Welcome to our website credit and debt managementr.

New offers options to American consumers who need an effective debt reduction plan. We have settled over 150 million dollars worth of unsecured, credit card debt while saving clients thousands of dollars. AmeriGuard believes it is important to make an informed decision especially when it affects your financial health. Understanding your options can be overwhelming; that’s why we offer experienced, knowledgeable guidance along the way. provides the information you need to participate in creating a better future..

Wednesday, July 31, 2002

How to Get Rid of Debt Without Paying

Numerous unofficial advertisements and infomercials promise to help you pay off your debts with no money out of your pocket and without having to repay the funds. They often promise government grants or "free money." The truth is the government is not going to hand you free money just because you need it and only a limited number of people qualify for grants. No government grants exist specifically for paying off personal debts. Government grants are generally offered for objectives like education, health care, job training and nutritional assistance, and they are gifts of financial assistance to individuals or organizations for government-authorized purposes, not for personal debt assistance.



    Complete the prescreening process to find any benefit or assistance programs for which you may be eligible. The official benefits website of the U.S. government is Benefits.gov, and it provides a list of benefits available and information about applying for assistance programs. Use the search tools to find potential benefits that will help you get rid of debt and bills incurred through medical costs, school expenses or other personal debts.


    Fill out the confidential eligibility questionnaire found on the government benefits website. Your responses will produce a list of benefits customized to your needs within all assistance categories. You can also search through government benefit and assistance programs listed by state, federal agency or a specific category, such as "veterans" or "teachers."


    Check the official government grants website to find grants for which you may qualify. The benefits and assistance programs offered through the government are not the same as government grants. The official government grants site is Grants.gov, and it holds information on more than 1,000 grant programs. The government provides access to roughly $500 billion in annual grant awards.


    Determine your qualifications for specific grant categories. You may have to prove you have a severe economic hardship or disability or you may have to be willing to participate in a job program to receive grant money. For example, teachers may be eligible for grant money to pay off education debt by agreeing to work their first couple of years in an economically-disadvantaged school.


    Apply for grants that suit your particular needs. If you are trying to start a small business, returning to college or obtaining your teaching credential, there are likely to be grants available to help you achieve your goals. The general idea behind government grants is to provide assistance to individuals and businesses for education or other endeavors that will benefit communities by providing funds that are not a loan and never have to be repaid. They put individuals and businesses in a position to get rid of debt without paying extra money on yet another loan.

How a Bounced Check Affects Your Credit Report

How a Bounced Check Affects Your Credit Report

Sometimes mistakes happen and you spend more money than you have deposited in your account. When you do not have sufficient funds to cover the amount of a check, it is referred to as a bounced check. Some banks will return the check without paying the amount while others will cover the amount of the check but charge a non-sufficient funds transaction fee. While this type of mistake can be costly, it does not directly impact your credit score as long as the debt is reconciled within a reasonable time frame, which is generally about 90 days.

Collection Agencies

    If a check bounces and you do not promptly pay, the outstanding balance may be turned over to a collection agency. The collection agency will attempt to collect the funds and reconcile the account. However, if the collection agency is unable to collect the money, it will report the amount to credit bureaus and it will show up as a negative account on your credit report. Therefore, it is best to ensure that all bounced checks are quickly paid in full to avoid collection agencies.

Consumer Information Agencies

    In some instances, a bounced check will be reported to consumer information agencies, which track consumer credit and spending history but do not supply credit scores like credit reporting agencies. These agencies often provide information about your credit and payment history to loan companies, car dealers, vehicle finance companies, utility companies and insurance agencies. Presenting a history of bouncing checks can increase the interest rate on loans or down payments required of you.

Legal Penalties

    Many states have legal penalties associated with bounced checks, whether civil or criminal. While they won't show up on your credit report, a criminal penalty will show up on your criminal history report and can be very costly. In a civil penalty, the person writing the bad check can be forced to repay the amount of the check plus damages, which is often a substantial amount of additional money. In criminal cases, the individual writing a bad check can be prosecuted or arrested if it can be shown that the check was intentionally fraudulent. The laws for both criminal and civil legal issues vary by state and can be reviewed through the National Check Fraud Center. In both instances, court and attorney fees may also be assessed to the overall payment.

Check Diversion Companies

    A check diversion company is a private, for-profit company that collects funds for bad checks. According to the National Consumer Law Center, these companies are known for charging excessive collection fees, making false implications and failing to give consumers the proper amount of time to pay or challenge the debt. When dealing with such companies, understand your rights under the Fair Debt Collection Practices Act, which was passed in 2006, particularly if the company threatens you with severe penalties for not paying the debt. However, if the debt is legitimate and the price is accurate, it is best to reconcile the amount before it is reported to a credit bureau.

Avoiding a Bounced Check

    One of the best ways to avoid bouncing a check is to regularly balance your checkbook. This is particularly important in the age of debit cards and electronic transactions where it is easy to lose sight of transactions if not closely monitored. Another option is to sign up for overdraft protection, which can link your checking and savings account together in the event of an overdraft. Some overdraft protection plans also allow your account to remain in a negative balance until a deposit can be made, but substantial fees are often associated with each transaction into the negative.

Tuesday, July 30, 2002

How Debt Management Provides Advice

The way a debt-management or credit-counseling company provides advice to its clients is an indication of whether its services are effective. Among other things, people who are seeking debt-management advice should note whether counselors offer a personalized financial plan to their clients, before they decide to work with a company.

Personalized Financial Plan

    Credit and debt-counseling services should offer debt-management programs as an option amid other financial assistance. According to the U.S. Federal Trade Commission, counselors should help clients create a customized financial plan that addresses budget and spending problems to prevent future financial difficulties. The debt-management programs that counseling services offer usually require clients to make monthly payments to the counseling services. These are then distributed to the clients' creditors. The FTC warns consumers against signing on to such programs if a counselor doesn't take the time to thoroughly look over their financial situation. Counselors wouldn't know if clients could complete a debt-management program without first sizing up their debts, income and ability to make payments into the program.

Debt-Management Programs

    Debt-management programs should be balanced. They should focus on helping consumers pay off creditors and leave enough money in people's budgets to pay for necessities and some entertainment. Otherwise, the program will be too stringent and participants won't complete it. Collection calls from creditors often stop after they find out a debtor plans to repay them through a debt-management service because creditors are usually satisfied to know a debtor is making an effort to repay them.

Credit Counselors

    Credit counselors not only set up a repayment schedule for debt-management programs, they negotiate with creditors to reduce what clients owe. Their goal usually is to get creditors to waive late fees and reduce interest rates. Creditors benefit from agreeing to such deals because they often recover more of what a debtor owes through credit-counseling agencies than through debt-collection companies. Collection companies can keep as much as half of the money they recover for creditors. Debt-management plans can take several years to complete, so creditors have a better chance of recouping more of what is owed on customers' accounts through counseling agencies.


    The FTC has found that some companies that offer debt-management plans have defrauded their clients. The FTC recommends that consumers who participate in such plans check their bills to ensure they're being paid as agreed. Still, a 2004 Bankrate article, titled "Debt Help That Isn't," says there are reputable

    nonprofit, credit-counseling agencies that charge low fees for debt-management programs and other financial services. Those agencies include members of the

    Association of Independent Consumer Credit Counseling Agencies and the National Foundation of Credit Counseling. According to Bankrate, some of the member agencies have charged monthly service fees as low as $12 to clients who enroll in debt-management plans.

Credit & Debt Settlement Help

Lenders sometimes offer settlements when you fall behind, or you can try to negotiate with them if you know you cannot pay. Debt settlement companies offer paid negotiation help if you are uncomfortable dealing with with creditors yourself. Mike Schiano of the Military Money website warns that, while a good negotiator can reduce your debt significantly, your credit rating often takes a beating.


    Credit and debt settlement means reaching agreements with your creditors to pay off your accounts at less than the original owed amounts. Schiano explains that debt settlement companies may help you get up to a 50 percent reduction on your balances. Lenders are under no obligation to accept any offers, or even to speak to a negotiator, but some agree because they worry that they might not get any money at all if you just stop paying or declare bankruptcy. The whole settlement process takes up to two years, according to MSN Money writer Liz Pulliam Weston.


    Debt settlement companies charge fees to help you. Weston explains that many expect up to 18 percent of your debt's face value, while others assess their charge based on the settlement amounts. The Internal Revenue Service views the forgiven amounts as taxable income, which increases your tax bill.


