Personal Finance Advice

I recently had a conversation with a friend who was having problems getting his tuition assistance paperwork to the correct office of the university he’s attending.  The mix-up wasn’t his fault, but he kept getting letters from the school asking him for payment and warning of possible late fees.  He knew that once the correct documentation was forwarded to the school then everything would be resolved, but until then he was steadfastly ignoring the notices.

“I just didn’t want to call the school until I knew what was going on with the paperwork,” he said. 

Bad idea.  Whenever you owe someone money, one of the worst things you can do is to avoid keeping them abreast of the repayment situation.  If you don’t make an effort to contact your creditors (or if you make a concerted effort to avoid talking to your creditors), then they may just make the assumption that you don’t ever intend on paying the debt.  What do creditors do when they don’t think they’re going to get money out of you through polite methods? They get aggressive.

It’s a much better idea to contact your creditors, even if you don’t really have a resolution to the issue.  Let’s say your check actually got lost in the mail, and you’re having problems with getting your bank to cancel the check so you can write another one to the creditor.  The whole situation turns into a big debacle and you’re having a hard time getting the bank to resolve everything.  Instead of keeping your creditor out of the loop, you should call up and let them know what is going on.  Even if you have nothing to say other than, “I got your notice in the mail today, but I’m still working with my bank to work this all out,” it’s far preferable to ignoring everything and just waiting for a resolution before you call your creditor.

Why? For a few reasons, really:

1.  Creditors can raise your interest rate in the blink of an eye if they want to (and if it’s permissible through the original terms and conditions).

2.  Creditors can send your account to collections.

3.  Your credit score can drop if the creditor reports the delinquent payment.

Are creditors actually so benevolent that they will delay taking negative action if you keep them in the loop of what is going on? Yes, some actually are.  Instead of hiding from your creditors, stay in constant contact and let them know the status of the payment.  You might save yourself some late fees (and grief) by doing so.