I think that dealing with creditors is probably one of the most emotional experiences one can have at a time when they are likely the most vulnerable. Think about it. When you owe someone money and they are constantly hounding you to pay what you already know you owe, it can break anyone down who does not know how to handle them. Usually what happens is they use tactics to bully you into using your grocery money to pay them NOW! Credit Sharks In Suits (FPU Lesson) is great for helping you learn how to deal with these sharks, as well as learn how to avoid them all together.
Myth: You need to take out a loan or open a credit card to build your credit score.
The truth as Dave Ramsey explains it, is that a FICO score is no more than an “I LOVE DEBT SCORE”. You have to continue to go into debt and pay it off in order to maintain a good score. Everything used to determine your score is based on debt. Old debt, new debt, level of debt, length of debt history, and debt payment history. Someone has started a myth that says you HAVE to borrow money in order to establish yourself in the world. Your financial responsibility is based on how irresponsible you are with money. What is wrong with this picture? Now some would argue that you can have debt and still be financially responsible, but I disagree. When you borrow money to buy something that you do not have the cash to buy, common sense says that you can’t afford it. Is it responsible to borrow money that you don’t have to buy something you can’t afford in order to build something that you don’t need? Your FICO score is a tool for the banks to win NOT YOU! Some often cry that they need a credit score to get a mortgage one day. This is also a myth. By going to a Mortgage Lender that does manual underwriting, you too can get a mortgage without going into debt to earn the privilege. Save a down payment, be early or on time with your rent payments for 2-3 years, maintain the same job for the same amount of years, and of course make enough to be able to afford that house. Don’t buy into the myths anymore!
How do you deal with bullies that use fear tactics and guilt to collect?
The basics to dealing with collectors are as follows:
- Your income should FIRST cover your FOUR WALLS. (Food, Utilities, Shelter, Basic Transportation)
- If you don’t have the money to pay them DON’T pay them. Don’t let them use fear tactics to make you pay them money you don’t have. Prioritize your necessities and when your income runs out that’s it.
- Make the creditors treat you with respect when they call and only allow them to call you every two weeks. If they try to bully you or make you feel guilty tell them you will talk to them in two weeks but only if they behave. Deal with them on your terms, but be sure that you are fair at the same time. After all you do owe them money?
- Do a budget and consider using the Pro-Rata method to give yourself some time and traction to get out of your mess. This method will in some cases keep you from being sued, as well as buy you six months to a year to gain control. Do not be confused, they can still sue you, but if you are trying to do everything you can to pay them the money you owe them they may not be as likely to waste their time taking you to court. (I will post an example of the Pro-Rata method on my home page in the sidebar.)
- NEVER, EVER give your creditors electronic access to your bank information. They will lie to you about how much they will take. Get any deal you make in writing before you send them payment. Mail your payment certified so they can’t say they never received your payment.
- In EXTREME situations where you are threatened or worse you can write a Cease and Desist Letter to keep from contacting you. You only want to do this in EXTREME situations because when you cut off the communication good or bad, they will surely sue you in court.
The bottom line is that no matter what situation you find yourself in there is a likely solution to YOU turning things around. It is going to take some patience and hard work, but YOU can do it! Once YOU start to get some traction with YOUR money YOU can accomplish so much. Most people make the mistake of buying into the lies that creditors use in order to get them to pay. When YOU are in control YOU will make better decisions, and the light at the end of the tunnel will begin to emerge.
Good luck and make the decision today to not be bullied ANYMORE!
Do you have a story you would like to share about an experience you had dealing with collectors? Tell us about it.
EDITED: Changed Title ending, but forgot to change the beginning too. BC @ EOD