February 2005 ~ Credit And Debt Management

Sunday, February 27, 2005

Debt Management Guidelines

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Debt limits what you can do with your finances. Instead of using money to build your wealth you are paying interest payments on loans to someone else. Debt payments also make it difficult to start your own business or to save money for a down payment on a home or a dream vacation. Learning to manage your debt and pay it off will free up your income for the things you want to spend it on.

It is important to know exactly how much debt you have and how long it will take you to pay it off. You do not need to include your home in this calculation, although some people do. All other debt including car loans, student loans and credit cards need to be included. Add up all of your debt to find out how much you owe to other people. You can also add up the amount you pay in debt payments each month. Another interesting number is the amount you pay in just interest each month. This number can motivate you to take control of your debt and pay it off.

Many lenders will look at your debt-to-income ratio to decide what your current credit risk is. To find out your debt-to-income ratio, take your monthly debt payments including your mortgage and divide it by your gross monthly income. If the number is greater than 25 percent you need to work to reduce your debt. If it is more 40 percent you need to take action now to get your debt numbers down.

The best tool for getting out of debt is a debt payment plan. Write down your debts in order from highest interest rate to lowest interest rate, with the total amount owed and the minimum monthly payments you need to make. Find extra money in your budget to apply toward debt. Then apply all of the extra money toward the first debt on your list. When you pay it off, move it to the next debt on your list, applying the extra money and the first payment amount to the debt. This will help you pay off your debt more quickly than paying a little extra on all of your debts.

Many credit counseling services and debt management companies promise to help you get out of debt, but the companies often go out of business in the middle of your plan. Some do not pay your monthly debts and end up lowering your credit score, because they try to negotiate a lower settlement amount. You can do nearly everything a credit counseling service does by contacting your creditors and asking for lower rates or payments. If you do decide to use this service check your company with your Better Business Bureau to be sure they have been open for several years and have no customer complaints.

Can a Debt Collector Levy?

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When you enter into a debt agreement, your creditor has the right to sue you for the amount you owe if you do not pay. Creditors sometimes use a levy to collect the funds. This involves seizing property owned by the debtor.

Creditors cannot just take your property without going through the proper channels. The first part of the process is filing a lawsuit against you in civil court. At that point, the creditor will appear in court and show that the debt is valid. If you cannot prove otherwise, then the court may give a judgment to the creditor.

After obtaining the judgment, the creditor still must give you some time to pay the debt. In most jurisdictions, this is 30 days. After that time is past, the creditor can apply for a writ of execution with the court. This document allows the creditor to enforce the judgment with various techniques, one of which is a property levy.

With a writ of execution, a creditor can legally seize your property and use it to pay off the debt. One of the most common forms of levy is the bank account levy. The creditor finds your bank and provides the writ of execution. The creditor has the right to take money straight out of your bank account. Unless the funds are exempt, the creditor has the right to take all of the money in the account. Some examples of exempt funds would be disability payments and child support payments.

If you are at risk of a bank account levy, you do not simply have to allow it to take place. One option is contesting the lawsuit. If you have evidence that shows you did not accumulate the debt, contesting the lawsuit can help you stop the garnishment. Another option is filing bankruptcy. By filing bankruptcy, creditors can no longer try to collect money from you. Another option is to stop using the bank account and live on a cash basis.

Should You Go to an Arbitration Hearing Over Bad Debt Without an Attorney?

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If your bills have gotten the best of you but bankruptcy seems too drastic, debt arbitration may be the answer. Arbitration allows you to negotiate a lower payoff amount for your debt with fewer credit hassles than bankruptcy. However, while debt arbitration might save you from the consequences of bankruptcy, it is still a legal proceeding and you need to go in prepared. Having a lawyer by your side can make a difference in the kind of settlement you get.

In a debt arbitration, a neutral third party called an arbiter will evaluate your case and the case of your creditor and make a decision on how the debt should be repaid. In most cases, the arbitration process is essentially a negotiation in which you and your creditor try to come to terms on a reduced amount it will accept to settle your debt. You will be allowed to present information about the financial situations that led to your debt and your ability to repay. Decisions by the arbiter are legally binding and both parties must agree up front to abide by the arbiter's ruling.

Arbitration requires the consent of both parties -- you cannot be forced into arbitration outside of bankruptcy, and your creditor can decline to enter arbitration. You can request an arbitration from your creditors yourself, but many debtors hire a credit counseling service or debt negotiation service that requests arbitrations on their behalves.

If you want to hire a company to help you set up arbitration, proceed with caution. Although there are legitimate debt counseling companies, there are also companies that offer less than fair deals to consumers. The Federal Trade Commission offers advice on finding a good credit counseling service on their website (see Resources). According to Debt Management.net, avoid companies that charge a fee upfront and that charge more than 20% of your total debt for their services.

You are not legally required to have an attorney represent you at an arbitration, but you should. During arbitration, your creditor will have legal representation and an experienced negotiator working for it. If you try to face the creditor alone, you are unlikely to get the best deal on your settlement. If you go through a credit counseling service to set up your arbitration, it may provide you with a representative. If not, consult a bankruptcy/debt attorney before negotiations begin. Your state bar association can point you in the direction of a qualified lawyer near you.

In most cases, debts are not forgiven during debt arbitration. Instead, settlements for lower amounts are reached, which means you will still be facing a bill. Once you pay off that amount, your debt will be reported as "settled" to the credit bureaus, rather than "paid in full." This mark will lower your credit score because it lets future lenders know that you paid less than the total amount of your debt.

The good news is that unlike bankruptcy, once your debt is paid, you can begin rebuilding your score immediately. According to LowerMyBills.com, your credit score will recover much more quickly than it would after a bankruptcy. Further, unlike bankruptcies, arbitrations do not become a part of the public record.

Can I Claim Child Support Arrears From Social Security?

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If you owe back child support, there's a good chance your case has been referred to the Office of Child Support Enforcement (OCSE). This office was established to ensure that families receive the child support to which they are entitled. In 2007, OCSE's largest group of clients were former welfare recipients. Federal involvement streamlines collection efforts across state lines and enables states to seize federal benefits, with the federal government acting as an agent.

The TOP program, or Treasury Offset Program, has the authority to seize your income tax refund and the statutorily allowed amount from your federal benefit check. Some federal benefits are exempt by statute, others are exempt by orders from the Secretary of the Treasury. The TOP program can authorize seizure of your income tax refund, garnish your federal benefits, such as Social Security, and prevent you from obtaining a passport.

Certain income is exempt from child support collection in accordance with federal law. Social Security benefits cannot be garnished for non-tax debt such as child support, but the federal government can still seize your state and federal income tax refunds. In addition, OCSE can place a lien on your property and force a sale, if necessary. You can always work out a payment arrangement to avoid this.

Aside from the above mentioned collection methods, the federal government has other tools in its arsenal. It can suspend driver's licenses, professional licenses or recreational licenses. It can deny you a passport, but only if you owe more than $2,500 in back support. Child support agencies also have agreements with financial institutions authorizing them to freeze and seize your accounts.

Though your Social Security income may be exempt, each state has their own methods of collecting back child support. One of these methods is criminal charges. Criminal charges and penalties vary by state and can be brought regardless of the child's resident state. The federal government can also impose federal charges, but only if the child lives in a different state than her father. The federal charge for unpaid child support is a misdemeanor and can only be brought if the support has been unpaid for a year or exceeds $5,000. If support remains unpaid for two years or the amount is greater than $10,000, you are charged with a felony.

Different Stages of Collection Letters

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The federal Fair Debt Collection Practices Act (FDCPA) was adopted in 1977 to protect both consumer debtors and creditors in the debt-collection process. In a 2003 report, the State of California Department of Consumer Affairs writes the FDCPA requires that debt collectors exhibit "honest, fair and reasonable" debt-collection practices. The process by which debt collectors attempt to collect a debt, both written and verbal, are addressed by this legal mandate, and may vary slightly depending on states' laws.

The first communication between a debtor and an agency attempting to collect a debt must describe the purpose of the communication and disclose to the indebted consumer that all information obtained by the agency will be used for that purpose. Failure to disclose this information is a violation of the FDCPA.