    Debt settlement may save you money and help you avoid bankruptcy, but Weston warns that it takes a toll on your credit score and opens you up to fraud. Lenders often will not negotiate unless your payments are behind, so settlement firms advise you to stop paying. Delinquencies are very bad for your credit score, since payments make up more than one-third of your number. Your creditors might decide to sue you rather than settle. Some settlement companies are run by scammers who demand money up front, then perform no negotiations.


    Credit counseling is a service that assesses your financial situation and recommends various solutions, including structured repayment plans with negotiated terms. Counselors often get your interest reduced and convince creditors to "re-age" your payment history and waive late fees, which helps your credit reports as long as you make plan payments as agreed, according to the Federal Trade Commission. Chapter 13 bankruptcy frees you from much of your debt if you need a more affordable repayment schedule. The court allows you to keep most assets and sets up your payment plan. Bankruptcy is hard on your credit score and stays in credit bureau records for a decade.

The Right to a Credit Report

You have the right to review your personal credit report free each year. Regrettably, some consumers never review the contents of their credit history. Failing to monitor credit activity can result in surprise rejections when applying for loans and credit cards.

What is a Credit Report

    Credit reports contain a complete listing of all your credit accounts -- past and present. Creditors and lenders pull individual reports before issuing loan approvals and use this information to determine a person's credit pattern. While lenders and creditors use credit reports to assess creditworthy, each consumer has the right to check his own report to learn his standing. Knowing what lenders and creditors are reporting can help you get financing with few hassles.

Annual Credit Report

    Watch commercials or search online for free reports. Several companies claim to offer no-strings, free credit reports. However, these ads are misleading because acquiring access to your free reports typically involve enrolling in a credit service -- credit repair, credit monitoring or credit counseling. According to the Federal Reserve Board, Annual Credit Report is the only place to receive free reports from each of the three reporting bureaus. Everyone's entitled to free reports on an annual basis.

Acquiring Reports

    Three ways are available to acquire your free report from Annual Credit Report. A quick and convenient way involves visiting the agency's official website and completing the credit report request form (annualcreditreport.com). Another option is to write for free reports each year: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. A third option is to contact Annual Credit Report by telephone and submit a request at 877-322-8228.

Other Methods

    Being able to receive one free report from each of the bureaus a year doesn't mean you can only check your report once a year. Every consumer can visit the official websites for Experian, TransUnion and Equifax and purchase a personal credit report anytime. Checking reports more than once a year is an effective way to monitor for identity theft and resolve reporting errors quickly. And if denied for credit, every consumer has the right to check his report for free within 30 days to see why a creditor or lender rejected the application.

Monday, July 29, 2002

Can My Wages Be Garnished in Pennsylvania?

When a person won't pay a debt, the creditor may attempt to extract payment by force. This can be accomplished in a number of ways, with one of the most effective being the garnishment of a person's wages. Most laws related to the garnishment of wages are made at the state level. In Pennsylvania, a creditor can only garnish for certain kinds of debts.

Debt Collection

    The first step in garnishing a debt in Pennsylvania is to have the debt recognized by a civil court. This can only be done after a civil suit has been brought by the creditor seeking payment of the debt. A judge will hear the suit and if he rules in favor of the creditor, then the creditor will be awarded damages in the amount of the debt, payable by the debtor defendant.


    If the debtor refuses to pay the money that the judge has ordered him to pay, then the debtor may have actions taken against him that will compel payment. A creditor will often petition a judge to order a garnishment of the debtor's paycheck -- a portion of the paycheck extracted each pay period and given to the creditor until the debt has been paid off.

Private Debts

    In Pennsylvania, garnishment can only be used as a means of collecting on certain kinds of debts incurred from private creditors -- meaning creditors not representing a government agency. These include debts stemming from a settlement of a divorce case; payments that are to be made for the support of a child or spouse; restitution for criminal matters; and back rent owed on a residence. Also, a Pennyslvania court may allow an out-of-state creditor to garnish wages for other reasons if an out-of-state judge ordered the garnishment.

Debts to the Government

    In addition, a person can have his wages garnished by the state if he owes the state child support payments, criminal restitution, student loans or certain types of taxes. The federal government can garnish a Pennsylvania resident's wages, too. For example, the Internal Revenue Service can garnish wages for failure to pay federal income taxes.

How Does Debt Relief Without Bankruptcy Affect Your Credit Rating?

    When you feel you are in debt beyond help, what do you do? Where do you go? It would seem that at such a time, all doors are closed and you have only two options: debt relief and/or bankruptcy. Both can have massive impacts on your credit score, but at least this could be a beginning of the long journey back to a debt-free status and a positive credit score. The first option, debt relief, offers a better way out.

How does it work?

    You need the assistance of a very reliable and reputable debt relief organization, and you need to enroll in its or other recommended debt management counseling classes. After all, debt relief is the treatment of a "disease," and if the disease is not cured from the roots, any treatment would be useless. The organization would enter negotiations with the lenders on behalf of the debtor and work out either a small per-month installment toward the complete liquidation of the loan or agree to accept one or two large installments as debt settlement.

How does it affect your credit score?

    Debt consolidation and debt relief do affect the credit score, but this is in much less a measure than bankruptcy. Bankruptcy can put a black mark on your credit report that will stay there for all to see for 7 to 10 years. During this period you would be seen as a high-risk investment option and therefore would attract very high interest in any approved loans, if any. Debt relief would give the remark as "settled for less than full" or some similar phrase, which initially would not add too much to your score. However, you would be able to put this behind you within 6 to 12 months with the right strategy and very soon could be on your way to building a positive credit score.

How to Report to Credit When Living Abroad

How to Report to Credit When Living Abroad

With the advancements of modern technology, one may think that your credit report is something that may be easily maintained no matter where you live. This is unfortunately not the case. When living overseas, your U.S. credit report will not apply in most cases and if left inactive can cause credit woes when you return. Therefore, you will want to ensure that you are able to keep your credit rating manageable by following a few easy steps.


    Be sure to use your credit cards for small purchases at least once per month.
    Be sure to use your credit cards for small purchases at least once per month.

    Keep your credit cards active. Do not make the mistake of closing out your credit cards simply because you are going to be living outside of the country. Lack of activity can damage your credit score. Keeping your cards active by using them for small purchases on a monthly basis will prevent this.

    Open a post office box at a mail receiving service such as Mail Boxes Etc. before you leave.
    Open a post office box at a mail receiving service such as Mail Boxes Etc. before you leave.

    Open a mail box at a location such as Mail Boxes Etc. or USA2ME before you move abroad. Then have your credit card bills and other financial statements sent to your mail box service address. This can be done fairly inexpensively and can pay off in the long run when it comes to maintaining your credit.

    Be sure to notify your bank of your plans to live abroad.
    Be sure to notify your bank of your plans to live abroad.

    Tell your bank that you are planning to live abroad. By letting the bank know in advance that you are planning to keep your accounts open, band personnel will not have cause to flag your card for suspicious usage overseas. This will help to prevent unnecessary complications.

    Forward the mail from your post office box to your address overseas.
    Forward the mail from your post office box to your address overseas.

    Have the mail from your mail box service forwarded to your address overseas. This will ensure that you are able to keep on top of your credit statements to ensure that you are able to continue to make your payments on time. This will also ensure that your statements do not become mixed up with your overseas mail.

    Check your report annually.
    Check your report annually.

    Check up on your credit. If planning on living overseas for more than a period of one year, be sure to request a copy of your credit report on an annual basis. Consumers are entitled to one free copy of their credit report yearly. Doing so will ensure that your credit worthiness stays intact.

How to Prove SOL Debt

The acronym "SOL" is used to describe debt that is beyond state statute of limitation laws. Statute of limitation laws regulate how long debt collectors can use lawsuits to collect unpaid debts. Laws vary by state, but the average for unsecured debt such as credit cards is about six years. A debt collector can still file a lawsuit after expiration of the statute of limitation, but a judge in the case will dismiss the lawsuit if the defendant argues that the debt is too old for consideration by the courts.



    Get a copy of your credit report from Annual Credit Report. This website is the only site specifically endorsed by the Federal Trade Commission to offer free reports under the terms of the Fair Credit Reporting Act.


    Read the credit report to review your accounts. Note the date of last activity on the accounts, such as any payment. The clock begins ticking on SOL at the date of last activity, according to BCS Alliance.


