I have a good credit score but high balances on my 3 cards. I have paid on time except for one <30 days late payment. From this month on, I will not be able to pay the minimum payments. I also am worried about how I will ever pay off these huge balances. I've been making up a monthly deficit for the past ~2-3 years using my cards (hence the high balances). The deficit was due to skyrocketing insurance costs and my husband was laid off for most of 2009. He is now working and I've recently streamlined my budget. My monthly deficit is now about the size of one of the minimum card payments. In the past few months all 3 of my cards have slashed my limits to just above my balance and hiked the interest rates. This has increased the minimum payments. The late payment caused another rate increase that took effect last month. I need lower interest rates to make a dent in my debt, and at least one lower monthly payment to stay in the black. I know people who stopped making payments, and after a few months they were offered drastically reduced interest and payments with frozen credit. Will credit card companies negotiate this way with people who are current on their payments? Would a credit counseling service help me? Would either of these approaches negatively affect my score? The only reason I'm not currently in default is because I've been creative about a cash flow that wasn't really valid.
I was in your position not long ago... All those cards will take reduced settlement amounts. I made the mistake of hiring one of those companies to negotiate on my behalf. It took me about six months to realize the error and fire them (and get all my money back). Don't hire them. Basically, I stopped paying on all my accounts and then started negotiating with the companies as I was able to save up money. If I had it to do over again, I would stop paying on a couple of cards and then negotiate with them, keeping current on the others if possible. That way, you won't have multiple tradeline on your credit report of no payments for 6 months or more. Also, it will hold off the big accounts from suing you until you are ready to stop paying them and negotiate a full settlement. I went cold turkey, not paying anybody and only settling. The big accounts charged off quickly and got aggressive with attorneys way before I was in a position to settle them. It's best to negotiate with the lender directly than with their attorneys who are really pushing for a higher amount to pay themselves. Also, is won't be as bad to have a reported settlement on your account as it will be to have a paid charge off.