The opportunity for a debtor to validate the debt must be offered either during the initial communication by the debt collector or no later than five business days after first contact. After receiving this written communication, the consumer has 30 days to dispute the debt if he believes the debt is invalid. Also during this time, the debtor may also research the validity of the agency attempting to collect the debt, including whether it actually owns the debt it is attempting to collect.

Many debt collections agencies are either law firms or work closely with law firms to collect a debt. Often, a letter of legal action will follow a debt-collection attempt that has been ignored or that maintains an unpaid balance. Terms contained within a notice of legal action often include the opportunity for arbitration between the consumer debtor and the debt-collection agency, as well as notice of court judgments and liens.

How to Stop Phone Calls From Credit Card Companies

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If your phone is ringing at all times of the day because of overdue credit card bills, it's time to make the calls stop. Unlike a debt collector, a credit card company is the primary creditor; as such, it's under no obligation to follow any laws that govern debt collection. However, there are ways to stop a credit card company from ringing constantly. Some of these methods may not be convenient, but they'll bring the harassing calls to an end.

Instructions

Make a minimum payment on your bill. This changes the status of your account from late to active and on track. Credit card companies will often leave a debtor alone if they simply make a marked effort to bring arrears up to date.

Tell the collections representative that, according to state law, they're no longer allowed to call. Since federal Fair Debt Collection Practices Act statute doesn't apply to the primary creditor, state law is the next step. Refer to your state's debt and creditor guidelines for the exact wording of the law in order to apply it correctly.

Send a certified letter that requests no more phone calls. The letter must list your name, address, phone number and account information along with a strong and direct request to only correspond in writing. Keep a copy of this letter on your files for reference if the calls keep coming.

Leave the calls unanswered, or block the number. If the credit card company has a main calling number, block this caller with your Caller ID service or through your cell phone. Keep in mind that companies often try calling from another number if the first doesn't work, so this solution is temporary at best.

Declare bankruptcy. By law, if a creditor is included in a bankruptcy filing, they can no longer call for purposes of collection. If the company continues to call anyway, report them to the bankruptcy lawyer for possible civil damages and penalties.

Consumer Credit and Debt Help

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If you feel like your credit situation is like quicksand and you're sinking further and further into debt, you must create a plan of action to dig yourself back to financial freedom. You must first come face-to-face with the reality of your credit situation, and then formulate a strategy of paying off your credit cards by allocating more money toward your debt each month. Once you figure out your own methods of paying down your debt, you must commit to seeing your plan through until you're debt free.

To begin fixing your credit and getting yourself out of debt, you must first understand where you stand. Everyone in the U.S. is entitled to free copies of their credit reports from the three credit bureaus (Experian, TransUnion and Equifax) through the Annual Credit Report website (see Resources). Your credit reports create a portrait of your financial history, including your debt-to-credit ratio and how responsible you have been about making payments. One of the quickest ways to improve your credit score is to report any errors that you find on the report in writing, with documentation, to both the credit bureau and your creditor.

One way to reduce your payments and pay off your debt more quickly is to reduce your interest rates. Gather any credit card offers you've received to come up with a target rate in preparation for negotiating with your creditor. Call you credit card company and let the representative know that you would like a lower interest rate. If you've been a cardholder for a long time, let them know that as well. In the event that you cannot get a lower interest rate by speaking to the representative, speak to his manager. Call back another day if you can't negotiate a lower rate right away.

One of the top factors in calculating your credit score is the timeliness of your payments to bills, and when you create a budget you plan for things like credit card payments, which makes it easier to pay them on time. To create a budget, track your spending for a week and break your purchases down into categories. Multiply the week's total by four and a half, then add in any recurring monthly payments, including your credit card bills. If your expenditures are closer to your take-home income than you would like it to be, make adjustments as necessary. By making your credit card payments part of your budget, you won't be taken by surprise when the payment deadline draws nearer---and it's easier to plan to pay more than the minimum each month.

Financial experts generally come from one of two schools of thought when it comes to paying off your credit cards. There are those who believe that you should pay the card with the highest interest rate first, since interest accumulated over time ends up multiplying your debt. Others believe in the psychological rewards of the snowball plan, which suggests paying off the card with the lowest balance first to get motivated by seeing each of your payments make a significant impact. Whichever method you believe will work best for you, choose one and stick with it. Only when you're committed to paying down your debt will you be able to boost your credit score and emerge from debt.

How Can a Mortgage Company Take Money From a Personal Bank Account?

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When a home buyer takes out a mortgage from a lender, he agrees to pay back the money according to the terms of the mortgage contract. However, many mortgages end in foreclosure -- the seizure of the property after the borrower has failed to pay back the home loan as required. In some cases, a lender may attempt to withdraw money from the borrower's bank account but only after the property has been foreclosed on.

A home loan is considered a secured loan, meaning that loan is secured by collateral. In the event that a secured loan is defaulted upon, the lender has the right to seize the collateral as compensation for its loss. When a home loan is defaulted upon, most mortgage companies retain the right to seize the home. They will not typically attempt to collect on a late mortgage payment through collection actions in the way the lender of an unsecured loan would do.

When a house is seized in a foreclosure, the lender will usually be required to put the house up for auction. The lender will then be compensated by the proceeds from the auction. In some states, the money from this auction is the only compensation that the lender is entitled to. However, in other cases, the lender can attempt to collect from the defaulted borrower the difference between the amount he owed on the home loan and the amount collected at auction. When a borrower is ordered to pay this money in court, it is called a "deficiency judgment."

If a lender brings a lawsuit for the deficiency against the borrower and is awarded a deficiency judgment, the lender has a number of ways to pursue collection of the judgment. In some cases, the borrower will simply pay the money owed him. However, if the borrower refuses, the lender can file a motion with a judge seeking permission to seize money from the borrower's bank account. If the judge grants the money, the mortgage company can take money out of the borrower's personal bank account to pay the debt.

It is patently illegal for a mortgage company to take money out a person's bank account unless one of two conditions has been satisfied. First, if the bank has received a seizure order from a judge, the lender can legally extract money from the account. Second, if the borrower has signed a contract that allows the mortgage company to extract money from the bank account under certain conditions, then the company can do so if these conditions have been met.

How to Settle a Disputed Invoice

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As a customer, you can dispute an invoice received from a company or creditor. Companies and creditors can make mistakes, and they may inadvertently charge you for items not purchased. Rather than ignore wrong information on an invoice and risk lawsuits and additional charges, talk with creditors to settle disputes.

Instructions

Write a letter to the company disputing an amount. Within days of receiving an incorrect invoice, send a written request to the company or creditor asking them to validate or verify the amount owed. This requires the company or creditor to forward written proof that you owe the money. Include your account number in the letter.

Provide your own evidence. If you can prove that you don't owe a specific amount due, provide this evidence in your written letter. For example, you can submit a copy of a canceled check or copies of your most recent statement from the company.

Use certified mail to confirm that the company or creditor receives your letter. Reduce the risk of having your dispute letter misplaced and use certified mail. The company or creditor will sign for the letter, and the postal service provides you with a receipt.

Agree to pay legitimate debt. If you only dispute a portion of a bill or statement, pay the amount you owe to settle the debt and maintain a good relationship with the company or creditor.

The Percentage of Debt to Income

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Debt-to-income ratios give lenders a picture of how much additional credit or debt you can manage. Not every creditor measures debt-to-income the same way. The amount of debt you can have relative to your income is based on the type of loan you pursue. In all cases, the lower your debt, the better your chances of approval for new credit accounts or loans.

Debt-to-income ratio is a major determinant when applying for a mortgage loan. Mortgage lenders assess your debt to income ratio with and without consumer debt. The amount of debt you have is compared to your gross income. Without consumer debt, your debt-to-income ratio should not exceed 33 percent. However, including consumer debt, your debt to income cannot exceed 38 percent to qualify for a mortgage loan. Lenders view borrowers with too much debt relative to income as a significant risk. If you are applying for a home loan, pay off credit cards and personal debt before completing pursuing financing.