    Contact a local office for the state attorney. Get the number by calling the local public library. Ask the person answering the phone at the state attorney's office for information on laws in your state regarding the statute of limitation. The receptionist may give you the address for a state website listing the information, or simply provide the information over the phone. For example, in Alabama, the SOL on credit card debt is three years as of 2011, but it is six years for promissory notes, according to BCS Alliance. Contracts and oral agreements also feature six-year statute of limitation laws.


    Match up your accounts with the SOL laws in your states. SOL laws regulate "open accounts," which are unsecured accounts such as credit cards, oral agreements, promissory notes and contracts. SOL laws in your state may vary depending on the type of debt. Make an appointment with a government-certified credit counselor if you need help understanding SOL laws in your state. Free consultations are available with counselors approved by the U.S. Department of Housing and Urban Development. The counselors specialize in housing and credit issues.


    Prove the debt is beyond your state's statute of limitation by comparing the date of last activity on your credit report to the state law for that type of debt. For example, if the SOL on credit card debt in your state is six years, then any credit card debt with a date of last activity older than six years is protected under SOL laws.

Can a Creditor Garnish Your Wages If You Pay Child Support?

When a person owes a creditor money, the creditor has a number of different methods by which it can attempt to collect on the debt. One way is to petition a court to garnish the debtor's wages. When wages are garnished, the debtor's employer withholds a portion of the debtor's wages and sets them aside for the creditor. Garnishment laws vary by state; in all states, only certain people are eligible for wage garnishment.

Wage Garnishment

    A creditor can garnish an individual's wages only after two conditions have been satisfied. First, the creditor must file a lawsuit against the debtor and receive a civil judgment attesting that the debtor owes the creditor money. Second, the creditor must file a motion with a judge petitioning for the right to garnish the debtor's wages. If the judge grants this motion, the creditor can present the petition to the debtor's employer, who is then obligated to comply with it.

Means Tests

    Laws regulating who can and cannot have their wages garnished are made at the state level. States may subject debtors to a means test. In a means test, the state examines the debtor's assets, income and expenses to determine whether he would have enough money to support himself and his dependents if his salary were garnished. Child support payments generally factor into this means test, meaning a person who makes such payments is less likely to pass the means test and be eligible to have his salary garnished.

Child Support

    If a person is delinquent in his child support payments, there's a high likelihood that either the state or federal government will attempt to pursue collection of this debt by garnishing the debtor's salaries. In fact, a far larger percentage of a debtor's salary can be garnished by the government to pay for child support payments than a creditor is able to garnish for the repayment of private debt.


    If a person's wages are already being garnished for child support, a creditor is likely not able to garnish the debtor's wagers until he has repaid his child support payments. This is because, according to federal law, a creditor can only garnish a maximum of 25 percent of an individual's wages. The federal government, however, can garnish a higher percentage. If the federal government is already garnishing the person's wages at a rate higher than 25 percent, the other creditors have to wait their turn.

How To Replace a High Interest Rate Credit Card With a Low Interest Rate Card

How To Replace a High Interest Rate Credit Card With a Low Interest Rate Card

Many consumers sign up for a specific credit card because they were offered an attractive introductory interest rate. The problem with introductory rates is that they eventually increase. Before you know it, you are paying off a balance at 19 percent rather than 1.9 percent. Many new cardholders and college students fall victim to signing up for credit cards that have high rates from the get-go. This often happens because the consumer is enticed by an incentive offer such as purchase discounts at department stores or "free" prizes for signing up. At some point, consumers will recognize the difficulty of paying off high-interest cards and will want to "upgrade" to a low-interest card.



    Research credit card offers that offer a lower rate. You can do this by reviewing credit card offers that you receive in the mail, viewing credit card offers on the websites of major credit card companies or visiting a credit card offer comparison site such as creditcards.com.


    Sign up for a lower-rate card by filling out a paper or online credit application. This application will ask for your name, date of birth, social security number, address, telephone number, annual or monthly income, monthly mortgage payment, your employer's name and your email address. Complete the required information, sign the application and submit it online or through the mail.


    Examine your credit approval statement. You should receive a statement in the mail with your new credit card. This statement will detail your interest rate and credit limit. You should always check this information before you begin using your new card. Sometimes a consumer will not receive an advertised interest rate because of his credit history. If your new interest rate is not lower than your current card, avoid using the new card for purchases or balance transfers and repeat Steps 1 through 3. Do not cancel your new card even if the interest rate is high. The additional credit provided by the card may help to increase your credit score by increasing your debt to credit ratio. Destroy the physical card or place it in a safe deposit box to reduce the temptation to use the card for purchases.


    Transfer balances from your higher-rate card to your lower-rate card. You can accomplish this action by calling your credit card provider and advising them that you wish to complete a balance transfer. They will either be able to complete the transfer over the phone or they will send you a paper or electronic form to fill out. You will need to provide the account numbers and balance amounts from the account(s) that you wish to transfer from. If you do not wish to transfer the balance from your high-interest card, you may pay the balance off in one lump sum or continue to pay it off over time. Once the high-interest rate card has a balance of zero, do not close the account for the reasons stated in Step 3 above. You may destroy the physical card or place it in a safe place.

Sunday, July 28, 2002

How to Establish a Credit Line

It seems like an impossible task---establishing credit when you have no credit history. It is difficult, but it can be done, according to Liz Pulliam Weston, personal finance columnist for MSN Money. Weston recommends that you start to establish a line of credit long before you expect to actually need it. The general idea is to create a record that shows how responsible you are with money.



    Start small by having the utilities---electricity, gas, telephone and cable---put in your name. Then make sure you pay the bills on time. Credit reporting agencies are beginning to consider these kinds of records as part of your total financial picture when building your credit report.


    Open banking accounts, checking and savings, in your name. Make regular deposits and withdrawals to establish a record of how you manage money. The checking account will show potential lenders that you have a means of making regular payments and the savings account will show you're putting something aside for the future.


    Apply for a gasoline or department store credit card. According to Weston, these are usually easier to obtain than major credit cards such as Visa or MasterCard when you have no credit history.


    Ask a friend or relative---someone with good credit---to co-sign a loan for you. This means the two of you share responsibility for the loan.


    Keep your credit in good standing once you have it established. Make payments on time and stay informed about the terms of each credit account you have. Keep your credit cards safe and be careful with receipts and other papers that contain account numbers. Handle any disputes quickly and responsibly. Keep a record of contact information and account numbers for all cards in case they are lost or stolen.


    Obtain a copy of your credit report if you have one. Check it carefully for mistakes or missing information. You'll want to take steps to correct any mistakes and to add useful information that is missing. For detailed information about how to do this, see the Resources section of this article.

Where to Find a Small Loan for Low Credit Scores

Bad credit can hurt your ability to get a loan and make the loans you get more expensive from high interest and user fees. Still, you have to start rebuilding your credit someplace. A small loan is a good place to start. Keep some things in mind when looking for that small starter loan.

Go With Who You Know

    A bank where you already have an account is the best place to start when looking for a loan with bad credit. The bank spent money attracting you as a customer and will go out of the way to keep you. Also, the bank has your account balance as collateral if you default. You won't get a huge loan, and you will probably pay high interest, but it's a start.

Credit Cards

    Almost anybody can get a credit card. The question is really how much interest you're willing to pay. Although this isn't a traditional loan, cash advance privileges and credit card convenience checks will allow you to use the money for whatever purpose you need.

Secured Debt

    Secured debt is a loan where you promise the lender can take something of yours if you default (like with a car loan or mortgage). With enough collateral, you should be able to find a loan. Pawn shops, title loan companies and paycheck loans are very expensive examples of where to get this kind of loan. You can also check with your bank about a secured line of credit on something valuable of yours.

Pay Early and Pay Often

    The major drawback to credit with a bad credit score is interest. The kinds of loans available are often at very high rates, meaning you pay a lot for the money.
    For example, some credit cards charge interest at 30 percent for poor credit risks. In just over three years, you will have paid twice the original value of the loan. When you take out this kind of loan, pay it off aggressively.

Tips to Repair Bad Credit

Sometimes a long period of financial hardship can lead to a bad credit score. The first thing you want to do when you have bad credit is to repair your credit so you can qualify for the financing you will need to purchase a home or car in the future. Repairing bad credit takes time, but it is not as difficult as it may sound.

Take Care of Current Debt

    The first step to repairing your credit is to make sure your current debt is under control. Consolidate your credit cards into one account by using a consolidation loan or transferring your balances to one low-interest credit account. Once you have consolidated your cards, stop using them. Pay off any old debts that may still be outstanding such as any old book club bills. Use cash as much as you can, and avoid applying for any new credit accounts.

