Q: I recently lost my job. Although I have some money saved, I’ve got quite a few outstanding debts. I have an excellent credit rating, and I don’t want this setback to change that. If I don’t find work soon, how do I handle my creditors?
-R. Webb, Washington, D.C.
A: Honesty remains the best policy. Instead of avoiding them or making excuses when they call, tell them you’ve lost your job. Believe it or not, creditors are more eager to work with those who admit they are in debt and looking for help.
According to the Institute of Consumer Financial Education, the moment you become aware that your income will be reduced, you should begin to develop a plan to contact your creditors. First contact them by phone (most of them have 800 numbers). Then follow up with a letter referencing your phone conversation.
Keep an open line of communication, updating them on the progress you’ve made toward reducing your debt. Contacting them first shows that you care about your financial obligations. Most important, don’t just tell them what they want to hear and get them off the phone. Give them an estimate of what you feel you can honestly handle. Don’t be embarrassed by small payments. It all goes to reducing your debt. Remember one of your goals is to get out of debt blemish-free, so don’t be rude or aggressive. How you handle your creditors could make all the difference in how they report your standing to credit reporting firms.