Credit card companies seek borrowers who present little financial risk. If you manage your credit card accounts responsibly---making timely payments and keeping balances low, you are more likely to qualify for a new credit card account. Responsible credit card management means keeping a low credit utilization ratio. Credit utilization is comparable to debt-to-income when qualifying for a car or mortgage loan. Credit utilization refers the amount of credit you charge relative to the amount available to you.

For example, if you own a credit card with a $100 limit and charge $70, your credit utilization ratio is 70 percent. According to Bankrate, your credit utilization ratio should remain below 30 percent to ensure a positive credit rating.

Auto loan officers consider your debt-to-income ratio to assess whether you can afford to add a car loan payment to your monthly budget. In general, your debt-to-income ratio should not exceed 36 percent when applying for auto financing. CarBuyingTips.com recommends getting your credit balances below 50 percent before pursuing a car loan to avoid getting stuck with a bad credit auto loan. These loans offer significantly higher interest rates and sometimes large down payments.

Debt-to-income ratios can have just as much impact on your loan approval status as your credit score. Paying your credit accounts on time is important in raising your score, but if you have too much debt, the slightest financial setback can lead to account delinquency. Stop charging on credit cards and find ways to reduce your spending before pursuing new financing. Bankrate recommends doubling up on your minimum payment to chip away at large debt balances. Avoid major purchases until you lower your debt-to-income ratio to a rate well below the recommended percentages.

Florida State Laws on Cash Flow Notes

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A cash flow note is a contract between two parties memorializing a loan agreement. Generally, the terms of the cash flow note include payment schedules, interest rates, final payment dates, and occasionally various types of penalties or fees. The common law and Uniform Commercial Code of Florida are the two bodies of law that regulate the bulk of cash flow note legal issues in the State of Florida.

Usury is a legal term used to describe the charging of interest rates beyond a level deemed to be fair and equitable. Florida state laws on usury limits, which apply to interest rates on cash flow notes, are fairly lenient on lenders. Florida follows a two-tier system for interest on promissory notes. Loans up to $500,000 have a maximum interest rate of 18 percent, while loans in excess of $500,000 have a maximum interest rate of 25 percent.

While Florida law sets a fairly high cap on interest rates and can be seen as lenient in that regard, those limits are relatively strictly enforced. A Florida court reviewing a cash flow note or other lending agreement that violates the usury limits will likely strike down such a lending agreement and hold that it is invalid as a matter of law.

Assignment refers to the transfer of one's contract obligations to another. In the context of a cash flow note agreement, assignment would mean the transfer of a loan obligation from one party to another, meaning that the original lender will now be owed money by a new borrower, and the original borrower is relieved of his obligation to repay. In Florida, assignment of cash flow note obligations is permitted, so long as the lender consents and the agreement does not significantly hinder the ability to recover on the loan. For example, an assignment to an insolvent third party would probably be held invalid, as this party would be unlikely to be able to satisfy the debt.

A statute of limitations is a legal time limit within which certain actions at law may be initiated. Once a statute of limitations period has run, the affected party generally has lost its legal remedy. In Florida, the statute of limitations for an action regarding a defaulting debtor is four years. This means that if an individual fails to make his payments on a cash flow note, the lender will have to initiate a suit to recover that debt within four years of the default.

Can You Get a Judgment If You Are Sending the Company Money?

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A judgment is entered against you when you owe creditors and ignore their requests for payment on past-due balances. There are many ideas on how to avoid judgments. Some believe paying at least a dollar on past-due balances keep creditors from entering a judgment against you. Communicate with your creditors. Avoid judgments by generating a payment plan that works within your budget.

Judgments are issued under a variety of circumstances. You used a service you never paid for. You went to the hospital without insurance. You used a credit card. You ignored or couldn't pay the bills when they arrived later in the month. A representative from the company calls you in regard to paying on your account. The calls are avoided. Soon you receive calls from collections agencies asking for money on behalf of the original creditor.

Companies have an accounts receivable department. Accounts receivable handles accounts that owe money to a company. An accounts receivable representative contacts you and requests payment of past-due balances within a certain amount of time. Eventually, unpaid accounts are moved from accounts receivable to a collections team. Collections teams are a separate office within the company or an outside hire. Exactly when your account is moved to collections varies with the policy of the company.

Collections teams contact you before pursuing judgment action. You receive paper notices and phone contact in an attempt to collect on your account. However, don't blindly send money to your creditor. Appropriate processing is necessary so your account is credited correctly. Talk to the collections department to set up a payment plan for past-due balances. Accounts placed in collections affect your credit. Credit repair experts advise paying before further damage is done to your credit.

Many people assume paying a minimal amount on debt, even one dollar, shows good intentions to pay. It is at the creditor's discretion whether receiving only one dollar a week or a month satisfies the definition of a payment. Even if you are showing good intentions, the company can still have a judgment entered against you. Communication with your creditors is the key. If your financial situation is unknown by the company, it will commence with judgment proceedings.

Contact the accounts receivable or collections department of your creditors. Inform them of your financial situation and your desire to pay all amounts owed. Keeping a calm head and not letting your account situation spiral out of control is the best path to working out a payment plan. Keep receipts of all payments made and stay current with your negotiated payment schedule. Defaulting on a payment plan makes you a candidate for future judgment proceedings.

How to Find Out What Debts You Owe

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Every American has a personal record of the debts they owe. If you want to find out which specific debts you owe, you can easily pull your own credit report for free and check it out. Credit reports detail all of your revolving credit, loan history, payment history and outstanding debt. This can be both good and bad. Having good credit with relatively little debt will allow you to open bank accounts, take out loans, apply for a home mortgage, lease or buy a car, and get credit cards with low interest rates. Having too much debt, however, will prevent you from many of these things.

Instructions

Go to the website of AnnualCreditReport.com, which is a service provided by the government that allows American citizens to pull a free credit report once a year from each of the three major credit reporting bureaus: TransUnion, Experian and Equifax.

Choose your state from the drop-down menu on the homepage. Click "Request Report."

Enter your personal information, which includes your current address, previous address, Social Security number, and date of birth. Hit "Continue" to go to the next page.

Click on which credit report you want to see. You can choose from TransUnion, Experian and Equifax.

Answer any multiple choice questions that the website may give you. For example, they may ask how many loans you have or at which banks. If you answer correctly, you can see your credit report.

Look through your credit report and note any outstanding debts. It will show how much money you owe and to which companies.

Contact the companies to whom you owe money and settle any debts.

Dispute any incorrect debts or data by hitting the "Dispute Item" button located next to each debt and choosing the reason for dispute. You should hear back in 30 days regarding your debt and whether it will remain on your report or be removed.

Signs That You May Need Professional Credit Counseling

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Feeling overwhelmed by debt and monthly bills is not an unfamiliar experience to the average American. Fortunately, there are places you can get professional credit counseling to help you get your finances under control and become debt-free. However, many people do not know the signs that indicate that they would benefit from professional credit counseling.

If you are only making the minimum payments on your debt, either because that's all you can afford or you are spending the rest of your disposable income on non-essentials, then credit counseling is definitely for you. According to MSN Money, paying only the minimum payment on a card with $1,000 will take you 22 years to pay off and thousands of dollars in interest. Credit counseling will aid you in getting off the minimum payment merry-go-round of interest rate payments and onto the path to becoming debt-free.

When you do not know how much money you owe on each card, let alone the grand total, it's time to involve a professional. Knowing how much you owe as well as your interest rates not only helps keep your spending within reason, but it gives you the knowledge necessary to improve your financial situation if you choose to take responsibility for it.

If you are spending more than 20 percent of your take-home pay each month on paying off your debt, yet you aren't really making much of a dent, you need professional credit counseling. Not only can a professional credit counselor work out a doable budget with you, but sometimes they can negotiate lower interest rates and waived fees with your creditors through a debt-management plan (DMP).

Charging necessities due to cash flow problems, loss of a job or no emergency savings is a red flag that indicates you need professional credit counseling. A credit counselor will help you take an honest assessment of your financial situation, both your income and your monthly expenses, to give you a functional budget that moves you in the right direction. In cases of temporary financial hardship, your credit counselor may be able to negotiate a temporary suspension of payments without penalties with your creditors.