Check Your Credit Reports

    Keeping a close eye on your credit reports is essential to repairing your credit. There are many reputable services on the Internet that will help you obtain your credit reports from the three major credit-reporting agencies, but be aware that these services normally charge a monthly membership fee. You can also go directly to the credit-reporting agencies yourself and purchase your reports. The credit-reporting agencies you need to contact are Equifax, Experian and TransUnion. If you have been denied credit for any reason in the past 30 days, you are entitled to reports directly from the credit agencies at no cost. By federal law, you are entitled once a year to a free copy of your credit report from each of the three agencies.

    Once you get your reports, check them for accuracy. Make sure each report has your current personal information correct, and also check all of your past information such as previous addresses and any aliases you have gone under. Be sure you recognize all of the credit accounts listed on your credit reports, and make sure the balances and histories are accurate. If you see anything on your credit reports that looks incorrect, follow the instructions on the report on how to report an inaccuracy. The credit-reporting agency will get back to you within 45 days of receiving your request.

Keep Money in the Bank

    When you are repairing your credit. it helps to have money available in your savings and checking accounts at all times. It does not need to be a large amount of money--amounts less than or equal to $50 will work fine. Banks report your account activity to the credit-reporting agencies, and having a balance always available in your accounts can help to increase your credit score.

Don't Close Old Accounts

    When you are in the process of repairing credit, it is a good idea to have accounts on your credit report that are old and still active. Normally, the advice would be to close a credit account once you have paid it off to have the available credit balance removed from your debt-to-income ratio, but when you are repairing credit it helps to have old credit accounts that are still active and still have a balance. This shows that you have the ability to maintain a credit account even while other parts of your credit history are experiencing problems.

Should I Use Savings to Pay a Line of Credit?

Should I Use Savings to Pay a Line of Credit?

    Deciding how to pay off credit cards is an important decision.
    Deciding how to pay off credit cards is an important decision.

Savings Are an Important Safety Cushion

    If you have savings set away, you are probably hesitant to decimate your nest egg, even for as good a cause as paying down credit card debt. It is important to have a safety cushion of savings, in case of emergencies such as unemployment, medical bills or car repairs, and even to keep you from going deeper into debt.

Credit Lines Cost You Money

    If you have money in savings, you are probably earning interest on it; if you have a credit line, you are probably paying interest on it. The problem is, the interest you are paying is probably significantly greater than any interest you are earning. In the long run, paying down a credit line will save you interest expenses that would far outweigh what you'd earn on your savings.

Bottom Line

    Set aside a small cushion of savings---debt guru Dave Ramsey recommends $1,000---and then use the rest to pay down your debt. It will cost you less in the long run to use your savings. Then you can build them back up once you pay down your credit line.

Saturday, July 27, 2002

When Do Collection Agencies Report to the Credit Bureau?

Collection agencies are responsible for collecting unpaid debts that an original lender has either been unable to collect or has given up on collecting. Often these companies buy unpaid debt from lenders at a wholesale value (usually at a drastically lower price than the dollar amount owed) and attempt to make a profit by collecting the debt in full from the borrower. A consumer should know the laws--especially those concerning reporting to credit bureaus--in order to remain informed if he or she ever faces collection calls.

Time Frame

    Collection agencies are required to notify delinquent account holders that in fact a collection agency is attempting to collect a debt. This is normally handled with a certified letter sent to the borrower in question. After this letter is sent out, the borrower has a maximum of 60 days to settle the debt before the information is reported to the bureaus. Most collection agencies will request a response with payment within 30 days (and it is recommended to pay as soon as possible after you've confirmed the debt), but legally you have 60 days to pay or work out an arrangement with the collection agency before the debt is reported to the credit bureaus.

Type of Reporting

    Collection agencies report delinquent accounts as "judgments." This is handled with credit bureau-speak--that is, a code is used to classify a dollar amount on a credit report. There are many different codes used to describe delinquent accounts, but common classifications are: account over 120 days past due, charged-off account, and account 360 days past due.


    While customers have a window of opportunity to settle a debt with a collection agency before it's reported to the three credit bureaus (Equifax, Experian and TransUnion), it's important to understand that any account that has been purchased by a collection agency is most likely already reported as a bad debt on the credit report. Most credit accounts are tracked and reported by lenders, so any account that the lender deemed "uncollectable" will show a negative history of non-payment.


    The effect of a negative report from a collection agency is major. Any judgment listed on a consumer's credit report drops a FICO score considerably. Further, the FCRA (Fair Credit Reporting Act) allows for all judgments (including paid or settled judgments) to remain on a credit report for a period of seven years. Thus, a credit score will be impacted for an extended period of time if a collection agency reports a bad debt.


    It's important to tread carefully when dealing with collection agencies. Some agencies will use scare tactics and intimidation to get borrowers to pay their debts. Informed consumers will verify bad debts, and attempt to rectify an error on a credit report with great haste.

How Do Credit Scores Work?

How Do Credit Scores Work?

About Credit Scores

    Credit scores have been likened to report cards for adults. It's true in as much as they reflect an individual's financial decisions and level of responsibility over a period of time. However, until relatively recently, credit scores were a closely guarded secret of the lending industry. It wasn't until the age of the Internet that credit scores became easily obtainable and that national legislation was passed to protect consumers from bad information in credit scores. Understanding how credit scores work will help an individual make decisions that will improve their score, and a higher score will lower their cost of borrowing and present new opportunities. Credit scores are used to determine eligibility for loans and interest rates.

Major Factors

    Several factors contribute to an overall credit score. More than a third of the score is based simply on whether bills are paid on time. Recent activity is weighted more highly than the past. Though a single missed payment won't destroy a person's credit, every late payment inflicts some damage. Consistently paying all bills on time, including credit cards, ultilities, mortgages, and car loans, will help to keep credit scores high.

    Another large contributor to credit scores is the amount of outstanding debt. Even someone who makes all their payments on time can only afford to have so much debt based on their income. The more of that debt that's already been taken out, the less attractive that borrower will be to future creditors, and therefore the lower the credit score will be. Having some debt outsanding and some unused available credit will produce a higher score than having all available credit maxed out.

Other Considerations

    The remainder of a credit score is determined by factors such as the length of an individual's credit history, the types of credit they have, and how much new credit they've applied for already. The longer a person has had credit in good standing, the more reliable they're deemed to be, so the higher their score. Similarly, individuals with a mix of credit types, such as credit cards, mortgages, and other loans, the more responsible they're seemed to be by ratings companies. On the other hand, lots of new credit applications often signals financial distress and will automatically lower a credit score.

    The exact methodology for calculating credit scores can differ. Several different ratings may be available from different companies, though most lenders might only look at one or two. Different companies may also have access to different information and can occasionally make errors. Frequently obtaining a copy of all credit scores and the contents of the credit reports can help protect against such errors.

Friday, July 26, 2002

Analysis of Debt to Total Assets

An assessment of an individual's or business's financial status can be made by comparing the amount of debt (liabilities) to total assets. If your debt is greater than your assets you may be experiencing some financial stress.


    When your debts exceed your assets, you are considered insolvent. There is probably a lot of financial uncertainty surrounding your credit and debt. You may not be able to meet your monthly obligations.

Debt Management

    When your debt far exceeds your assets, you may need to seek help from a consumer credit counseling program. The agency can counsel you on budgeting and debt management and might enroll you in a debt management program.


    If you cannot resolve debt-to-asset problems, you may have to file for bankruptcy. This should be your last resort.


    A company can determine its financial well-being by comparing current assets to current liabilities using the current ratio. This ratio determines the liquidity of a company. It measures how many assets are available to pay debts that will need to be paid during the year. .


    A particular industry may determine what's acceptable for the current ratio. Many companies keep their current ratio between 1 and 2. If a company has current assets of $20 million and current liabilities of $10million, the current ratio is 2.

Thursday, July 25, 2002

Credit & Debt Consolidation Programs

The causes of financial crisis can range from overspending to medical bills to the loss of a job. Whatever the cause, credit and debt consolidation is one of several solutions available to help you gain control over your financial situation. While it is not appropriate for everyone, credit and debt consolidation is a good option for those committed to sticking to a budget and refraining from credit card use.

How Consolidation Programs Work

    When an individual decides to use a credit and debt consolidation program, she acquires a loan for the amount of debt she needs to pay. Then, instead of making several payments to different creditors, the debtor makes just one payment to the lending institution that gave her the large loan. The term "credit consolidation" is used interchangeably with the term "credit card consolidation," which combines credit card debts. Debt consolidation programs can combine a variety of different debts, such as medical debts or personal loans, into one. Therefore, credit and debt consolidation programs help an individual pay off a variety of debts by combining them and charging the debtor with one debt payment per month.

