Gilda Gazor Gazor is a fourth-year
political science student and recovering debt sufferer. You can
reach her at [email protected]. Click
Here for more articles by Gilda Gazor
Yeah, yeah “¦ you signed up for the Visa MBNA card for the
T-shirt, but ended up with a bill over $3,000! But there is a way
to stop the debt collectors from calling you every morning at 8
a.m. Whether you have a slight credit slip-up (only missed a few
payments) or are in totally over your head (haven’t made any
payments and can’t do so anytime soon), there is a solution
for you.
The first step to resolving debt is to deal with it, so you are
already on your way by reading this.
The next step is to contact your credit card company to see
exactly how much you owe. So call their 800 number or answer their
calls! If you owe over $2,000, don’t give up hope.
The truth is simple: credit card companies want their money and
are willing to cut deals in order to ensure that they will get at
least a portion of it. Debt collection is costly for both parties,
so it is in the best interests of the credit card agency to work
out a deal with you or a debt consolidator on your behalf.
If you are less than two months behind in payments, you can try
to work out smaller minimum payments directly with your credit card
company.
If you are three to four months behind, this is the best time to
contact a debt consolidator who can reduce your interest rates and
overall payment. Consumer Credit Counseling Service-LA is one such
company, affiliated with the National Foundation for Credit
Counseling. They offer financial management education as well as
services to minimize your debt payments. Check www.cccsla.org for
more information.
Also, search online or go to www.debtguru.com, another debt
consolidation organization that may suit your needs. The costs of
these services are minimal, ranging from $20-$25 per month.
Now for the big fish. If you are over six months behind, you are
in a bind. But you have two options here: One: make a settlement,
which means you must find out what options the collection
department will offer and chose what is best for you. For example,
do you have enough funds to pay off only half of your bill now? If
so, you can pay half now and settle your account as soon as
possible.
Or two: file for bankruptcy. Contrary to popular belief, you can
do this and bounce back in less than seven years in comparison to a
settlement that will stay on your credit record for seven years.
However, filing for bankruptcy is a serious thing and you must
contact an attorney to see what risks you may face.
I speak from experience when I say that it is possible to end
your credit card debt and clear your credit report. I started the
same way you did, in my early innocent years and ended up with a
$3,000 Visa bill that I could not afford. I ignored the bill for
several months until it went to a collection agency. Fortunately, I
worked out a deal with my credit card company in which I pay only
$1,500 in nine months to settle my account.
Most students, however, cannot afford to pay off even half their
debt because they are spending money on “books” (i.e.
drinks at Madison’s and a new entertainment system.) So some
companies may offer you a break in which you can pay with a reduced
interest rate for a brief period of time.
Creditors are willing to work with students who are interested
in paying their debt. Therefore, don’t be intimidated by
their threats. Remember, you are trying to please them, but
ultimately, they would rather have some payment instead of none at
all.
Although credit card agencies are the enemy, they offer
collection departments that are trained to negotiate with people
like you. Arrangements may vary from a reduced minimum payment to a
reduced interest rate.
Keep in mind that every person has a different case and
depending on your creditor and the significance of your hardship,
the settlements will not be the same for each individual (according
to Capital One, MBNA, debtguru.com and CCCSLA).
If you are an uncorrupted freshman, heed my advice and do not
fall into the evil trap of credit card companies! Cut up your cards
if you have them. Avoid the fuzzy bears and UCLA paraphernalia as
much as you can. Stick with check cards so you only spend what you
have. Stop the madness and take control!
It might seem far from now, but keep in mind that it takes seven
years to clear your credit history and by then you may want to sign
a lease or buy a home. You don’t want to end up with a good
job at 26, living at home, listening to your parents nagging you to
take out the trash.