Feeling overwhelmed or hopeless about improving your financial situation is a sure sign that you would benefit from credit counseling. According to the National Foundation for Credit Counseling, credit counselors advise, educate and enable you to take control of your budget, debt and financial future through counseling sessions, classes and literature. Trust your gut if you're feeling like you're drowning in debt, and get the help you need from professionals who can guide you to a better place financially.

The Best Way to Clean Credit Report

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Cleaning your credit report requires waiting for a long time or some spare cash to pay off any creditors that you have late or delinquent accounts with. Paying off your debts in full will also restore your credit rating, but settlements can get you the same result for a lower cost. Monitor your credit report as well, so you can dispute any errors that may come up and be made aware of any accounts that may be late.

Paying your debts in full is one of the best methods to clean up your credit report quickly, but it is the most expensive. If you're paying a late or delinquent account, make sure that you secure an agreement for a "pay for delete" in writing to get the most benefit to your credit report for your money. If you can't get that condition in an affordable manner, request that the account be marked "paid in full" instead.

Settling your debts is an option that only becomes available once your accounts are 60 days or more late or have been sold to collections agencies. If you have late or delinquent debts, contact the current owner of the debt (listed on your credit report) and ask for a "pay for delete" in return for an amount of money less than the total obligation. Set your starting offer at 10 percent of the total value and move up from there if you need to. If you get a "pay for settlement" it will harm your credit rating more than a "paid in full" entry. A deleted entry is the best possible outcome for your credit rating.

You may also choose the alternative of waiting for your debts to fall off your credit report. Delinquent debts will fall off your credit report after seven years and cease affecting your score. During this time, your creditors may sue you for collection until the statute of limitations on the debt expires. These statutes differ depending on the state from which the loan was made. Attend any court dates that you may be required to so you can avoid a default judgment against you. Settle the debt in writing with any attorneys representing your creditors. If your debts are relatively small or your creditors overlook you, you may be able to avoid being sued for them.

How to Calculate Yield Maintenance

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Yield maintenance is an additional fee that some lenders charge to borrowers if they choose to pay off their loan early. Lenders charge this fee in order to ensure that they still make the expected revenue from the loan regardless of when it is paid back. Knowing how to calculate yield maintenance will allow you to make more informed decisions regarding major financial decisions such as whether to refinance your mortgage.

Instructions

Gather the necessary information. You will need to know the initial principle of the loan and the interest rate of the loan. You will also need to know the amount of time between the date the loan was originally expected to be paid off and the date the loan will actually be paid off. Finally, you will need to know the interest rate of a treasury note if it was held for this same amount of time.

Subtract the interest rate of the treasury note from the interest rate of the loan. For example, if the interest rate on the loan was 7 percent and the interest rate on a treasury note of the same duration was 3 percent, you would subtract 3 from 7 to get 4 percent. We will call the result of this calculation the penalty interest rate.

Multiply the penalty interest rate by the initial principle of the loan. For example, if you determined in the previous step that you had a penalty interest rate of 4 percent and the loan's initial principle was $400,000, you would multiply 400,000 by 0.04 to get $16,000. We will call the result of this step the annual penalty cost.

Multiply the annual penalty cost by the number of years that the loan was paid off early. For example, if you determined from the previous step that your annual penalty cost was $16,000 and you paid the loan of five years early, you would multiply 16,000 by five to get a yield maintenance fee of $80,000.

Credit Reports & Foreclosures

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The setbacks of foreclosure are great. Once you lose your home, an avalanche of financial and legal woes appear. Foreclosure is a long-term stain on your credit report and your score can take years to rebuild after the process ends. Finding help in advance of the foreclosure process can help mitigate your loss.

Seek help from a Housing and Urban Development-certified foreclosure counselor as soon as you receive a foreclosure notice. Counselors can help you determine solutions for keeping your home or prepare for foreclosure if there is no other option. When speaking with a foreclosure counselor, have all your loan, income and household budget information handy. Foreclosure counselors are also helpful in alerting you of your state's laws regarding mortgage deficiency judgments.

A deficiency judgment is a demand for the remaining sum on your mortgage following foreclosure. Since financial hardship is generally what leads to foreclosure, most homeowners are unable to make debt payments and afford a new home. Filing for bankruptcy is an alternative to making payments on a judgment.

Credit reports detail your financial relationship with your creditors. A new creditor can learn your payment history, charged off accounts and the number of credit accounts you have available through your credit score. Legal actions such as liens, judgments, foreclosure and bankruptcy also appear on your credit report. Foreclosures remain on your credit report for seven years.

While a foreclosure remains on your credit report, it may be difficult to find certain types of employment. Jobs that rely on the financial credibility of their employees such as jobs with banks, jewelry stores and credit unions, seek employees with good to excellent credit scores and a history of responsible borrowing in their credit report.

Your credit score can take years to rebuild following a foreclosure. According to CNN Money, your score drops between 85 points and 160 points after foreclosure. The extent to which your score drops is based on the status of your other credit accounts. If your other accounts remain in good standing with a positive payment history, impacts to your score may be lessened. Focusing on repaying remaining credit accounts on time and keeping available balances low on revolving accounts helps you rebuild your score the fastest.

What Are the Advantages of a Debt Management Plan?

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Debt management plans (DMPs), also called debt repayment programs, are programs enacted by consumer credit counseling services on your behalf. When you enroll in one, a counselor will look at your current financial situation, including all income, expenses and debts owed. They will then help you draw up a budget to get you back on track financially, without the need to file for bankruptcy -- and that's just one benefit.

Counselors for services that offer DMPs negotiate with your creditors on your behalf to lower your interest rates. Additionally, they may be able to convince creditors to waive any late fees or other charges depending on your situation. While they may not necessarily be able to reduce your existing balance, even a small reduction in your interest rate can make a big difference in how quickly you are able to pay off the principal.

If you are considering a DMP, chances are good that you have received some calls from collection agencies. Enrolling in a DMP can get those calls to stop, although it might not happen immediately. If they do continue to call directly after you have enrolled in the plan, simply refer the collection agency to your plan's customer service hotline, and tell them you have enrolled in such a program. Simply knowing that your bills are getting paid on time and reported to the three national credit bureaus also clears away the stress you may be feeling prior to addressing your debt problems.

DMPs do not, in and of themselves, affect your credit history or score one way or another. However, since enrollment in a DMP closes your outstanding unsecured debt accounts, this may affect the account age portion of your credit score. The good news is that, if you are considering a DMP, you probably have some late payments on your account already. If this is the case, enrollment in a DMP will likely improve your credit history and score as you build a record of paying your obligations on time, month after month.

As of February 2011, the maximum amount of time that accredited and reputable DMP providers can have you enrolled in such a plan is 60 months. Consider this in conjunction with the interest rate reductions and waived fees your DMP secured on your behalf. This combination of things means that your debts will be paid down sooner than they would if you had continued to struggle on your own month to month, since more of your money will go toward paying down your principal.

How to Resolve Financial Problems

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Financial problems plague just about everyone at one point or another. From attempting to properly manage credit to figuring out how to pare down debt, resolving financial issues can be more than challenging. For some, it may seem like a completely insurmountable goal. However, there are ways to resolve financial issues, many of which start with proper budgeting and discipline.

Instructions

Write down everything going out and coming in. This is the only way that you will have a clear picture of where your finances are and where you are going wrong. Put expenditures in one column and incoming payments in another. List every expenditure, right down to your daily cup of Starbucks, as well as your regular monthly bills like mortgage and car payments. This will give you a clear idea of what you need every month to pay your bills. It will also tell you where the financial issues come into play, particularly if you have more to pay than what you actually bring home each time you get paid.

Make a new budget. Making a budget is the only way to resolve financial issues so that you don't go deeper into debt. The budget should consist of absolute expenses that must be paid for survival, like electricity, food and shelter (rent or mortgage). Set aside any old bills or items in collections to be addressed outside of the budget. If possible, allow for some wiggle room to reward yourself every now and then. It is important to have even small rewards for sticking to the budget. This could be something simple like that cup of Starbucks you cut out of your daily expenditures or something a bit more elaborate like a new outfit.