    In addition to using a debt and credit consolidation program, the Federal Trade Commission (FTC) states that some choose to consolidate debts through a home equity line of credit or a second mortgage. While credit and debt consolidation loan programs offer unsecured loans and advertise lower interest rates, they cannot guarantee this. A second mortgage and home equity line of credit are secured loans that generally do charge low interest rates and may offer tax credits, but also charge points -- one point equals 1 percent of the amount borrowed. The FTC states that delinquency on secured loans can cost an individual her home, as this is the collateral.

Protecting Yourself

    The FTC warns that there are credit and debt consolidation programs that do not always have a customer's best interest in mind. Before signing any contracts with such a program, learn about all the fees associated with the program. A program may also ask you for "voluntary contributions," which is another term for fees. Be wary of credit and debt consolidation programs that state they are part of a new government bailout program, promise to make your unsecured debts, collection agency calls and lawsuits disappear, and tell you to communicate with your creditors no more. A good credit and debt consolidation program will not make promises to charge you interest rates that are pennies on the dollar, will send you free program information and will take the time to review your financial situation before signing you up for its program. Additionally, a legitimate debt consolidation program should not charge you any fees before it accepts you into its program.

Managing the Symptoms

    A credit and debt consolidation program is most effective for those who know how to budget and have good money management skills. Ideally, consolidation programs should offer this as a service, but some do not. According to financial adviser Dave Ramsey, when an individual enrolls in a credit consolidation program that does not teach about money management skills and budgeting, he only masks the symptoms of a spending problem that leads to large amounts of debt. Instead of taking care of the spending problem, an individual just transfers his debt to a new creditor without consideration for a debt elimination plan. Consequently, according to Ramsey, it is common for these individuals to accumulate new credit card debts and, consequently, obtain lower credit scores.

Credit Rating

    A credit and debt consolidation program can hurt or improve your credit rating. Lending Tree states that if the consolidation program negotiates a settlement with your creditors for an amount that is less than what you originally owed, your credit report may state that you did not repay all the money you promised. Your credit score can also drop if a consolidation program does not repay your creditors on your behalf on time. A good credit and debt consolidation program should help you raise your credit score.

The Effect of Debt Management on Credit

If you watch any television at all, you have probably seen advertisements from companies claiming they can help get you out of debt by working with the credit card companies on your behalf. These companies specialize in debt management. The programs they offer may be the solution if you're over your head in debt. However, one of the mysteries about debt management programs is how they affect your credit.

Credit Basics

    Your credit file is one of the most important pieces of information associated with your identity. Good credit gives you easy access to credit and the best interest rates. On the other hand, bad credit can make it impossible to get a loan, a credit card or even an apartment or job. The mistakes you make now will stay on your credit report for the next seven years, so any credit issues you may currently face can haunt you for years to come.

Debt Management Basics

    People often confuse debt management programs with debt settlement programs, which attempt to reduce what you owe. In a debt management program, you'll pay back what you currently owe to all of your creditors, but you'll do so at reduced interest rates. The debt management program pays all of your bills on your behalf with money you give them on a regular basis, so you don't have to worry about missing a payment. The goal of debt management is to wipe out all of your unsecured credit card debt within five years.

Debt Management and Credit Reports

    One of the main reasons debt management is preferable to debt settlement is your credit report will show that your accounts as paid in full, unlike a settlement, which is less desirable for obtaining future credit. The impact on your credit report is more favorable as well. According to Bankrate.com, the credit bureaus mark your accounts with a note that you are paying them through a debt management program. This remark goes away once you pay the balances. This does not affect your credit score. However, some factors directly resulting from your participation in the debt management program can affect your credit.

Closing Accounts

    The biggest reason why many people are iffy about debt management's impact on credit is it requires you to close out all of your credit accounts. This means that you cannot use any credit cards while you're on the program and the accounts will not be available to you once you finish. The age of your accounts comprises 15 percent of your credit score, and since the program will close out your accounts, your credit score will suffer as a result.

Timely Payments

    Though closing your accounts may negatively affect your credit score, a consistent record of timely payments will help your score. This is one of the aims of debt management. Since you'll be paying on time every month you're in the program, you will build up a nice history of current payments. This will diminish the impact of any late payments you may have made in the past, as it shows you're becoming more responsible. Your payment history makes up 35 percent of your credit score, so improving this area can drastically help your score. It will also offset the hit you'll take by closing your accounts.

Wednesday, July 24, 2002

Does Paying My Credit Early Hurt My Credit Score?

Your three-digit FICO score is used by potential creditors to determine your creditworthiness. The higher the score, the more likely you are to be issued credit and receive lower interest rates. Some factors, such as paying late and carrying high outstanding balances in relation to your total available credit, hurt your score. Paying early generally has no negative impact.

Early Monthly Payments

    According to credit reporting agency Experian, paying credit card bills early each month won't hurt your credit, but it won't necessarily help it, either. Credit card issuers typically follow a monthly billing cycle in which your balance due is calculated once each month, and it matters little when you make your payment within the cycle. Card issuers are more concerned that you make your payment by the required due date.

Paying Outstanding Balance

    Paying off an outstanding balance of a debt obligation in full also normally does not hurt your credit score. In fact, the CarsDirect website reports that paying off a car loan early can actually help your credit score and demonstrate to lenders that you can manage credit effectively. You can maximize the positive impact on your score by making timely payments for 12 to 24 months before paying off the remaining balance.

Prepayment Penalties

    If you are thinking of paying off a debt balance early, check your loan contract to see if it includes a prepayment clause that institutes a penalty. Home and auto lenders sometimes include these penalties to offset some of the interest they will lose if you pay off the balance before the final due date. While prepaying won't negatively impact your credit score, you won't benefit as much as you had hoped.

Closing Accounts

    You could harm your credit score if you pay off a balance on a credit card and then close the account. The CNNMoney website indicates that one factor that determines your score is the length of your credit history. If you choose to pay off a card you've owned for several years and always made timely payments, paying off the balance and closing the account shortens your credit history and reduces your score. A better strategy is to pay off the balance and keep the account open.

Tuesday, July 23, 2002

How to Get Florida to Enforce Child Support

Florida handles child support services through the Department of Revenue. If your child's other parent defies the child support payment order, apply for services through the Department of Revenue and ask them to locate the parent and enforce the order. Florida Child Support Services may enforce child support orders through both civil and criminal sanctions against the parent.



    Open a case with the Florida Department of Revenue. Apply online for Child Support Services through the Department of Revenue. You can fill out the application online before printing it, or download it and print it to fill out by hand.


    Elect full service by checking the appropriate box on the cover sheet. Full service gives the Florida Department of Revenue permission to take measures to enforce child support orders as well as locate your child's other parent. List the names of your children on this sheet as well as the other parent's name. Sign and date the form. Provide a current telephone number so that the Florida Department of Revenue can get in touch with you if it has any questions regarding your application.


    Provide information about yourself on the first page of the application. If you need the Florida Child Support Office to keep your location confidential, check the gray box on the front of the application.


    Fill out a Parent Information Form. Provide as much information as you know about the child's other parent. If you are the child's guardian but not his parent -- such as a grandparent who has custody -- fill out a separate Parent Information Form for each of the child's parents.You can download extra blank Parent Information Forms from the Department of Revenue site, or print out extra sheets from Adobe Reader before filling out the application by hand.


    Provide information about your child such as his name, address and date of birth on the Child Information Form. Fill out a separate Child Information Form for each child who is supposed to get support. Indicate that there is already a support order for the child by checking the appropriate box, and do not fill out the rest of the form below the space where it asks if there is a support order. If you have more than one child, fill out a separate Child Information Sheet for each child.


    Print the application if you filled it out on the computer. Attach a copy of the court order regarding child support, any orders regarding paternity and a copy of the child's birth certificate. Mail form and attachments to the Child Support Office in the county where the other parent lives. If you do not know where the other parent lives, mail the package to the Florida Department of Revenue.


    Check your mailbox and voicemail for a telephone or written response from the Child Support Office. If the Child Support Office asks you for more information, provide the required information as quickly s possible to expedite the handling of your case.


