How To Negotiate Lower Interest Rates With Bad Credit

If you want to learn how to negotiate lower interest rates with bad credit, you need to be prepared and explore all your options. Bad things happen, and when they happen to your credit, it can affect your lifestyle, employment and future credit for years to come. However, negotiating a lower interest rate now can help your short-term financial situation and start you on the path to repairing your bad credit.

1. Be prepared. Have the history of your account handy and go over the information to determine how long you've been a customer and your payment history. When you're negotiating a lower interest rate, the customer service representative you talk to will have all your information in front of them. You want the same advantage so you can pinpoint positive account information. Additionally, decide what interest rate you want and what you're willing to settle for before contacting creditors.
2. Give it a little time if possible. Credit scores fluctuate constantly, and if you are in a position to pay your bills on time each month, consider waiting three to six months before negotiating. When companies see that you're recent history reflects responsibility towards your debt, they're more willing to work with you.
3. Use the direct route and ask. Many people with bad credit are afraid to just call and ask a creditor to lower the interest rate. They shouldn't be. It's your money and credit rating at stake, and the worst that can happen is they will deny the request. However, many companies are willing to work with you if you explain the situation. When speaking with a representative, focus on positive account facts, such as the length of your credit with them and on-time payments. This often works if your bad credit is due to associations with other creditors and not the company with whom you're currently negotiating.
4. Try a little persuasion. Unfortunately, just asking for a lower interest rate with bad credit doesn't always work. In these situations, you might consider telling the company that you're thinking about transferring the balance to another loan or credit card with a lower interest rate. This may work if your credit is bad but not terrible. However, if your payment history with them is poor, they may jump at the chance to be paid via balance transfers. Additionally, creditors have become wise to this tactic and may still deny the request, as they know that most people with bad credit aren't usually offered competitive interest rates.
5. Persuade a little more. If asking and using the balance transfer techniques don't work, consider telling the company that you're considering bankruptcy. It's not recommended to use this technique unless you're in dire straights. Lenders are in the business to get money, and if they believe that they won't see a dime due to a bankruptcy, they may become more willing to negotiate. When you broach the subject, project sincerity and avoid being confrontational.
6. Consider using a professional. Credit and debt counselors are in the business of negotiating with lenders, and if you've been unsuccessful at negotiating lower interest rates with bad credit, you might benefit from an outside service. Before utilizing a debt counselor, make sure you get all services and fees in writing and check the company's consumer history with the Better Business Bureau.

Resources:

Better Business Bureau: Choosing a Credit Counselor

Federal Trade Commission: Knee Deep in Debt, Consumer Information