to someone (and get their name and contact details!). This will help you stay in control and will give you proof of what you’ve both said and agreed to, should you need it in the future.

Things You Shouldn’t Say to Debt Collectors

Debt collectors will usually have access to your credit file and details of legitimate debts they’re chasing. It’s important not to give them any extra information about your work, finances, or other credit agreements you have. They could try to use these details to pressure you into paying them rather than another creditor. You could also be at risk of identity theft.

Don’t agree that a debt is yours (even if you recognize it) before they have sent you proof. This could restart the statute of limitations on that debt. If you know a debt isn’t yours or you don’t recognize it, make sure you tell the debt collector.

When dealing with debt collectors, always try to stay calm. Remember that you’re under no obligation to tell them about:

  • your personal circumstances
  • where you work
  • how much you earn
  • how you spend your money
  • details like your bank account, social security number, or date of birth

Stand your ground and don’t let them bully or intimidate you into agreeing to something that you can’t stick to. You may need to speak to different individuals at the debt collection agency over days or weeks before agreeing on something.

How to Stay Ahead of Debt Collectors

Although there are ways to handle debt collectors, prevention is better than cure. There are steps you can take to avoid having to deal with them and repair the damage to your credit. These include things like using professional credit repair services, sticking to a budget, and (of course!) paying your creditors on time.

Hire a Credit Repair Agency

It’s possible to improve your credit score, and the best credit repair companies can help make doing so much easier. These experts know best how to remove negative items from your credit report . They can also help build your credit, fix errors on your credit file, negotiate with creditors, and help prevent you from becoming the victim of fraud by continually monitoring your report.

Create a Budget—and Stick to It

Take the time to document your income and all your expenses. This will help you see where your money is going and plan how much you can pay to your creditors. Be determined to stick to your budget and spend only what you can afford. Personal finance apps can help you do this.

Pay on Time

Write out everything you owe and when each payment is due, so you don’t pay late or forget to pay altogether. Try adding payments to the calendar on your phone or computer so you get reminders. Paying what you owe when it’s due will stop your debt from being sent to collection agencies and save you a lot of hassle.

Final Thoughts on Debt Collection

Although you might not be able to avoid them completely, you can learn how to negotiate with debt collectors, and win, by:

  • dealing with them right away, rather than ignoring them
  • staying calm and in control
  • remembering your rights and not telling them anything they don’t need to know
  • getting any agreement you make with them in writing before making any payments

Remember, you can also use a credit repair agency to help you fix any damage to your credit score. Keeping track of your finances and paying what you owe on time, whenever possible, can save you the inconvenience of dealing with debt collectors.