The phone rings. You don’t pick it up, because you know that it’s going to be another debt collector. You’ve fallen behind – the mortgage, rent, credit cards. It doesn’t matter, you’re still under water for a lot of money and are looking for a way out.

The time to remedy this is before it reaches a collections agency. There are some very basic things you can do to keep your credit in good standing.

First and foremost, maintain a channel of communication. Contact your creditors (even the collections agencies) proactively and talk to them. Explain what’s going on in your life; the common perception that they’re heartless sharks isn’t close to reality. They want to get their money, yes. But they’re worried that you’ll vanish down a rabbit hole leaving them with an uncollectable debt as well.

Before you make that call, find out if your debt has been sent to collections or is still with the creditor. Call them and tell them you’re willing to work with them to pay what you owe. This can prevent your debt from being sold to a collection agency, and possibly prevent the “charge off”.

Third – prioritize your payments. You want to make the biggest boost in your cash flow that you can; that means paying off the highest interest cards first while keeping up with the others. Your budget should also include saving for a vacation, and other entertainment expenses; people who try to get their way out of debt trouble by living through a personal austerity program rarely make it all the way through before something ’snaps’ and they splurge on something, digging themselves back into the hole.

Fourth – talk to your creditors. Call them if you’re going to be late with a bill. Tell them about what’s going on, and demonstrate that you do consider your debts important. Most creditors live in fear of a person becoming noncommunicative and bailing out on the debt or filing bankruptcy. Most will be quite happy to extend a payment deadline by a week or two to help you out.

If you are dealing with a collection agency, have a copy of your credit report handy. Try to get the final disposition of the debt changed to “settled for less than the total outstanding balance” rather than “did not pay as agreed”. Even better, if you can work out a livable agreement, and pay it off, make sure to get your credit report again and get your creditors to report it as settled.

To be fair, if you have more than 1-2 creditors, or a lot of bills in collections, it’s important to get professional help. You can talk to your bank about getting a consolidation loan, or talk to a consumer debt counselor about a debt settlement program for more assistance on this. If push comes to shove or if you wait too long, you may have to file for bankruptcy, which will entail a ten year disaster for your credit.

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