Contact debtors to set up payment plans. Determine where you are having the financial problems and contact those companies. Ask if you can set up a payment plan that not only appeases the company, but also fits in the confines of your new monthly budget. If the bill collector is unwilling to work with you, then you may have to simply set aside a certain amount of money each pay period until you are able to pay off the balance.

Negotiate interest rates on credit cards and loans. Particularly if you have been a valued customer, ask for better rates to get your payments down and provide some breathing room in your budget.

Generate secondary streams of income if you have more going out than coming in. This is a common problem for people with financial problems and it may require some sacrifice to dig out of the hole. You might consider getting a second job at night or on weekends, or finding a way to make money online, such as freelance writing or virtual assisting. You might consider turning a hobby, like cooking or sewing, into a side business to generate extra income.

Methods to Destroy Credit Cards

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When you get a new credit card in the mail you will need to destroy your old one. According to CreditCards.com, if you do not properly destroy your old credit card, you could become a victim of identity theft. There are several effective methods to destroy credit cards.

A reliable pair of scissors can do the job of destroying your old card for you, according to CreditCards.com. When you cut your credit card, be sure to cut your signature and account number into at least three pieces. The more pieces you cut, the better. When you throw out your cut-up credit card, throw it into three or four different garbage cans. This will prevent a criminal from being able to pull the pieces out.

Not every shredder is designed to handle credit cards, so buy one that is credit card capable, according to MSN Money. A shredded credit card destroys the account number and three-digit security code on the back to the point where it would be impossible to piece it back together. You should also shred all of your credit card bills to protect that information as well.

Burning a plastic credit card can give off potentially dangerous fumes, but if you can create a fire in a well-ventilated area, then this is a good way to destroy a credit card, according to MSN Money. Make sure the card burns all the way down and that none of the pertinent information can be read.

MSN Money suggests an extra step to destroying your credit card to ensure that no information can be retrieved from the pieces. Run a strong magnet along the magnetic strip on the back of your card before you destroy it to erase the information from it. If your card has a computer chip in it, then smash the chip with a hammer.

Savings Accounts Vs. Paying Off Debt

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Many people face two distinct but competing goals. If you are saddled with high-interest rate debt, you want to get out from under that debt as soon as possible. At the same time, you want to start building savings and a cushion you can rely on in an emergency. In many cases it is smart to use a combination strategy that allows you to meet both of these vital financial goals.

When deciding whether it is better to focus on paying off debt or building your savings, the first thing you should do is evaluate the debt you have. The higher the interest rates on your debt, the better the return you will get when you retire that debt. For instance, paying off a credit card with an 18-percent interest rate is the same as getting an 18-percent on your savings. If your interest rates are high, making paying your debts a priority is a smart move. You can put some extra money toward building up your savings as well, but getting rid of those debts should be first on your list.

You never know when an unforeseen event like a job layoff or major expense will strike. That is why it is so critical for everyone to have an emergency fund set aside. If you have not built an emergency fund containing three to six months' worth of living expenses, you should make that a priority. If you can transfer just a small amount from each paycheck to an emergency fund, you can start to build those savings. While paying off your debt is important, so is building an emergency fund, and it is a good idea to work on both of those goals. Look for ways to trim your budget, then put some of the savings toward an emergency fund and the rest toward paying down your debts.

If you are saddled with high-interest debt, you might be able to lower your monthly payments and get out of debt faster with a debt consolidation loan. If you are eligible for a debt consolidation loan, you can roll your high-interest credit card debt into that loan, then use any money you save to boost your emergency fund and get started on your investments. Lowering your interest rate can be a huge boon when it comes to getting out of debt, so look at your debt consolidation options carefully when reviewing your debt reduction strategies.

Instead of deciding between paying off debt and building your savings, you can apply a combination approach to the problem. Getting out of debt is very important, and it can save you a great deal of money in the long run. At the same time, it is also important to develop a long-term strategy for saving and investing, and to build a short-term emergency fund. To combine these two critical goals, you could invest enough in your 401k to get the full company match, and put any extra money toward paying down your debt. Investing in your 401k gives you an immediate tax savings, and you can use those tax savings to help reduce your debt. Once your debts are paid off, you can use any excess cash flow to build your retirement and personal savings.

Bankruptcy and Credit Scores

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Your credit score is a quantitative measure of your financial history. Calculated by three major institutions who use slightly different techniques and scales, these scores are the single most important factor determining how much you can borrow and what interest rate you will pay. A bankruptcy is the most damaging event for your credit and will significantly drag down your score. It will also be reported for a full decade on your financial report cards.

Your credit score is basically your last seven to 10 years of financial history summed up in a single figure. These scores are calculated by three major credit reporting bureaus in the United States: Equifax, Experian and TransUnion. The scores are based on proprietary formulas, which take into account your income, outstanding debt, when these debts will be fully paid off, past delinquencies and defaults, as well as your unused credit lines. In addition, bankruptcy filings are factored in and have a very large impact on the final score. Ordinarily, the credit score is calculated based on the last seven years of data. Bankruptcy filings are an exception, however, and will continue to negatively impact your score for 10 years.

Although different rating agencies use slightly different scales, the figures are comparable. A score of 680 and above is usually considered satisfactory, also referred to as "prime". Scores between 575 and 680 are subprime and indicate that the funds extended to the borrower carry a significant repayment risk. The term "subprime mortgage" refers to mortgage loans extended to these types of borrowers. Loan applicants with scores below 575 will be usually denied credit unless they find a cosigner with better credit history. A bankruptcy filing will usually drag your score down by 160 to 220 points. The more recent the filing, the greater the impact. The quantitative hit on your record, however, will continue for the full 10 years.

In addition to producing a final number, in the form of credit scores, the rating bureaus also produce credit reports. These reports include the specific information used to calculate your score and outline specific events such as bankruptcies and defaults, along with the exact dates, size of the default and so on. The bankruptcy will be prominently mentioned on this report for 10 years after which it will no longer be reported. Naturally, a bankruptcy will make it very hard, and in many cases impossible, to obtain home or car loans, mortgages or credit cards. Usually, only after a few years have passed and you have demonstrated the ability to handle your finances more responsibly will lenders start to provide small loans again.

It is, of course, best to avoid bankruptcy filings if at all possible. If, however, you have no other choice, try to work with a bankruptcy lawyer who can ensure that you can make a fresh start as quickly as possible. The more accurate the paperwork and the more comprehensive the plan presented to the judge in bankruptcy court, the faster you can start to rebuild your credit. You are likely to be denied all credit applications at first. Don't despair. Get either a prepaid credit card or find a cosigner. In either case the limit on the credit card will be very low, but a small step toward building a clean credit history is far better than not acting at all.

Does Florida Let Creditors Put a Lien on Your Home?

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Florida wont allow a creditor to place a judgment lien against your home, but not all creditors know that. Some that do might try anyway. Although theres no law that prevents them from putting a lien against your property, both Article VII, Section 6 and Article X, Section 4(a) of the Florida Constitution let you easily remove it if a creditor is successful.

A catch exists in Floridas laws protecting your home from creditors. You must live in your property and it must be your primary place of residence. A vacation home that you own in Florida doesnt qualify. The address of your home must be your regular mailing address. The property must be clearly distinguishable as your residence from any other real estate you own, either within the state or elsewhere.

Loans specifically secured by your property are exempt from Floridas laws against creditor liens. For example, when you take out a mortgage to purchase a property, that mortgage forms a lien against it. If you default on your payments, you risk foreclosure. The laws also protect construction loans. If you take out a loan to add a second floor to your property, and if the lender places a lien against your home as collateral for the money, Florida does not disallow that. Property taxes are also exempt. By their nature, they form a natural lien against your property, and Florida laws will not allow you to remove it.

You can protect your property by registering it with your county as your homestead. Youll need either your tax bill with your name on it or a copy of your recorded deed. Take it to the property appraisers office in your county and ask for Form DR-501. Complete the form and give it to the clerk, along with proof that your home is your primary residence. Accepted forms of proof include a copy of your auto registration and voter registration card, if they show the address of your property. After you file your application form, the laws protect your home against creditors.

