You wake up one morning to notifications about problems processing your payment and it hits you. 

“OMG, I can’t pay my bills! What the heck am I going to do?”

Okay, maybe it’s not like that. Maybe it’s a growing credit card balance and a shrinking paycheck, a lost job, or a series of massive expenses that lead up to the ultimate freak-out moment. The details may differ in some way, the result is the same though. You’ve hit a new financial rock bottom. 

Episode 12 on Reaching Abundance: How to Negotiate with Creditors During Financial Distress

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Now you’re sitting there with your mind spinning. A million questions are running through your head around who to call, how to get money, what to say or do, and what to do first. 

How do I negotiate with credit card companies?

What do I say when I call my credit cards?

How do I talk to creditors?

What will happen to my account/ my credit?

Will they sue me?

How do I fix this?

Where will I find the extra money?

I know what you’re thinking because I was there too, and I remember it so vividly, I can recall the exact feelings of panic and stress, even to this day, even though it was nearly 6 years ago.

Situations like this are conducive to overwhelm because multiple steps are needed to even begin to make progress toward rectifying your finances. Yes, you’ll need to get creative about generating cash in order to have money to pay the bills, but first, you need to call your creditors. 

When You Need to Call Your Creditors

As soon as you notice there will be a hiccup with your payment and especially as soon as you see that you can’t make the minimum payment this month, you need to be on the phone with your credit providers. 

First, I suggest taking a few deep breaths and logging into your bank and credit accounts. If you use a program like Mint or YNAB (I highly suggest them!) to track & budget, I’d start there since that’s where you can see everything on a single screen without logging into multiple accounts. 

As you scour the most recent statements, account balances, and terms, try to identify what went wrong.

Was it simply not enough income?

Was it frivolous spending?

Is the cash there, available to make the payment, but some mistake prevented things from processing?

Have you been spending like you make 100K when you only really bring home 50K?

If you’ve recently had hours cut or lost your job, then the answer is obvious and you can move forward with making phone calls. 

Now, I get it, these days we prefer little-to-no contact, and you might be just hoping you can text, email, or use the bot chat that’s on their website, but trust me, this requires a little more of a personal touch, and you need to call. 

It’s best to pick up the phone and talk to a customer service rep before you’ve missed a payment and especially before the 30-day past due mark. Although it’s much easier to hide in our shame and fear, don’t wait and don’t be afraid or defensive.

Remember that the person on the other end of the call is a human too and is likely going to try to help you.

Why You Should Call Your Creditors

Although making a phone call to someone to explain why you can’t pay your bill might seem intimidating, this is one of those issues you should be proactive about and address head-on. Remember, these customer service reps deal with this every day and have heard it all. Someone somewhere has faced a similar hardship. 

If you don’t call, no one can help you. If you do call, the possibilities are endless. There are several things you can ask for that, if granted, might help you get through and beyond this situation. 

You can request to:

• Have the minimum payment waived or reduced
• Temporary lower or suspend minimum monthly payments
• Lower the interest rate
• Remove or suspend late fees
• Apply for a hardship or forbearance plan

You never know what options the creditor may have access to on their end, so be ready to listen as much, if not more than you’re prepared to talk. They may have internal deferment or forbearance programs for customers experiencing specific hardships. Creditors with which you have a long history of on-time payments might be even more willing to work with you just based on your loyal status. 

If you’re concerned about suffering a dip in your credit score, a negative mark on your credit report, or about a creditor being upset with you, acknowledge that fear and plan to call the creditors anyway. THIS is exactly why you’re proactively making the phone call – to prevent the situation from getting worse and scarring your flawless history.

Creditors WANT to hear from you before your account or your credit gets messed up. They want to retain you as a customer which means helping you find a resolution for your current issue and keeping your account in good standing. 

Listen to the whole episode on YouTube

How to Prepare for the Conversation

The caller (you) who’s most informed has a greater likelihood of success. It helps if you know your balance, the interest rate, any introductory or promotional terms and their expiration date, the minimum payment requirement, and your available credit or credit limit. When you call, have your account pulled up on the computer, your most recent statement in front of you, plus a note pad where you can record details discussed. 

Set aside at least 30 minutes per creditor you need to call, and separate your calls with time to step outside, eat, or whatever you have to do to “shake it off” in-between conversations. It’s okay to be stressed, feel foolish, or even hate this process, but it’s not okay to allow this to affect your ability to communicate clearly or to take out your anger on an unsuspecting call center employee. 