    Wait for the Florida Child Support Office to enter the child support order and locate the other parent. Florida does not have a specific time frame for responding to enforcement requests, but the Child Support Office will contact you when it locates the other parent and inform you of what actions it is taking to enforce the child support order. The Child Support Office may garnish the other parent's wages, seize his tax refunds, suspend his driver's license or pursue criminal charges against him.


    Obtain a payment options form once the Child Support Office enters an order for child support. You can get this form online if the Child Support Office does not send it to you. You may get paid via a special debit card or through direct deposit to your bank account. If you want direct deposit, provide your banking information on the form.


    Send the payment options form to the Florida Distribution Unit. If you elect to use the debit card, you will receive the card in the mail. You will receive child support payments on the card or in your bank account once a month after the Florida Child Support Office locates the other parent and enforces the payment order.

State Laws on Debt Collections in California

Each state has its own set of laws that companies must follow when collecting debts from residents living in that state. California has consumer protection laws that prevent creditors from participating in unethical or abusive collection activity, but it also grants creditors considerable debt recovery options when a debtor refuses to meet his financial obligations.

Creditor Conduct

    The Fair Debt Collection Practices Act (FDCPA) is a set of federal laws governing the debt collection industry. The law prohibits such behavior as using foul language when speaking with debtors, communicating with debtors at any time and place the individual claims is inconvenient and informing the individual's friends, family members and employer about the delinquent account. The FDCPA only regulates the behavior of third-party collectors such as a collection agency hired by the original creditor. California, in an effort to protect consumers from potentially abusive collection activity, extended the FDCPA to cover not only third-party collectors but the original creditor as well.

Statute of Limitations

    California allows creditors to sue consumers for unpaid debts. State law, however, dictates the amount of time a creditor has to take legal action. All creditors have four years in which to file suit against a California resident unless the original debt was secured using an oral repayment agreement. California only permits creditors two years to file lawsuits for debts incurred under an oral contract.

Community Property Law

    Because California is a community property state, creditors have a wider range of options when collecting debts. Community property law dictates that what belongs to one spouse also legally belongs to the other. This applies not only to property but to debt as well. If the debtor incurred the debt during her marriage, a creditor can hold her spouse just as responsible for paying off the debt as the debtor. While not all community property states permit creditors to pursue a debtor's spouse for repayment, California permits the practice even if the debtor's spouse had no part in incurring the debt or was not aware the account existed.

Judgment Enforcement

    If a creditor sues a California resident and wins the case, state laws give the creditor several ways in which to collect the debt. The creditor can use the judgment the court provides after a lawsuit to seize the individual's personal property or real estate via a lien, garnish the individual's wages or seize his bank accounts via a bank levy. Court judgments in California are valid for 10 years.

Can a Credit Card Company Foreclose on My House?

Technically, it is possible for a credit card company to foreclose on your home because you stopped paying on a credit card. However, such foreclosures almost never happen, according to Bills.com. State laws make the process difficult, resulting in too much hassle for the card companies. Bills.com notes that homes can be voluntarily handed over during a bankruptcy liquidation, but that's usually because the homeowner is looking to get rid of all debts, including the mortgage.

The Foreclosure Process

    A credit card company trying to foreclose on your home is forced to follow a different process than your mortgage company. Mortgage companies often foreclose on homes and sell them at auction to pay the balance remaining on the mortgage. The process begins after you miss your first payment but usually isn't started until you fall two or three months behind. Foreclosure by a credit card company works differently and takes much longer to complete.


    MSN Money reports that generally, your credit card account will remain open until you have fallen six payments behind. At that point it is closed and the card company lists it as charged off. The next step is placement with an internal or external debt collection agency. Debt collection efforts often continue for months or even years. Eventually the credit card company or debt collector could file a lawsuit against you and win a judgment in court. Judgments are court orders signed by a judge. A judgment in a credit card lawsuit orders you to pay the full amount owed on the account.

Taking Your Home

    A credit card company with a judgment against you can return to court for permission to foreclose on your home to satisfy the credit card debt if the laws in your state allow it. Credit card companies usually pass on the option because foreclosing on your home requires the card company to pay off the first mortgage as well as any additional mortgages, such as a home equity loan. After paying all the mortgages, the card company has to hope the house sells at auction for enough money to cover the paid-off mortgages and the credit card balance.


    Card companies are far more likely to pursue garnishment of your bank account or wages than take your home. Bank garnishment allows the card company to freely withdraw money from your checking or savings account, while wage garnishment allows a percentage of your paycheck to be sent to the card company each payday. That's a much better arrangement for the card company than a long and risky attempt to foreclose on your home.

Can a Bill Collector Debit a Bank Account Without Permission?

Can a Bill Collector Debit a Bank Account Without Permission?

Being harassed by a debt collector is stressful, and confusion about what the collection agency can and can't do to get its money can make a bad situation worse. Knowing your rights is a crucial part of dealing with the collection process. When it comes to your bank account, bill collectors need to satisfy some requirements before they can debit your account.

Pre-Judgment Collections

    If your account is in collections, but the bill collectors have not sued you and won a judgment, they cannot take money from your bank account without your permission. They can only debit your bank account if you agree to a payment and provide them with your account details for the purposes of making that payment. They can only take the payment or series of payment you authorize.

Post-Judgment Collections

    If bill collectors cannot obtain payment from you, they can sue to try to recover the debt. If they win their case, they can then request that the court give them a garnishment order against you. With the garnishment, your bill collector is legally entitled to ask your bank to hand over the money in your account to cover your debt without your permission. They can only take up to the amount of their garnishment order.

Protecting Yourself

    Don't ignore notices from collections agencies threatening lawsuits or notices that a case has been filed against you. If you don't respond, the collection agency can get a judgment against you in your absence and you will lose your opportunity to answer their claims or to set up payment arrangements before they win a garnishment against you. A lawyer can help you understand your rights if a collection agency sues you. Your state bar association can help you find a lawyer who specializes in your type of case.

Unauthorized Debits

    If a bill collector debits your bank account without your permission and without a garnishment order, you have the right to sue. According to the Federal Trade Commission, you have up to one year from the date of the violation to file the case. If you win your case, you can be awarded up to $1,000 plus any damages you can prove you suffered from their unauthorized debit. You should also report any bill collector violations to your state attorney general's office.

Monday, July 22, 2002

How to Dispute an Old Credit Report Entry

How to Dispute an Old Credit Report Entry

Credit agencies keep thorough records on all American consumers who use credit. Some debts can legally remain on a credit report for as long as 10 years. If you are struggling with an old debt on your report, you can take action to try and remove it. To do this, though, you need to determine what the account is, where it began, whether it has a balance and if it is incorrect.



    Collect any supporting documents if the old account is reporting an error. These documents could include an old paid-in-full letter, a cancelled check or a bank statement confirming the payment. Send a brief business letter to all credit bureaus. Include your name, address, Social Security number and the account in question. Refer the bureaus to the documents contained in your letter and request that they correct the error.


    Check the statute of limitations for debts in your state. In many states, the statute of limitations on credit card debts is seven years. If the old account has been on the books longer than the statute allows, write all the credit bureaus and ask them to remove it. Include the copy of the state's statute of limitations for your type of debt.


    Pay the account if it is still active and has not passed the statute of limitations. To dispute the account, it must be paid first. You cannot remove the item until it has a zero balance. Contact the original creditor. They may refer you to a collections agency. Ask for a payoff statement.


    Write a goodwill letter to the credit bureaus if the account has not yet passed the statute, is a valid account and is paid in full. The bureaus have a legal right to keep the old debt on your report. A goodwill letter is a plea to remove the debt.


    Include your name, address, Social Security number and account number in the letter. You must reference the economic hardship you suffered in the goodwill letter. You should also provide evidence to support that argument (disability award letters, Social Security income, unemployment checks). Send this letter to the credit bureaus.


    Wait for a response from the credit bureaus. According to the Fair Credit Reporting Act, the bureaus have 30 days to respond to all inquiries, and an additional 90 days to correct errors, review accounts for statute-expired debts and remove items.

Is My Spouse or Family Liable for My Debt?

The common denominator in the question of debt liability shared within a family structure is twofold: one, the act of mutual consent/signature; and two, the applicable law as set down in the state where the family resides.

Mutual consent/signature

    In the vast majority of cases, if both spouses sign a debt agreement contract, both are held jointly liable to the creditor. However, a spouse or family member could, unknowingly (and inadvertently), assume liability, if the issue took place in a "community property" state.

Community Property States

    There are presently nine "community property" states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Community property laws are unique to each state, but there is a basic common thread which seems to exist throughout.