When a creditor files a lien against your property, it does so through the recorder of deeds, not through the appraisers office. The recorder of deeds might accept and file a lien against your property, unaware that its your homestead and that you've protected it. If this happens, you can have it removed. Complete a notice of homestead, available through either Floridas state website or the recorders office. Forward it to the creditor who has successfully placed the lien. The creditor has 45 days to either remove the lien or file a response with the court, objecting to your notice. Your creditor cant challenge your right to have the lien removed, but it can challenge the fact that you really live there and that you use the property as your primary residence. Youll have to appear in court to prove it, but as long as you actually live in the residence, you should be successful at overturning the creditors claim.

In addition to using your homes address for your voter and automobile registrations, use the address of your home for filing your taxes, banking, employment records and Social Security records. This increases your odds of prevailing over a creditor objection.

How to Get a Brinks Fire Safe Key

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Brinks has fire-proof safes with dual lock security systems, requiring both a combination and a key to open them. Though Brinks no longer manufactures safes, First Alert, a home security company, reissues keys and combinations for Brinks safes for a fee. The replacement fees are set in the instruction manual that came with the safe. First Alert will respond to certified requests for new keys from the safe owner that include a check or money order.

Instructions

Write down the key, model and serial numbers of your safe. The key number is located on the face of the safe lock. The model and serial numbers are both on the safe and in the instruction manual that came with the safe.

Draft a letter addressed to First Alert requesting another key to your safe. Document and identify the key, model and serial numbers for your safe in the letter. Note your name and that you are the owner of the safe. Include an email address and phone number where you can be contacted. List the address at which you wish to receive the replacement key.

Sign the letter in the presence of a registered Notary Public. Ask the Notary to notarize the letter to confirm your identity and signature.

Enclose a signed check or money order for the fee amount listed in the owner's manual made payable to First Alert.

Mail the letter and check to:

First Alert

ATTN: Consumer Affairs

3901 Liberty Street Road

Aurora, Illinois 60504

You may also fax your request to 630-851-7995. Customer service will respond to your request with a request for payment within 48 hours.

Disadvantages of Debt Management Plans

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As of 2010, 43 percent of Americans spend more money than they earn annually, according to MSN. In addition, nearly every household in America holds more than $8,000 in credit card debt alone. The average debt per family in America is more than $18,000, excluding mortgages and living expenses. With increasing debt, the number of people seeking the aid of credit counseling agencies and debt management plans has increased. Debt management plans do offer several advantages but consumers must know all the facts.

Debt management plans offer a way to organize your finances and reduce your monthly payments. However, there is no guarantee of a reduction in your interest rate or your outstanding balance. If your credit counseling agency has promised a reduction in either, keep checking your credit card statements to see that this indeed happens. With reduced payments and no other reductions, many consumers end up simply taking far longer to pay off their debts.

Participating in a debt management plan will not likely harm your credit score as long as you make timely payments according to the terms of the agreement. However, your credit report will reflect that your are in debt management for certain debts. As long as this remains on your credit report, obtaining additional credit could be difficult. You may have to wait until the debt is cleared and the record of debt management removed before being approved for further loans or credit cards.

Although debt management plans vary from company to company, most offer very little control on the part of the participant. The company decides how much is paid to each creditor each month. It also decides the amount you should pay it. There is no flexibility on dates. If you miss payments to your debt management company, you could loose any reductions that might have been negotiated for you. If your income isn't stable, then a debt management plan could possibly do more harm than good.

Several debt management companies charge fees for their services even though they are nonprofit. In most cases, the fees are small and most companies will not refuse to provide their services if you are unable to pay the start-up fees. However, according to the Federal Trade Commission, consumers need to question the nature of the fees to protect themselves from fraud. The FTC recommends asking how the debt management company employees are paid. If employees are paid on a commission basis, then you might want to look elsewhere. Do not sign up with any debt management company that will not answer your questions or disclose the requested information.

Will Paying Off Debt Improve My Credit Score?

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Paying off current debt and keeping your account balances down is a great strategy for improving your credit. On the other hand, settling old debts for less than what you owe can sometimes hurt your credit score.

Your account balances determine 30 percent of your FICO score, a credit scoring system used by many lenders in the United States. Lowering your current account balances by paying them off is a good credit score boosting strategy. Don't close your accounts, though, as this can harm your credit score, according to Maxine Sweet, Vice President of Public affairs at Experian.

If you are in financial difficulty and have accounts that are charged off, in default, or are in danger of default, settling your debt for less than you owe can be very tempting. Unfortunately, debt settlement can also lower your credit scores, so you may need to weigh this option against alternatives, such as taking out a debt consolidation loan.

Keeping your account balances at under 30 percent of your available credit can significantly improve your credit score, according to financial writer Liz Pulliam Weston at MSN Money. If you do enter into a debt settlement agreement, try to get your creditor to agree, in writing, to report the debt as "paid in full" to avoid the damage that a "settled" account can cause.

Refinance Options for Bad Credit

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Using assets to restructure debt is the most viable way to improve a poor credit rating for homeowners. Mortgage loans can be refinanced at lower interest rates to consolidate debts and pay off bills by borrowing against the equity in a home. This allows borrowers to use a lower-rate loan to pay off high-interest debt.

Poor credit score can mean unfavorable loan terms

Credit scores are ranked by FICO to help lenders assess the risk of loans sought by consumers. The credit rankings range from 850 to 300, with anything more than 700 considered excellent, and any rating below 500 making it difficult to acquire a loan. The higher the rating, the better the interest rates, the lower the rating the more unfavorable the loan terms.

Borrowers carrying high-interest credit card debts or car loans can improve their credit score by a refinance to consolidate those payments into one loan at a lower rate. Monthly debt payments also can be reduced by refinancing a mortgage at an adjustable interest-only rate. If payments are made promptly over the first few years, improving the borrower's credit score, the loan can be refinanced at a low fixed rate.

Lenders determine the terms of refinancing with two factors in mind: "loan to value'' and "debt to income'' ratios, which determine their risk. Loan to value is a measurement of the loan amount against home equity. The more equity held after the loan, the more favorable the terms. Debt to income measures percentage of debt against income. Higher income against low debt obligations results in better terms.

Pros & Cons of Concentrated Debt

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Concentrated debt might help you climb out of debt, but it can also hurt your credit score in the process. How much benefit you receive from concentrating debt depends on the specific method of debt consolidation you choose. A debt consolidation loan or debt management plan are the most popular forms of debt concentration available.

Concentrating your debt in once place through a consolidation loan or debt management plan allows you to make payments on all your debts by making one monthly payment. This can make your debts much easier to manage, especially if you have debts with due dates strung out across the month. You can also avoid the chance of missing payments on your accounts when you concentrate your debt. Missed payments for credit accounts, including credit cards, often incur late payment fees of as much as $40.

A consolidation loan or debt management plan creates a structured repayment calendar which pays your debts off over a finite period of time. You are no longer shackled under the open-ended repayment terms of your credit card companies and credit line holders. This can provide you with a sense of relief that you can become debt-free and also creates a goal for you to work toward in becoming debt-free.

The problem with a concentrating your debt is the loss of your available credit. A consolidation loan typically requires you to close your credit card accounts and lines of credits. A debt management plan allows you to keep your credit accounts open but your creditors will typically bar you from using your cards until you have successfully completed the repayment period. The lack of a credit card can hurt you if you travel frequently for business because most hotels and rental car companies require credit cards to a debit transaction.

A debt consolidation loan can hurt your credit score because your credit accounts are closed as a result of the debt concentration. This can make securing new lines of credit more difficult if your credit score is already damaged due to defaults or late payments. Negative notations on your credit report can remain for up to seven years even if you resolve the delinquency quickly. A debt management plan should not have a direct effect on your credit score though your score could suffer because you are not using any credit available to you because your accounts are locked.

Can a Credit Card Company Debt Become a Mortgage?

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If you don't pay your credit card debt and your credit card company obtains a judgment against you, your credit card debt can take on some characteristics of a mortgage. This is because your creditor can acquire a lien on your house and has the power to conduct a foreclosure.

If your credit card account is seriously delinquent, for example if you have not made a payment in six months, your lender may decide to go to court and obtain a judgment against you. Credit card companies usually do this only if they believe you can afford to pay off your debt or you have a valuable asset, such as your home. A judgment hurts your credit score and provides your creditor with several ways to collect the debt.