Be prepared to listen well, consider options, and negotiate. Remember, this is a two-way conversation, not a demand session or an opportunity for harassment from either direction. The credit card representative may ask you questions in order to get a better understanding of what level of assistance you might qualify for. 

How To Talk To Your Creditors

Now that you’ve concluded that a phone call is required and you understand that there’s potentially help available, you need to know what to say. 

You want to use the correct wording, use the right verbiage, and basically know what to say that will lead to the results you want.

But wait, what results do you want? 

The answer to this is completely up to you and also imperative to the conversation. 

• When you opened your accounts or your tracking app (Mint) or your budgeting app (YNAB), what conclusion did you make? 
• Is this a temporary issue for this month, or might you need multiple months of suspended payments? 
• Can you pay a reduced value this month or would a reduced interest rate be the solution?
• What is your plan to rectify your financial situation?

Pretend to be a detective and arrive at the answers to the above questions based on your credit report, your account statements, and your expected (and previous) income levels before calling your creditors. 

What To Expect When You Call Your Credit Card

Calling your creditors is no easy task. It’s going to require patience, lots of automated prompts, and your ability to repeat your story and your request to one gatekeeper after another until you reach a customer service representative who can actually help you. 

The last thing you want to do is layout your 10-minute saga to someone who doesn’t have the authority to make account adjustments.  So before launching into your full story, succinctly explain your reason for calling first, like this: 

(speak slowly and clearly)

“Hello, I’m calling today because I’m in a strenuous financial position and I’d like to request adjustments to the terms on my account. Are you able to make adjustments to the minimum required payment or the interest rate on my credit card account?”

If they say yes, then feel free to make your case by (briefly) explaining your story.

If they say no, then politely ask for a manager or a representative who has the authority to assist with financial hardship. 

What To Say When You Call Your Credit Card

When you successfully reach an account manager, you’ll need to summarize how you arrived in this situation, what will help you (what you’re asking them to adjust on your account), and how quickly you’ll be back on your financial feet. 

Be prepared to listen well, consider options, and negotiate. Remember, this is a two-way conversation, not a demand session or an opportunity for harassment from either direction. The credit card representative may ask you questions in order to get a better understanding of what level of assistance you might qualify for. 

Do your best not to get defensive. These questions are tough to answer, but the more realistic you are with yourself about the struggle you’re facing, the more clearly you can communicate the severity of your problem to the rep, which also makes it more likely that the arrangements you two make will actually help you. 

As an example, if you called me asking for a reduced interest rate and explained that you’ve lost your income, I’d proceed to ask you why you think a reduced rate will help. In my mind, the better solution may be a couple of month’s deferred payments plus a temporary account freeze so that no further interest can accrue while you’re in search of a new job. 

If you can’t pay the minimum payment this month, say so. Be firm, yet positive by saying something like this: 

“I cannot make the minimum payment this month but I do want to keep this account and pay my debt as soon as possible.

What can we do?”

Since you have no idea what kind of account options they have access to, it’s important to remain open to answering questions about your finances while remaining firm that you need help. Help facilitate a 2-way conversation by asking open-ended questions and listening as much as you speak. 

What Might Happen If You Call Your Credit Cards

I touched on this before, but you may get the run-around. Expect lots of No’s. Expect to be passed from rep to rep, put on hold, asked if you can call a different number, referred to debt management companies, and the like. Be polite, persistent, and patient. 

Determination is key. Don’t say “Okay, thanks, bye” after being told you first “No”. 

Of course, there is the possibility that you’ll wind-up talking with a grumpy or difficult creditor sometime during this process. (how many cards do you have to call?)

Remember, you don’t deserve to be belittled or harassed. Simply hang up and call back if you feel you’re being given unnecessary negativity, it’s likely someone else in the call center will answer your next call and be more helpful. 

When you prepare yourself mentally to receive pushback, you’ll be pleasantly impressed when you get a “Yes” or when you reach a helpful rep.

How Will Your Credit Score Be Affected

Even if you’re successful at requesting deferred or reduced minimum required payments, a lower interest rate, or fee removal, you need to be aware of other potential consequences as well.

Assistance may only be available if you agree to have your available credit limit lowered, your card frozen, or your account closed. This protects you from racking up even more debt and exaggerating the current problem. While you may not like these limiting circumstances, they are for your and the creditor’s protection. 