Spousal debt liability in Community Property States

    According to the firm, Legal Helpers, there is a basic tenet existing in all nine of the community property states. A non-signing spouse residing in a community property state may still be held liable for the debt, but only if the debt incurred during the marriage was used for the benefit of both spouses.

Spousal debt liability in non-Community Property States

    According to the Moran Law Group, if the spouses never resided in a community property state, and only one spouse signed the debt agreement contract, then only the spouse who signed can be held responsible for the debt incurred. This would automatically relieve the non-signing spouse of any future liability implications.


    As lawyers from "Just Answer" point out, it certainly would be in the best interest of any married person to thoroughly probe any and all debt liability ramifications, either direct or indirect, that may be incurred from the spouse.

Sunday, July 21, 2002

Does Paying Off Collection Accounts Raise Credit Scores?

Does Paying Off Collection Accounts Raise Credit Scores?

A collection account appearing on credit reports is very harmful to credit scores. It indicates that a debtor failed to pay an account as agreed, forcing the creditor to close the account and list it as charged off. After that, the creditor transferred or sold the account to a debt collector, resulting in an update to credit reports noting the new status as a collection account. It is impossible to maintain an excellent credit score with active collection accounts on credit reports. However, paying off a collection account may not immediately increase scores.


    Experian, one of the major credit reporting agencies, recommends paying collection accounts. However, it also acknowledges that the payment may do nothing to increase credit scores over the short term. Most of the damage from a collection account occurs while the account is delinquent. Paying off the collection account cannot reverse the harm from the collections process, including late payments and a charge-off. Those negative credit entries remain on credit reports for seven years, although their impact on credit scores diminishes over time.

Credit Repair

    The Federal Trade Commission recommends that people focus more on their future than on the past when trying to raise credit scores. The agency supports resolving old debts such as collection accounts, but points out that paying current bills on time while keeping balances low is the best way to raise credit scores over the long term.


    Credit scores range from 350 to 850, with scores of 720 or higher usually qualifying people for the best interest rates on mortgages and other loans. Some mortgage companies may not approve a person for a loan if the credit report shows active collection accounts. That is one reason for paying off collection accounts even if doing so does not significantly increase credit scores.


    Once a debtor pays a collection account, credit reports update to show the account as a "paid collection account." That shows creditors that the debtor resolved the issue with the creditor or debt collector. The only other option in paying off a collection account is to negotiate removal of the information entirely from reports. This is possible under a process known as "pay for delete." Some debt collectors may agree to remove the collection account in exchange for full payment. However, not all debt collectors will agree because they feel the process is not fair to people who pay their bills on time. Removal of collection accounts from credit reports could lead to an immediate increase in your credit score.

Saturday, July 20, 2002

Ethical Credit Solutions

Ethical credit solutions are available from respected sources such as government-approved credit counselors. Reputable credit advisers focus on basic credit fundamentals to create long-term strategies for credit repair or financial growth. The Federal Trade Commission warns that you should stay away from questionable credit solutions offered by so-called credit repair specialists, foreclosure rescue experts and debt settlement agencies. The FTC acknowledges that some of the firms are legitimate, but many others are scams.

Nonprofit Credit Counseling

    Nonprofit credit counselors approved by the U.S. Department of Housing and Urban Development offer a wide range of ethical credit solutions. Counselors are available nationwide and initial consultations are usually free. The counselors specialize in resolving excessive debt, including credit cards, and are experts in foreclosure avoidance. If necessary the counselors will join you on three-way conference calls with your major lenders to work out credit problems. Find counselors in your area by visiting the HUD website or call a local charity such as the Salvation Army for a referral.

Debt Management Plans

    Debt management plans are a specialty offering from credit counseling agencies and recommended by the Federal Trade Commission as an alternative to bankruptcy. Debt management plans focus on eliminating unsecured debt such as credit cards. The counseling agency takes control of your budget and pays most of your monthly bills, while negotiating more favorable terms with your unsecured creditors. The agency will regularly request lower interest rates and reversal of finance charges to help you pay off the card sooner. You must agree to remain in the program for four or five years while sending a lump sum to the agency each month covering the minimum monthly payments on your accounts. A monthly management fee is charged.

Debt Settlement

    Debt settlement is another solution for credit problems and is endorsed by the FTC. However, the agency recommends you manage the process instead of hiring a debt settlement firm. Doing it yourself makes you more informed about your finances and empowers you. Debt settlement allows credit card and other unsecured debt to be paid off for less than the full balance, typically 20 to 70 percent of the total. It is an excellent solution for accounts that are several months behind and on the verge of being assigned to a debt collector. Contact your credit card company directly to discuss debt settlement. Simply ask the representative if you qualify for a settlement. Although really old debts are settled for about 20 percent, most settlements are for about half the balance.


    Bankruptcy is an extreme credit solution, but it is effective. Chapter 7 bankruptcy eliminates unsecured debt in as little as three months, but only those with modest incomes will qualify. Others can opt for Chapter 13, which requires a payment plan of three to five years. Select bankruptcy only after exhausting all other ethical solutions.

Friday, July 19, 2002

Credit Line Vs. Number of Credit Cards

Every credit card you use affects your ability to get new forms of credit and can raise or lower your credit score. Creditors want to know how well you can manage your credit, and using your cards unwisely results in a lower credit score and a more difficult time in getting credit. You should always know exactly how many cards you have at any time, as well as the associated credit limits that come with them.

Credit Line

    A credit line is the amount you are allowed to charge on each of your credit cards. Also known as a credit limit, each card company determines how much each card's limit is. Card companies determine your credit line based on your credit score and your income level. The higher your score and the higher your income, the more you'll be able to charge on each card.

Number of Cards

    In general, the number of cards you have doesn't have a big impact on your credit score. Rather, it is how you use the cards you have that has the primary impact on your score. If you have a lot of cards, carry a monthly balance on all of them and are barely able to keep up with the monthly payments, you have too many cards. You should only keep as many cards as you can reasonably manage or you risk damaging your credit.

Credit Score

    If you use a credit card and carry a balance from month to month, the amount you carry can affect your credit score. If you charge the maximum amount on any credit card, known as "maxing-out" your card, your credit score lowers anywhere from 10 to 45 points. On the other hand, if you keep any balance to below about 25 percent of your available credit line, you can improve your score, according to Kiplinger.

Other Effects

    If your credit score drops, your credit card issuers may also lower your credit lines. Though the creditor has to notify you of any change it makes to your credit card agreement, it doesn't have to ask your permission to lower your credit limit. If you max-out several credit cards and suffer a lower credit score because of it, your creditors may lower your lines on cards you barely use at all.

Wage Garnishment Rules for Tax Liens

Wage Garnishment Rules for Tax Liens

Wage garnishment law applies uniformly in most circumstances. When a person defaults on a debt, the creditor to whom he owes money can obtain a judgment and a writ of garnishment to collect money owed by garnishing the debtor's wages. Owing back-taxes is no different. If a debtor owes taxes --- whether state or federal --- wages can also be garnished to pay for taxes owed.

Federal Law

    The Consumer Credit Protection Act (CCPA) is a federal law that sets limits on the amount of wages a creditor can garnish. According to the CCPA, creditors can garnish up to "25 percent of disposable earnings." "Disposable earnings" is any income left over --- during a pay period --- after mandatory deductions such as Social Security, unemployment and Labor and Industry (L&I) are made. The CCPA also makes it illegal for an employer to fire an employee for the first creditor's garnishment.

Tax Levies

    Regarding taxes levies, the allowable garnishment percentage is much higher. In fact, if a tax debtor owes the state in which he resides or the Internal Revenue Service (IRS) back-taxes, up to 80 percent of his wages can be garnished until the debt is paid in full. Additionally, if an employee's wages are insufficient, the IRS can seize bank accounts, pension and retirement plans, and even place a lien against real estate.


    It is common for the IRS to attempt to work out another way of collecting tax debt before it begins garnishing wages. In fact, wage garnishment is considered the last resort for the IRS. Typically, when a tax debtor is having his wages garnished by the IRS, the IRS has likely sent several notices to the tax debtor before resorting to garnishment.


    The process for stopping wage garnishment for tax liens differs from other types of garnishment. For example, if the IRS is garnishing an employee's wages, he might be able to work out an alternative payment plan by simply contacting the IRS. This procedure differs from other writs of garnishment, as stopping garnishment where a private creditor has obtained a writ of garnishment involves objecting to the garnishment in court.

What Is Primary Consumer Debt?

What Is Primary Consumer Debt?