With a judgment, your credit card company has the power to file a lien against your home. This makes it similar to a mortgage loan, which you usually take out to purchase your home. The lien gives your credit card company a claim on your property. However, this lien is usually lower in priority compared to your actual mortgage loan.

Your credit card company usually uses its lien to claim some of the proceeds from selling or refinancing your property. If the outstanding amount of your credit card debt is higher than the amount of equity you have in your home, the credit card company's lien may prevent you from selling or refinancing until you can pay off the debt. Your credit card company also has the right to foreclose on your property.

Although your credit card company can foreclose on your property, it is unlikely to do so, according to Bills.com. This is because its inferior lien means that it has to use the foreclosure sale proceeds to pay off any other lien holders, such as your mortgage lender, before getting anything. A foreclosure may also hurt your credit card company's business image if the media reports about a small credit card balance resulting in the loss of a home.

How Long Do Collections Stay on Credit Reports?

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The Fair Credit Reporting Act sets legal guidelines for how long a collection account can remain on your credit report. After the reporting period has expired, the collection account will be removed from your credit file by the credit bureau that is reporting the debt.

A collection account can only remain on a credit report for seven years from the date the debt first went 180 days delinquent. After this time period, the original creditor's account and any subsequent collection accounts that have resulted from the debt going unpaid must be removed.

The removal of a collection account will improve your credit score. A higher credit score will help you to get lower interest rates on loans and lines of credit in the future.

Contrary to popular belief, paying a collection account does not result it in being removed from your credit report unless you negotiate an agreement in writing with the collection agency to remove the negative notation once the debt is paid in full.

The Fair Credit Reporting Act gives you the right to dispute any information on your credit report that you suspect may be inaccurate with the credit bureaus. The credit bureaus then have 30 days to attempt to validate the information. If it cannot be validated, it will be removed from your credit history.

Some collection agencies have been known to intentionally report incorrect dates on collection accounts in an effort to have their notations appear within consumers' credit files for longer periods of time.

Can Not Paying Business Credit Cards Affect Personal Credit?

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Business credit can open or close doors to financial resources. Creditors use your payment history to assess whether you are a safe or risky borrower. Paying your business credit card late negatively impacts your business credit score. This may also have an impact on your personal credit score depending on how your business is structured.

When you apply for a business credit card, you have the option of entering your Social Security number if your business does not have substantial credit history. New business owners are usually faced with this predicament because they are not able to verify their propensity to pay back bills without using personal credit information as a reference. If you apply using your Social Security number, your business card is attached to your personal credit score.

Late payments negatively affect your credit score. If you make no tie between your personal credit and your business credit, your personal credit is unlikely to be affected by activities of your business. Ties can only be made during the application process. Certain business cards do not require any personal input from the business owner, but they do require the business to have assets and credit references. When you don't have credit references or assets, you must use your Social Security number to apply for your business credit card, and any late payment is reported on your personal credit report.

Corporations protect the personal assets of directors and shareholders. Corporations are entities that can obtain credit, bring lawsuits and pay taxes. Corporations with assets and credit history can usually be approved for business credit cards without the need for a Social Security number.

Limited liability companies are not tax-paying entities and still require the personal information of the owner until the business is established. Sole proprietorships and general partnerships do not provide financial protection for business owners. When you are a sole proprietor or are joint owner in a partnership, your personal credit history is affected by business credit cards in your company's name.

Even if a corporation is liable for the debt of a business, a representative of the corporation must manage the notices that come from collections. That may mean that your personal assets cannot be taken to cover the debt of the business, but you are still involved in the process. Maintain documentation of all transactions related to billing on the credit card in case the corporation is sued for the balance on the card.

How to Get a Co-signer Released From a Sallie Mae Student Loan

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Many private student loan companies, including Sallie Mae, require students to have co-signers to obtain loans. This is because students do not have the credit history to support the risk the lender would take in issuing the loan. To solve this, the co-signer agrees to repay the loan if the student fails to pay. A co-signer release removes the student loan from the co-signer's credit report and removes all liability the co-signer had for the loan. Sallie Mae has provisions to allow the co-signer to be released from the obligation as soon as one year after the borrower begins repayment.

Instructions

Finish your schooling and establish your repayment plan with Sallie Mae. The repayment term will vary depending on the amount you borrowed and how long you would like to have to repay it.

Make the agreed principal and interest payments on-time every month for 12 months in a row on a Smart Option Sallie Mae student loan. If you have another type of Sallie Mae private student loan, you must make 24 consecutive on-time payments of principal and interest.

Pay all of your other credit-related bills on time, including credit card payments, auto loan payments and other student loan payments. Sallie Mae will check your credit report and require that you meet their lending guidelines before releasing your co-signer.

Log into your Sallie Mae online account management or call (888) 272-5543 to request a co-signer release form after you have made the correct number of consecutive on-time payments.

Fill out the co-signer release form and return it to Sallie Mae.

Continue making on-time payments while Sallie Mae processes your application for co-signer release. If you miss a payment during the processing time, your application will be denied.

How to Find a Local Collection Agency

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For a business, customers with unpaid debts can be a real problem. When a business's unpaid accounts receivable mount, that business is not able to pay its expenses. That, in turn, can cause the business to suffer or even fail. When this happens, it becomes necessary to hire a third-party collection agency to collect the unpaid debts. It is easy to find a reputable local collection agency that will soon have your business back on track.

Instructions

Look in a local phone book to see if any collection agencies are listed. Local collection agencies work best for accounts with a small amount of money to collect. These local companies will know all the laws and requirements for collecting money in your area.

Look online, too, for local collection agencies. Search for collection agencies in your city, region or even by zip or postal code. Some local collection agencies will have an online presence rather than a listing in the phone book. It is often easier to tell if a company will be able to handle your collections from the information listed on its website.

Ask other local businesses or friends what agencies they have used to collect their unpaid debts. Someone who has used a particular collection agency previously will be able to tell you if that agency is right for your needs. They will be able to tell you if the agency was able to collect the necessary debts and how long it took to do so.

Create a list of potential local agencies that have recommendations from other local businesses or that you think will be able to work with you. Call or e-mail these agencies to set up a face-to-face visit. A personal visit will help you solidify your final choice. Cross off any businesses that are rude or that do not have working numbers. Also cross off any agencies that are not members of ACA International (the association of credit and collection professionals).

Visit each potential collection agency with a list of qualifications. You want to choose a collection agency that presents integrity, professionalism, expertise, reasonable rates and fees and a friendly attitude. They should also be able to present a record of what percentage of unpaid debts they usually are able to collect. An agency with several different collection methods is likely to provide the best results.

What Do the Scores on a Credit Card Represent?

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Credit scores are an indicator of your level of credit risk. Lenders, landlords and even some employers use your credit score as a predictor of whether you'll be able to handle new responsibilities. Therefore, it's important to know what elements make up your score.

Whether you make on-time payments makes up 35 percent of your credit score, according to Smart Money. Because this part of your score accounts for such a large chunk, late payments are devastating to your credit. A single payment that is more than 30 days late may damage your credit score by as much as 110 points. Set up automatic bill payments to maintain a good credit rating.

The amount of debt you have and the way you're using your credit constitute 30 percent of your score. Your debt utilization ratio is the amount of debt you're using in proportion to the amount of credit available to you. The Better Business Bureau recommends keeping your balances to 25 percent or less of your credit limits. It's vital to adhere to this guideline throughout the month rather than spending up on your credit cards and paying them off at the end of each month; your creditors could report to the credit bureaus at any time. Keep in mind that if you close an account, you negatively impact your debt utilization ratio.

The length of time you've had your accounts open constitute 15 percent of your credit score. In this area, those nearing retirement usually fare better than someone fresh out of college. To keep your credit score as high as possible, it's important to stay active on your oldest accounts, using them at least once every six months and paying off the balances in full. If you are thinking of closing accounts, make sure to keep the oldest ones open to minimize the effect on your credit score.

Are you obtaining new credit -- but not too much of it? You need new credit to keep your credit score high, but applying for too much new credit at once signals, rightly or wrongly, that you're in desperate need of money, which drops your score. Open new accounts over time to prove your ability to responsibly meet your financial obligations and you'll keep your score up. This aspect of your credit makes up 10 percent of your score.