Creditors still have to report something to the credit bureaus, so there is a chance that your account negotiations may prompt a flag on your credit report. If you haven’t missed any payments and are being proactive about requesting help, a change in status should be avoidable. 

Be open with the credit card rep making the term adjustments and ask how and when your account status will be reported. Ask how to remain in good standing and what mistakes you’d have to make to mess this “deal” up. Do your best to learn what to do and what not to do – this is the best way to protect your score. 

In My Experience

Honestly, by the time I went from “This is bad but I can handle it.” to “Holy $#!+, we can’t pay the minimum payment!”, our cards’ credit limits were all totally maxed out, and our credit score had been on a downward trend anyway. That’s what happens when you’re using more than 50% of your available credit.

If this sounds similar to your current situation, don’t waste your time stressing about your credit score. It’s going to get worse before it gets better, and you’re along for the ride whether you like it or not.

Even back then, before my obsession with financial education, I knew that if I fixed things on the front end, my credit score would naturally adjust upward to reflect my good behavior.

Focus on creating behaviors and habits that fix your finances upfront by increasing your income, creating a budget and sticking to it, establishing an emergency fund, and following a debt-payoff strategy. 

As you pay off your debt, your available credit (the difference between your credit limits and how much you owe) will increase, your payment history will show consistent, and your credit score will naturally rise just like mine did, as a reflection of positive behavior. 

Our score was in the 530s when our journey began, but 3.5 years later, with $80,000 in debt paid off, our score was above 750. This was without any tricks, gaming the system, credit counseling, or any other ploys. 

As a side-note, I want to highlight a few things – we never made over 100K in income and it took a full 3.5 years from rock-bottom to debt-free, with lots of bumps and missteps along the way. We were committed for the long-haul though because I NEVER want to feel that level of fear and panic again in my life. Do these same things, referencing the linked blog posts as guidance, and your numbers will improve as well. 

Who Should You Call First?

You may be calling everyone you owe or you may only be calling a few accounts, this is dependent upon your financial situation. 

If you’ve been laid off or experienced a medical emergency, for example, you may not be able to pay any of your bills. In this case, I’d advise you to notify everyone, including your utilities, landlord or mortgage company, and all loans and credit cards. 

If, on the other hand, you’re just in a bind but still have foreseeable income, you’re going to need to prioritize. The income you do have has to cover the necessities first. This includes the roof over your head, your basic utilities, and groceries. Afterward, with any additional money, you’ll cover transportation, cell phone bills, daycare, and other basic NEEDS. 

From here I’d start to identify secured versus unsecured credit lines and evaluate my options. I chose not to call our mortgage company and our car loan, because I planned on making those payments, in addition to the utility bills, no matter what. I decided to call every single unsecured line of credit (for us that was all credit cards) because that’s where I expected the most wiggle room to exist. 

Secured loans like mortgages and car notes, 

plus basic utilities come first, 

then unsecured debts like credit cards. 

Medical bills are absolutely last on the list.

Take your list of creditors and look at the minimum payments due. Does any certain one or maybe a group of them stand out? For me, I drew a line and called any credit card who’s minimum payment was over $100. Our total minimum payments due on all our credit cards totaled over $800 per month (It’s no wonder we were broke!) and I quickly saw that if just half of them gave me some grace, we could squeak by. 

I’d choose 2-3 of your accounts that have either the highest minimum payment, an inconvenient payment due date, or the highest interest rate, and line those up as my first few phone calls. See what progress you can make with those before choosing a second group. 

Work in batches and evaluate your “script” and your progress after each call, adjusting as necessary. 

What’s Next

With each successful phone call, you’ve agreed to new terms, a lower or suspended minimum payment or interest rate, and you should have notes reflecting your new account terms on your note pad. 

It’s imperative you follow through – make that new agreed-upon minimum payment on or before the due date, communicate with your creditors, and stay organized. Keep your list of bills with due dates and amounts handy and you can even try one of my favorite tools, the cashflow calendar. 

This is your opportunity to dive into financial education, learn from your mistakes, and prepare your mind and finances so that this never happens again. Take this chance to build a working budget, establish savings, and create valuable financial habits so that no future surprise ever threatens to take control of your life. 

Over the next few days and months, you’ll need to revisit your budget and continuously focus on ways to increase your income and simultaneously decrease your expenses. Keep in mind that any sacrifices you decide to make are temporary and for the specific purpose of flipping your finances. 

You can do this! I believe in you, mama!