The debt relief trick I learned when I stopped paying my credit card bill

If you’ve ever dealt with an account in collections, you know how miserable an experience it can be. Debt collection agencies really go after you.

But what if I told you it was possible to pay them half of what they ask and have the account removed from your credit reports?

I haven’t always been a credit card expert. Like most people, I’ve made mistakes and had to learn lessons the hard way.

I did truly terrible things to my credit when I was younger. When debt on my credit card was sold to collections, I didn’t really know what it meant or what to do. Luckily, the solution was so easy that it almost felt like a trick.

And I’m going to tell you about this trick. Here’s how I ended up with a debt in collections and got rid of it, as well as cleaned up my credit report.

How I ended up with a debt in collections

I was 22 when a credit card preapproval letter came in the mail. Still a new immigrant, I knew little of how credit cards worked. I don’t even remember what card it was — one of those for people with bad or limited credit history. My income was meager for Los Angeles, where I lived at the time. I struggled paying for essentials, so I thought another credit card might make things easier. This was my second card — I was close to maxing out the first and mainly just made minimum payments.

I applied for the new card and was approved with a $300 credit limit. I didn’t end up using it on essentials. Rather, I was so tired of counting pennies, I think I bought something nice for my little studio apartment. My budgeting skills were lacking too. I told myself it would be fine. I’d pay off the balance.

I didn’t, of course. I was living off instant ramen and tea indefinitely borrowed from my old place of work. I could barely pay my rent. It didn’t take long before I maxed out the card and gave up on paying credit card bills entirely. I didn’t know what to expect, which was scary. But the bank didn’t call demanding me to pay, and no police came knocking on my door. No one took me to a debtor’s prison. So I continued not paying. My balance ballooned to over $1,000, thanks to late fees and interest.

The issuer eventually charged off my account, selling the debt to collections. I received a validation letter requesting that I pay. This prompted me to finally research what I had gotten myself into (better late than never, right?) and how to get out of it.

How I got rid of the debt — and collections

I decided to face the problem head-on. From reading up on collections, I knew the agency might offer me a payment plan. The thought of another string of recurring payments to add to my life was terrifying. Instead, I decided to save up some money to pay off the collection account in full.

It took me a while to come up even with half of what I owed. I finally got in touch with the collectors, calling the number from the letter they sent me. I relied on a couple of things I’d read:

• Collectors buy debt for pennies on the dollar.
• Paying collections doesn’t remove them from your credit report. The collector, however, might agree to remove the report from your credit report if asked.

With that in mind, I said something along the lines of: “I don’t want a payment plan. I can pay you half the total amount right now if you remove the collection account from my credit report.”

I expected negotiations would follow, perhaps even refusal. Instead, the agency representative quickly agreed. It was a short conversation that got me what I wanted. My debt was paid off. My credit report soon looked just a little cleaner too. I was shocked at how simple it all was.

My financial struggles lasted for a few years after that, and it took me six years to rebuild my credit back to good. I did learn a valuable lesson. And I don’t mean the one about maxing out your card, which I don’t recommend. The lesson was, don’t be scared to ask. Advocate for yourself. When you’re dealing with debt, find out about your options and ask for what you need. You might be surprised about what’s available to you.

Paying down debt before it goes to collections

The best way to deal with collections is to prevent them from happening in the first place. Credit card debt can be overwhelming — but the sooner you rein it in, the fewer issues you’ll have down the road.

Rework your budget

High credit card balances can put you in a state of mental paralysis. It can be much more appealing to bury your head in the sand than face the mounting debt. Sadly, doing so won’t make it go away.

Take the time to look at your budget and see if there’s anything you can adjust to put more money toward your credit card bills. If you’ve cut all but the essential expenses but still can’t make room for credit card payments, consider picking up extra work to earn more income — if you can.

Consider debt repayment tools

If your credit is good despite your credit card debt, you’re in luck. Repayment tools such as balance transfer cards and debt consolidation loans may be an option for you.

A balance transfer card allows you to move balances from other cards. You then get an intro period during which you don’t pay any interest on the transferred balances. Some of the best balance transfer cards come with an intro period as long as 21 months.

A debt consolidation loan allows you to combine multiple credit card balances under a loan. This makes for an easier repayment process since you’ll only have one fixed, monthly payment to worry about. Just make sure the interest rate on the loan is lower than the rates on your cards.

Pick a strategy

Having a strategy will help you feel in control and keep you accountable. It may be as simple as setting up autopay to allocate a certain amount to go toward your debt automatically once a month.

Or, if you have multiple credit card balances, choose which ones you’ll focus on first. For example, the debt avalanche method prioritizes debt with the highest interest rates. The goal in this case is to save money on interest.

Alternatively, you can try the snowball method and pay off your balances from smallest to largest. This can help you stay motivated as you watch the number of balances decrease more quickly.

With both methods, you still have to ensure you’re making at least minimum payments on all your debts.

A final word of caution about collections

My experience isn’t universal. There’s nothing easy about dealing with credit card or any other kind of debt. Having an account collections is still extremely stressful. The longer you go ignoring it, the more you wonder whether there’ll be legal action. And the damage from unpaid bills plagues your credit for years. I know — I’ve been there. Plus, negotiations with collectors might not always go your way.

With that, keep the following in mind when it comes to collections:

• Debt collection scams abound. Make sure you recognize the debt you’re asked to pay and the collection agency is legitimate. They should send you a validation letter first. If they don’t, and you’re bombarded with threatening calls or emails, you might be dealing with a scammer.
• Collectors might always say no. Of course, they might agree to settle on your terms, but they can also push back. For that reason, don’t let delinquent debt go to collections hoping it will allow you to pay less.
• You need to get everything in writing. In my case, I didn’t ask for any documentation verifying the settled amount or the agreement for collections removal. I was simply lucky the agency decided to honor my request. Don’t be like me. An agreement is only official when put on paper.
• Collection accounts are separate from your original delinquencies. Even if you’re successful at removing a collections account from your credit report, the original delinquency reported by the creditor will still be on your record. It will remain on your reports for seven years from the date of the original delinquency.
• Collectors must follow the rules. They can’t lie to you, harass you or threaten you. The Federal Trade Commission has a convenient page with answers to frequently asked questions on the matter. Read up to ensure you’re treated fairly.

The bottom line

It can be intense to have an account in collections. You might feel tempted to ignore this debt, but it’s best to come up with a plan and face it – ideally before you ever have to deal with a collection agency. Whether you can pay it off in one big swoop or need a payment plan, make sure to negotiate first. And don’t forget to ask the collector to remove the account from your credit report. There’s no guarantee they will say yes — but they just might.