The final 10 percent of your score relies on the diversity of your credit. To make the most of this category, you need to have both revolving and installment loans. Credit cards and lines of credit are considered revolving loans because the credit is available to you even after you've paid off your balance. Mortgages, car loans and student loans are considered installment loans because you pay them off over time and then the accounts are closed. However, you need to be active on your mix of credit; simply having unused open accounts won't help your score at all.

How Does Credit Work When Moving to Canada From the U.S.?

9:09 AM No comments

Credit management is as important in Canada as it is in the United States. Most large U.S. banks also have branch offices in Canada. All three major credit bureaus--TransUnion, Equifax and Experian--operate in Canada. If a consumer moves from the U.S. to Canada, his credit history will absolutely follow him. Most new citizens in Canada will need to reapply for loans and mortgages, but these loans will be based on their United States credit histories.

The United States and Canada have a very close relationship. They share banks and credit bureaus. Canadian citizens' credit scores are held under Social Insurance Numbers. However, banks who have operations in both countries have access to all of their customers' credit histories--whether they are Canadian or American.

Moving to a Canada will not relieve an American citizen of his debts in the U.S. An American credit report will remain active throughout the life of any native-born American or naturalized citizen. This history is accessible to any authorized lender in both Canada and the U.S.

Canadian banks may not extend credit to a newly arrived American citizen. First, he will not have a Canadian Social Insurance Number. Second, without a printout of a current credit report and a letter from an American bank, he will likely be denied any loans.

The main benefit of the close financial relationship between the U.S. and Canada is the ease with which Americans can make a move to Canada. Customers should print out a copy of a current credit report and get a letter of standing from their banks. In addition, customers can request that a Canadian loan officer pull an American credit report from one of the three credit bureaus.

Customers cannot leave a poor history in the United States. If a customer applies for a loan, mortgage or car loan in Canada, the loan officer will need to verify his credit history. Without a valid Canadian credit report, the loan officer will get authorization to run his American credit bureau--thus revealing the poor credit history.

How to Cancel a READYdebit Card

7:22 AM No comments

A READYdebit card is a prepaid Visa card issued by Ready Financial designed for rebuilding damaged credit. You can receive a READYdebit card by completing an online application at readydebit.com. Use the READYdebit card to complete any transaction that accepts Visa debit cards. The Ready card is nontransferable and allows you to cancel at any time without prior notice. Canceling your card is not a difficult task.

Instructions

Locate the customer service number on the back of the card, from your statement or the online website.

Dial 866-295-2460, press "1" to continue in English or "2" for Spanish, then press "2" for account information and wait for a representative to come on the line.

Inform the representative that you want to close your READYdebit account. Give the representative your name, card number and any additional information to verify your identity. He will let you know the amount you have left on your card.

Request to have your remaining balance amount issued to you by check. Wait to receive your check by mail, which Ready Financial will send via mail to the address listed on your account.

What Happens if I Make a Deal With a Collection Agency?

10:57 PM No comments

Collection agencies use a variety of methods to attempt to collect past-due debts. Initially, collection agencies usually attempt to collect the debt in full but in some situations, collection agencies strike deals with debtors in which the debtor can settle the debt for a fraction of the outstanding balance. If you make such a deal with a collection agency, it usually signals the end of your dealings with that firm.

Collection agencies often buy bad debts from lenders. The collection agency pays a nominal fee to the creditor and thereafter the agency has a legal right to any payments made toward the debt by the borrower. Many collection agencies act as agents on behalf of lenders, which means that the lender retains the debt but the collection agency receives a fee if the debtor agrees to make a payment toward the balance owed. Legally, collection agents can contact you between 8 a.m. and 9 p.m. local time, although you can stop collection agents from calling you at work by submitting a request for the contact efforts to stop.

Debt settlement arrangements with collection agencies and lenders have a negative effect on your credit score. Credit bureaus partly base your credit score on your payment history. In a debt settlement arrangement, you only pay off a portion of the balance owed and the outstanding balance remains on your credit report. The delinquent account appears as "closed" rather than "delinquent" on your credit report, but the fact that you failed to repay the debt in full may dissuade other creditors from lending you money in the future.

Collection agencies can use a variety of techniques to attempt to collect payment on past-due debts ranging from telephone calls and letters to court action and garnishments. These efforts cease when you enter into a debt settlement arrangement. However, every state has a statute of limitations on debts after which neither lenders nor collection agencies can take you to court. Debt collectors can continue to contact you after the statute of limitations expires but have no recourse against you if you refuse to settle the debt. The statute of limitations varies from three years to 15 years depending on the type of debt and the state in which you live.

If you fail to settle your past-due mortgage debt with a collection agency and you go into foreclosure, laws in some states allow your lender to sue you for the remainder of the mortgage debt many years after the foreclosure sale occurs. Furthermore, a debt collector agreeing to accept a reduced payment on a debt and the original creditor agreeing to close the debt are not necessarily the same thing. You may think that you have resolved a debt issue, only to have a new collection agency buy the debt and begin proceedings against you. Therefore, understand the terms of the agreement before agreeing to any proposals from collection firms.

How to Convert a Secured Credit Card to Unsecured

6:26 PM No comments

Secured credit card issuers generally require cardholders to make a cash deposit to a savings account that serves as collateral if cardholders don't pay off the charges on their cards. The amount of the deposit usually establishes a cardholder's credit limit as well. Secured credit card users rarely have say in converting their secured accounts to unsecured accounts. The card issuers make such decisions based on the cardholder's account activity.

Instructions

Pay your secured card bill on time each month. This may result in your card issuer automatically converting your account to an unsecured account within a year or less. Keep in mind that such conversions occur at the discretion of the card issuer, and the timetable and standards for conversion vary among secured card companies. Boost your chances for getting an unsecured credit account by not exceeding your credit limit and not maxing out your credit line.

Ask your card issuer to convert your secured card to unsecured after you have kept your account in good standing for at least six months. The card issuer may comply. Bear in mind that a secured card issuer might raise your credit limit without requiring an additional deposit, but that's not the same as converting your account to unsecured status. Don't expect to get your original deposit back in such cases. It remains with the card issuer as security for the account.

Try to get an unsecured credit card account with the same company that opened your secured account. If you're successful, cancel your secured card. Apply for an unsecured credit card with another company if your secured card issuer won't give you an unsecured card after you have kept your secured account in good standing for a year or more.

Welcome to our website credit and debt managementr.

Sunday, February 27, 2005

Assess Where You Are

Debt-to-Income Ratio

Debt Payment Plan

Be Careful of Debt Management and Credit Counseling Services

Friday, February 25, 2005

Suing for a Judgment

Getting the Writ of Execution

Levy

Stopping the Garnishment

Debt Arbitration Process

Entering Debt Arbitration

Legal Help

Debt Arbitration Consequences

TOP Program

Exempt Income

Other Collection Methods

Criminal Charges

Thursday, February 24, 2005

Disclosure of Purpose

Validation of Debt

Legal Action Notice

Instructions

Wednesday, February 23, 2005

Credit Report

Interest Rates

Budgeting

Payoff Methods

Foreclosure

Deficiency Judgment

Bank Account Seizure

Considerations

Instructions

Tuesday, February 22, 2005

Mortgage Loans

Credit Cards

Car Loans

Considerations

Usury

Violation of Usury Law

Assignment

Statute of Limitations

Origin

Collections

Pre-Judgment

Myths

Avoid Judgment

Monday, February 21, 2005

Instructions

Minimum Payments

Blind Spending

20 Percent Rule

Charging Necessities

You Feel Overwhelmed

Paying Obligations

Settlement Solution

Play Waiting Game

Instructions

Sunday, February 20, 2005

Help

Credit Report

Employment

Credit Score

Saturday, February 19, 2005

Fiscal

Personal

Credit History and Score

Time

Instructions

Friday, February 18, 2005

Scissors

Shredder

Fire

Chips and Strips

Interest Rates

Emergency Funds

Debt Consolidation

Combination Approach

Thursday, February 17, 2005