How do I pay off all my creditors and get my credit report sparkling?

Question

I'm taking out a loan to pay off all my creditors, but how should I go about it? I have been past due in all of my accounts for over 2 years, and all of it is unsecured debt. I owe between $9,000 and $19,000 depending on the reporting agency. Should I just pick up the phone and start negotiating with them? What terms should I settle for? I'm wary of debt consolidators, so should I go to a CPA if I want professional help? And, should I get professional help?

Answer 1

Ok, I would have to know your exact credit situation to answer this. First, get all three credit reports AND scores and see exactly what is on there. Also, challenge everything. You can dispute EVERYTHING on it, even if you owe T-mobile $2000, they have to respond to the credit agency by a certain time frame when you dispute it, if they don't, it disappears. This might take a couple months, but go for it asap. I got 3 things knocked off every one of my credit reports this way. My score went up so high in 6 months I was able to buy a house.

At the same time, pile up all of your bills and first make a copy or write down the addresses and your account numbers so you can start sending in payments (don't worry, even if you send $1 a month to someone they can't report you as late or send you to a collection agency). The reason you need a copy is that some won't send you a new bill once you made your first payment, so then you are waiting for that bill to come while they aren't sending it so they can charge you more fees. Start sending each of them either the minimum payment each month (for credit cards still open) or $1 each month (for collection agencies and closed credit cards). These are the first 2 steps for you turning your life around.

After you've done that and you're sure you can get some lump sum of money to pay your bills off start negotiations, don't settle for anything more than 60% of your money owed to collection agencies, start at 40% though, they should counter with something and you guys can go back and forth.

Then only use what you need to pay EVERYTHING off. Now, DO NOT use money to pay your bills only to have to pay a ridiculous interest rate though. Make sure you can pay that consolidated loan back before you get it.

The only other step is to not ever miss another payment on anything, 5 years later, things will look a lot better, 7 years later, things will look perfect.

Answer 2

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RE:
How do I pay off all my creditors and get my credit report sparkling?
I'm taking out a loan to pay off all my creditors, but how should I go about it? I have been past due in all of my accounts for over 2 years, and all of it is unsecured debt. I owe between $9,000 and $19,000 depending on the reporting agency. Should I just pick up the phone and start...

Answer 3

You can call the creditors directly and ask them for a payment plan for the full amount or a one time pay off amount to settle the account. I was in the same boat a while back and managed to take my bonus and settle several of the accounts. As a result, this was in February mind you, I was able to recently open up a small line of credit with a low APR credit card to help me rebuild my credit. I was also able to get approved for a cell phone and can now have that under my name as well.

From my experience, credit counciling services are just money grab opportunities for companies that charge outragous fees for their services. I think that their knowledge of the industry is average at best, sure they do have relationships with some credit agencies, however they will essentially get your the same type of deal that you could get on your own. Remember, just because they are trying to collect a debt, doesn't mean that you have no control over the situation.

I was able to negotiate a settlement of $.45 on the dollar so you could start with that as your base and work up and down accordingly. Good luck and remember to take control of the debt, don't let the debt control you.

Answer 4

how are you getting a loan?? If it's a home equity or refi w/ cash out, that's a risk of tying unsecured debt to your only secured asset.

Before you pay any....make sure you know what collector goes w/ what original debt..... and make sure any info you get from a collector (collection agency) is in writing ....If they say $3,500 will clear out the debt, get that in writing BEFORE you send money..


Any credit cards that are still billing you monthly I would pay off first.

Debt consolidation is a bad idea - ever - get all your bills together compare them w/ all the credit reports and start calling....I don't think you negotiate much, but certainly offer to pay in full less an over-abundance of late fees and such....If they don't go for it, pay it in full and be done with it.

To sparkle - whatever credit card is still active - keep it open and don't use it for 24 months.....unless you pay the balance off in full.
EACH AND EVERY MONTH

Answer 5

Consult a professional agency to help you get out of this hole. They are used to negotiating with creditors, and it won't cost you a dime. I haven't used one, so I don't want to recommend one over another, but I've never heard of anyone who was unhappy with the outcome.

Another option is to file for bankruptcy. (The laws have not really changed that much. It's still easy to do.) It will stain your credit for 7 years, but if you are paying off 9 - 19 grand in debt, you won't have any money for the next seven years anyway, and still won't be able to get a loan.