How to Set Up a Debt Payment Plan for Items on Credit Report

Reader Question: How do I set up a payment plan to pay off the things on my credit report?

First off, I would like to congratulate you for being proactive about fixing the situation. Debt reduction and repayment has many benefits, but only if you take the necessary steps to make it happen. A lot of people choose to ignore the problem. So it's refreshing to see people doing the right thing once in a while. Kudos!

In most cases, you would work with the company who is reporting / holding a particular account, and you would agree on some kind of debt payment plan. It needs to be something you can afford, obviously. And as long as the creditor is getting the money paid back in some form or fashion, they'll be happy with just about anything. From the creditor's point of view, it's better to get the money back in installments than not getting it back at all.

As an example, let's say I had a store credit card that I stopped making payments on (for whatever reason). After a few months, the store will probably turn my account over to a collection agency and write it off their own books. This is called a charge-off because the store is simply charging the bad debt off and taking the loss. They are also transferring the account to a collection company.

So now I will have two negative items appearing on my credit reports, just for this one account. The store's charge-off will show up on my report, and there will also be an entry labeled as "in collection" from the company that took over the account.

If I wanted to set up a debt payment plan in this type of scenario, I would contact the collection company and work toward some kind of agreement. In most cases, it's best to do this by mail or email (rather than on the phone). For one thing, this gives you a record of communications -- a paper trail, if you will. It also helps you avoid any kind of over-the-phone bullying or harassment.

There are also debt management companies that specialize in creating debt payment plans for people in your situation, if you'd rather not do it yourself. I know that Credit.com offers a free debt consultation you might want to look into. I don't know that much about it, aside from what it says on their website. Learn more here

Related Q&A Sessions:

• Should I pay off my debt in full or make payments?
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I hope that helps you out a little. Good luck with whatever you decide to do.