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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, August 30, 2006

Debt Recovery Tips

When you're deep in debt, it's easy to feel overwhelmed, and hard to know where to begin digging your way out. Recovering from debt is not easy, nor is it a quick process, but it is possible. Admit that you have a problem, account for all your debts and do whatever you need to to repay them, and you're on your way to recovery.

Know How Much You Owe

    It's impossible to get out of debt until you know how much you owe. Gather all your bills, starting with your mortgage and car payments, credit card bills, medical bills and any other bills you owe, and tally up the amount you owe, and the minimum payments due every month. It's likely to be a sobering experience, but don't let it daunt you -- accounting for every penny you owe is a necessary step in pulling yourself out of debt.

Know How Much You Can Pay

    Once you've got your debt expenses tallied, it's time to compare them to what you can feasibly pay toward your debt. Make a budget that accounts for all your income, all of your household expenses, and all of your debt. Don't be surprised if the income to debt and expenses ratio is tight, and be prepared to take another hard look at your budget to see where you can afford to make cuts.

Get Serious About Paying Off Debt

    If you're serious about paying down your debt, sacrifices are often required. Tighten up your budget wherever possible to free up more money to pay toward your debt, even if it means giving up eating out, entertainment expenses and other things you can live without. If possible, bring in more income by taking a second job or selling items you no longer need. The more you can pay toward your debts, the faster your budget will recover.

Ask for Help If You Need It

    Sometimes, it's just not possible to tighten your budget any more than you have, because your expenses are simply more than your income. In this case, it's time to talk to a reputable credit counselor. A credit counselor can get you on the road to debt recovery by working with you and your creditors to create a debt-management plan that will reduce your monthly payments and/or interest to make repaying your debt possible.

Equifax Dispute Tips

Equifax Dispute Tips

If your credit score is lower than you think it should be, do not just accept the score as a fact. Get a copy of your credit report and inspect it closely. Check for any incorrect reports that were made to the credit reporting agency. If you find any, carefully craft a response to the credit reporting agency to dispute those issues. A bad credit score can lower your chances of getting financing for a home, a vehicle, and other purchases.

Put It In Writing And Get A Receipt

    When filing a dispute over the information on your Equifax report, send a letter with a receipt confirmation. A receipt confirmation is a request you make at the post office requiring the recipient to sign and write the date on a card indicating he received the letter. A copy of this signed card is sent to you by the post office. Chargeoff.com recommends this delivery method instead of faxing or emailing your letter, because a signed delivery confirmation is not possible with those other methods.

Limit The Scope Of Your Dispute

    Limit the number of items you dispute on your credit report to four or less. According to chargeoff.com, if you dispute a large number of items in a single letter, a credit bureau might consider your complaint frivolous. Choose the most significant issues, so that, if you are successful, you can remove the most damaging, incorrect reports from your credit report.

Be Specific

    When writing your complaint letter, write two to four sentences regarding each disputed report, explaining why you are disputing it. Also, provide corroborating information to support your request that the mistaken information be removed from your credit report.

Time Frame

    After you have submitted your dispute, allow up to 30 days for the dispute to be settled. You should receive a letter from Equifax, explaining the credit bureau's decision regarding your dispute within that time frame, according to credit.com. After you receive the response, request another copy of your credit report to ensure the information was indeed removed or corrected.

If You Lose Your Dispute, Don't Give Up

    Don't give up if you lose your dispute with Equifax. If your dispute was denied due to a lack of documentation, obtain that documentation and resubmit your dispute letter. Another option is to contact the creditor that made the reporting error directly, and see if you can persuade the creditor to correct the erroneous report. If you can not settle your dispute on your own, credit.com recommends hiring an attorney who specializes in credit dispute corrections.

Monday, August 28, 2006

The Effects of Debt Management Programs on Credit Scores

If you're struggling to pay off your bills every month, a debt management program may be a good option to help relieve some of your financial stress. Before you commit to any such program, however, you should carefully consider its positives and negatives. Debt management programs can help you get out of debt, but they will also limit your financial options.

Credit Score Factors

    There are numerous kinds of credit scores, each of which is based on different factors as determined by the company that creates the score. One of the most popular scores, the FICO score, is based on five factors: your history of timely payments, the amount of debt you owe, how long you've had your credit accounts, the number of new accounts you've opened and the variety of types of credit you have, according to FICO.

Management Plans

    A debt management plan typically works like this: you go to a credit counseling agency and agree to pay it a single monthly payment. The agency then takes your payment and pays your debts on your behalf. These programs, according to Bankrate, usually last three to four years and are aimed at letting you pay your bills on time---the single largest credit score factor---without having to struggle with making multiple payments at different times.

Debt Management Goals

    Consumers use debt management programs to help themselves get out of debt and eliminate as many financial difficulties as possible. These programs allow you to better manage your debt obligations, and though keeping to a strict plan will likely increase your credit score, that is not the main focus of such programs. Further, people who seek out debt management help and create a debt management program often already have low credit score because of their inability to manage credit.

Debt Management Impacts

    Debt management programs do not directly impact your credit score, according to Bankrate. While credit reporting agencies include your participation in a debt management program on your credit report, this information does not impact your score. However, some debt management programs prohibit participants from getting new credit during the course of the program, so even if you raise your score with the management plan, you may not be able to get a new loan before you complete the program.

How to Get Credit Card Debt Under Control

Credit card debt is more than epidemic in this country. Worrying about credit card debt is just about a national pass time. But that doesn't mean that you should just accept it as a part of life. It's dangerous to your financial security, to your credit rating and to the future of your entire family. Read more to learn what you can do to get your credit card debt in check.

