I Just Got Called by a Creditor – What Should I Do?

Money
anxious over money
Share on Pinterest Share on LinkedInShare on Flip it

When you receive a call from a creditor, it can be a daunting experience, filled with anxiety and uncertainty. And maybe a little self-doubt.

However, handling these calls effectively can alleviate stress and lead to a manageable resolution. This isn't the end of the world. These things happen, and there are ways to handle it appropriately.

Here's a comprehensive guide on what steps to take when you get that call.

What You Should Do If You're Called By A Creditor

Understanding Your Situation

1. Stay Calm and Collected

First and foremost, stay calm. It's essential to approach the situation rationally. Remember, you have rights and options, even when dealing with debt.

2. Identify the Creditor

Confirm who is calling. Ask for the creditor's name, the agent's name, and contact details. Confirm if they are representing the original creditor or if they are a collection agency.

3. Request Validation of Debt

Under the Fair Debt Collection Practices Act (FDCPA), you can request a debt validation. This means the creditor must prove that the debt is yours and the amount is accurate.

Knowing Your Rights

1. Understand the FDCPA

Familiarize yourself with your rights under the FDCPA. Creditors are not allowed to harass, oppress, or abuse you or anyone else they contact. They cannot lie about the debt, falsely claim to be an attorney, threaten arrest, or do anything considered unfair when collecting a debt.

2. Determine the Statute of Limitations

Debts have a statute of limitations, varying by state and type of debt. If a debt is old, it might be “time-barred,” meaning the creditor can no longer sue you. However, acknowledging the debt or making a payment can restart this clock.

Responding to the Call

1. Don’t Admit to the Debt Immediately

Avoid acknowledging the debt or making promises to pay during the initial call. Your acknowledgment can be used as an admission of obligation, which can box you into a corner if you're not careful. 

2. Keep Conversations Brief and Professional

Limit the discussion to obtaining information about the debt. Avoid sharing too much personal or financial information.

3. Record Keeping

Document every interaction, including the date, time, the person you spoke with, and the conversation details. This record can be crucial in any dispute.

Post-Call Actions

1. Analyze Your Financial Situation

Assess your financial status. Determine if you can afford to pay the debt in whole or through a payment plan.

2. Consider Debt Verification

If you're unsure about the legitimacy of the debt, send a debt verification letter within 30 days of the initial contact. The creditor must then provide evidence of the debt.

3. Explore Repayment or Settlement Options

If the debt is valid and you can afford to pay, consider negotiating a repayment plan or a settlement for less than the full amount. Ensure any agreement is in writing.

4. Consult a Professional

If you're overwhelmed or unsure about the debt's validity, seek advice from a financial counselor or attorney specializing in consumer debt.

Dealing With Disputes

1. Dispute Inaccurate Debts

If the debt isn't yours, is inaccurate, or is outside the statute of limitations, you can file a dispute. Send a dispute letter to the creditor and credit bureaus.

2. Know the Impact on Credit Score

Understand that unpaid debts can significantly impact your credit score. Addressing debts promptly can help mitigate this.

3. Legal Considerations

If a creditor violates your rights, you can take legal action. Document any violations as evidence.

Preventative Measures

1. Monitor Your Credit Report

Regularly check your credit report for inaccuracies or unrecognized debts.

2. Stay Financially Informed

Educate yourself about credit, debt management, and financial planning to avoid future debt issues.

3. Establish an Emergency Fund

Building an emergency fund can help you avoid debt due to unforeseen expenses.

Getting a call from a creditor doesn't have to be a nightmare. Understanding your rights, remaining calm, and taking informed actions can help you navigate the situation effectively. Remember, being proactive about debt management is crucial in maintaining financial stability and peace of mind.

And, Stay Out of More Debt

Staying out of debt requires financial discipline, responsible decision-making, and a proactive approach to managing your finances. Here are some key strategies to help you avoid accumulating debt:

  1. Create a Budget: Establish a realistic monthly budget outlining your income and expenses. Be sure to categorize your expenses, including fixed costs like rent or mortgage payments, utilities, and groceries, as well as discretionary spending on entertainment and dining out. Stick to your budget to ensure you're not spending more than you earn. If you're not into budgeting, try the Pay Yourself First method.
  2. Emergency Fund: Build and maintain an emergency fund to cover unexpected expenses, such as medical bills or car repairs. Having a financial cushion can prevent you from relying on credit cards or loans in times of crisis.
  3. Live Within Your Means: Avoid overspending on luxury items or non-essential purchases. Prioritize your needs over wants and be mindful of your financial limits. Consider adopting a minimalist lifestyle to reduce unnecessary expenses.
  4. Save and Invest: Cultivate a habit of saving and investing for your future. Allocate a portion of your income to savings accounts, retirement funds, and other investment vehicles to help your money grow over time. Compound interest can be your ally in building wealth and staying debt-free.
  5. Use Credit Wisely: If you use credit cards, pay off your balances in full each month to avoid interest charges. Use credit cards for convenience and to build a positive credit history, not as a means to finance your lifestyle.
  6. Set Financial Goals: Establish clear financial goals, both short-term and long-term, and create a plan to achieve them. This can help you focus on your financial priorities and resist unnecessary spending.
  7. Seek Financial Education: Continuously educate yourself about personal finance, budgeting, and investment strategies. The more you understand managing your money, the better you'll be equipped to make informed financial decisions.
  8. Avoid Impulse Purchases: Before making significant purchases, take some time to research and compare prices. Avoid impulsive buying decisions, especially for big-ticket items, as they can lead to regret and debt.
  9. Regularly Review Your Finances: Review your financial situation to ensure you're on track to meet your goals and that your spending aligns with your budget. Adjust your financial plan as needed to adapt to changing circumstances.

By following these principles and maintaining a disciplined approach to your finances, you can significantly reduce the risk of accumulating debt and enjoy greater financial security and peace of mind.