Primary consumer debt is a financial term for the type of debt consumers accrue by purchasing basic items for daily life. It describes the costs to individual consumers, not businesses or governments.

Common Types of Debt

    The most common types of primary consumer debt are in the form of credit card debt and personal loans. These are often at a higher interest rate than a long-term loan, such as a mortgage.

Fun Fact

    With the total amount of consumer debt in the United States standing at approximately $2.5 trillion, the average debt for each person living in the U.S. comes to about $8,100.

Common Misconception

    Interest payments of primary consumer debt are not deductible, the way they are on mortgages.

Debt Options for Low Income People

Debt Options for Low Income People

If you earn a low income and are in debt, there are a options available to help you become debt free. Seeking help from debt counseling services, negotiating with creditors or taking out a personal loan are some options. By repaying a little each month, you will be able to get out of debt. Learning how to better manage your income or finding a higher-paying job are ways to ensure you don't end up in debt in the future.

Debt Counseling Services

    Pay off your debt so you can save more money

    If you owe a significant amount of debt and are falling behind on monthly payments, contacting a debt counseling service may help. Debt counseling services can negotiate with creditors and lenders for lower monthly payments, help consolidate your debt into one monthly payment and help you create a budget that allows you to repay the debt while learning how to manage your money wisely.

    When choosing a debt counseling service, look for a service that helps you learn how to manage money. Non-profit and for-profit services are available. Those that charge a fee for their services should be researched carefully. Research the legitimacy of debt counseling services by contacting your local commerce office and by contacting the Better Business Bureau.

Nogociate with Creditor and Lenders

    Contact creditors and lenders before you fall behind on payments. This is the best time to ask for changes to your payment schedule or to ask for more time to repay your debt. Creditors and lenders are more likely to grant lower monthly payments to people actively trying to repay their debt.

    Obtain a copy of your credit report and credit card and loan statements. If you're already behind on payments, ask to speak with a supervisor. Tell them your situation and how you plan to repay what you owe. Be specific in what you're asking for. You may need to contact creditors several times before they agree to what you're asking for.

    Create a debt repayment budget. This budget should include all debt and how much you can afford to pay each month. Stick to this budget until your debt has been repaid.

Personal Loans and Other Options

    Even though you have low income, you may still qualify for a personal loan to cover your debt. With a personal loan, you will only have to make one payment each month. Your personal loan may include an interest rate that's lower than most other loan and credit card payments.

    If you can't obtain a personal loan from a bank, consider asking family members for a loan. Repay the loan as soon as you can or create a loan repayment schedule.

Can Wages Be Garnished From a Student Loan?

Student loans have helped millions of low- and middle-income students earn a college degree. Student loans, particularly those issued or guaranteed by the federal government, require recipients to begin paying back the debt six months after graduating or leaving school. Although the U.S. Department of Education offers several mechanisms for avoiding default, if a borrower is unable or unwilling to pay back the loan, the federal government can garnish wages to help pay down the debt.

Loan Terms

    Student loans issued or guaranteed by the government generally require a student to remain carry at least half-time course loads. When the student graduates or leaves school, loan repayment begins six months after the last enrollment. Although borrowers can successfully petition for forbearance while they seek a job, the borrower is required to pay back the loan with interest.


    The Department of Education can seize up to 15 percent of a person's disposable wages to offset defaulted student debt. Because no statute of limitations exists on student loan debt, garnishment can continue until the entire balance is paid in full.

Garnishment Procedure

    Student loan garnishments do not require the normal process of a judicial hearing and court order. Instead, the federal government can issue an Order for Withholding of Wages directly to the borrower's employer. In general, the Department of Education provides ample warning of a pending garnishment, including a 30-day notice, directly to the defaulted borrower.

Loan Rehabilitation

    Borrowers in default might have the default removed from their credit report if they follow a rehabilitation process. This process requires the borrower to make nine on-time payments during a 10-month period. Any payments made through wage garnishment will not count toward rehabilitation. Once the loan has been rehabilitated, borrowers can incur additional loans if they are eligible.

Thursday, July 18, 2002

How to Find Out My Debt to Income

Your debt to income ratio is a calculation used by lending institutions to determine your ability to pay off new debts each month. It evaluates your current debt vs. your current income. The lower the ratio, the more likely you are to be able to afford new debt. For example, a mortgage company might require you to have a 30 percent or less debt to income ratio before your new loan and a 50 percent or less debt to income ratio after your new loan.



    Add up all of your current monthly debt payments. This includes all of your minimum payments for credit cards, mortgages, car loans, student loans and alimony or child support. Any monthly payment that is considered debt is included.


    Add up all of your pre-tax income. If you are salaried, simply divide your yearly salary by 12. If you are an hourly employee, multiply your average weekly hours by 52. Divide that number by 12 to find out your average hours per month. Then, multiply that sum by your hourly wage to find out your pre-tax income per month.


    Divide your total from Step 1 into your total from Step 2 to find out your debt to income ratio.

Wednesday, July 17, 2002

When Should I Try to Settle Bad Credit Card Debt?

A bad credit card debt can be reported on your record for up to seven years. But there may be some life changes that come up inside of those seven years that would require you to settle the debt with your credit card company immediately. Even though you may be in a desperate situation, when you do decide to settle your credit card debts, don't let the creditor know exactly why you have had a change of heart. That could give you a disadvantage in negotiations.

When Trying to Buy or Rent a Home

    When you have bad credit card debt listed on your credit history, this can cause you to receive higher interest rate quotes from mortgage lenders. Even just a half point difference in your interest rate on a home loan could cost you thousands. Many lenders will tell you to clear up your bad credit card debt to raise your credit score, then come back in a few months for a loan package. An unsettled credit card balance could also cause you to be denied for an apartment. So if you have future plans to move or buy a home, call your creditors or the collection agency to negotiate a settlement.

When Looking for a New Job

    Employers look at credit history when making hiring decisions. Companies are looking for honest, responsible workers who meet their obligations---if they see that you have a bad debt on your credit report, this could be the difference between a "yes" and a "no thanks." So if you are planning to transition into a new job or career, you need to work on settling your bad credit card debt immediately.

When about to Get Married

    A survey done by Relationships Australia of men and women cites "financial stress" as one of the main reasons why people get divorced. If your partner doesn't know that you have bad credit card debt, and you plan to get married soon, this is an ideal time to start trying to settle your bad debts. Call to negotiate a settlement figure at least six months before your impending nuptials. Be honest with your partner about the debt and your plans to pay it off before you tie the knot so that there will be no secrets going into the marriage.

Can the Credit Card Company Give a Debt Collection Agency Original Documentation for a Lawsuit?

Collection agencies collect debts consumers did not pay off. Credit card companies utilize both in-house and third-party collectors during the debt recovery process. If a debtor does not work with his original creditor or the collection agency to resolve his payment obligations, the collection agency has the right to sue him, but may need documentation from the original creditor -- in this case, the credit card company -- to prove its case to the judge.

Debt Documentation

    A collection agency that sues you must send you a legal summons before the hearing date. If you plan to defend yourself against the debt collector's claims, you must file an answer to the summons with both the collector and the court. If you do not do so, the company wins its case by default without needing to provide paperwork to back its claims. The court views your lack of response as consent. Should you fight the lawsuit rather than ignore it, the collection agency must prove to the court that you owe the debt.

Original Documentation

    Your original signed contract with the credit card company agreeing to pay off any charges applied to your card serves as proof the debt in question is yours. Most collection agencies, however, do not have a copy of your original signed credit card agreement.

    Collection agencies purchase delinquent debts in bulk. Some credit card companies provide their collectors with full documentation of the debt -- including copies of paperwork you signed. Many credit card companies, however, do not provide collection agencies with any paperwork the collector can use to prove your liability for a debt.

Records Request

    A collection agency can request copies of original documentation of your credit card account from the original creditor, but that does not guarantee the original creditor will oblige the request. If the collection agency is working for the creditor on a commission, the creditor still owns the debt. Because of its vested interest in the collection process, the credit card company may provide the collection agency with the information it requests. Once the credit card company sells the account, however, collecting the debt becomes the collection agency's problem, and the original creditor is less likely to provide the collection agency with copies of documents that support its case against the debtor.

Time Frame

    Even if a credit card company is willing to provide a collection agency with original documentation proving the debtor's responsibility for the debt in question, that doesn't mean that it can. While credit card providers maintain extensive records on their current clients, once an account is closed, charged off and sold to a collection agency, the credit card provider only maintains records related to the account for a certain period before purging its database.