Instructions

    1

    Know that you're in trouble. The most serious sign of severe credit card debt is lying to the people you love to hide the truth about your debt. The first step to getting out of trouble is admitting that you're in trouble.

    2

    Do a financial review. Write down all the household income and expenses. Include utilities as well as the minimum payment for every credit cards. Now write down all your expenses that are not essential - high speed internet, weekly lunches and regular shopping sprees. Be brutally honest about what is necessary for your family's survival. Subtract the essential bills from your income. If there's a negative balance, consider which nonessential expenses to eliminate.

    3

    Take all of your charge cards out. Write down each account number, balance, interest rate and minimum payment. Call each company to explain the financial setbacks you've experienced. (Be sure to provide information concerning medical bills, household expenses and car expenses.) Ask if you can enroll in an assistance plan.

    4

    Think about ways to make extra income as well. Can anyone take on a part time extra job? Cant the kids go to work and pay for their own expenses? Can you have a yard sale? Can you see clothing you no longer use rather than give it away? It's amazing what such little things can bring into the household.

    5

    Be creative when finding new ways to have fun. Consider board games, cards, movies nights, walks as a family and camping.

How to Write Letters to Credit Companies to Get a Clean Credit Report

How to Write Letters to Credit Companies to Get a Clean Credit Report

According to Fair Isaac Corporation, the company that invented the FICO score, how you pay your bills accounts for 35 percent of your credit score. If you've had late payments on your credit accounts, chances are your score has taken a hit. Under the Fair Credit Reporting Act (FCRA), you have the right to dispute erroneous information on your report and have it removed. The law does not, however, allow for the removal of accurate, negative data. Creditors will, at their discretion, remove negative account information from your credit report if you ask them to. This is known within the industry as a goodwill letter. The creditor is not required to do so, but may remove the negative account information as a gesture of goodwill if the account is paid or in good standing currently. Here are five steps you can take to have credit companies remove negative account information from your report.

Instructions

    1

    Order a free copy of your credit report. Under the Fair and Accurate Credit Transaction Act (FCRA), consumers are entitled to one free credit report every year from Experian, Equifax and TransUnion. Congress created the website www.annualcreditreport.com where consumers can order one or all of the reports in one place. You may also order your reports by phone, mail or at the individual websites of each credit bureau.

    2

    Look through your report and locate the "personal information" section. Make sure that your name and social security number are listed correctly and that your report isn't merged with that of another consumer. Bureaus update information on a regular basis, so data may have changed since the last time you viewed your report. Check the "positive accounts" and "negative accounts" sections. Note any credit accounts that have negative data associated with them, such as late payments.

    3

    Write a goodwill letter to each creditor. Indicate any distinguishing reasons that will give the creditor an incentive to make an adjustment to your account history. If you've been a customer of that creditor for a long time, mention that in your letter. Also mention if there were any mitigating circumstances which caused you to fall behind, such as the loss of a job, physical disability or the death of a spouse or close relative. Also mention other factors that may apply to you and your relationship with this creditor, e.g, you've been a loyal customer or you paid the debt off in a timely manner. As an act of goodwill on your part, remember to thank the creditor at the end of your letter for considering your request. Also keep in mind that the account must be paid or in good standing before a goodwill request can be made. Creditors will not make goodwill adjustments on accounts that are currently delinquent.

    4

    Send the letter to the creditor via certified mail, return receipt requested. You want to ensure that the letter reaches the recipient, and to ascertain on what date the post office delivered it. You may also call the creditor to ask for this adjustment, but written correspondence may convey your message more clearly.

    5

    Wait to hear back from the creditor. It could take up to 30 days or longer to receive a response, or it could take two weeks. It all depends on the creditor's methods for responding to goodwill requests from consumers. Remember, they are not required to honor your request, but many do. Depending upon the company, you may receive a letter indicating that the item has been deleted or corrected, or the creditor may simply adjust the account with the credit bureaus directly. If you have credit monitoring, you will usually receive an email when a change occurs to one of your accounts.

How to Make Payments on Judgements

A judgment is a very negative credit event and should be taken seriously. Judgments are awarded in civil court after a creditor or debt collector wins a lawsuit against you for an unpaid debt. "The New York Times" reports that judgments are often awarded when people fail to appear in court to defend themselves. Such judgments are called "default judgments" and give the creditor or debt collector the right to garnish your bank account or wages.

Instructions

    1

    Contact the creditor or debt collector that was awarded the judgment against you. Find the name and telephone number on court papers you received notifying you of the judgment. If you don't have the papers, visit your county small claims court to search court records listing your name. A clerk can help you find the public record detailing the judgment.

    2

    Negotiate a payment plan with the creditor or debt collector for the full amount due. The judgment and threat of wage and bank account garnishment gives the creditor or debt collector complete leverage, making it unlikely that you will be granted a payment arrangement for less than the full balance.

    3

    Request the terms of the agreement in writing. Make on-time payments to the creditor or debt collector whose address is listed in the agreement. Keep records of all your payments, including, possibly, copies of cashier's checks.

Free Debt Settlement Help

Free Debt Settlement Help

Debtors beware. Consumers should invest time researching and evaluating debt elimination or debt settlement organizations before enlisting their aid and paying the fees associated with the majority of debt negotiation programs. Many debt settlement firms offer claims bordering on unbelievable. Recent federal rules limit the bravado as well as curb fees charged by these debt management companies. Some agencies offer free credit counseling services aimed at educating consumers about the credit process.

Free Assistance

    Self-help may be the first step in taking control of finances. Developing a realistic budget that lists necessary expenses, and aligning them with household income, is free. All it takes is a pencil and some paper. A household budget creates a basis for prioritizing other drains on finances, and gives the creator an opportunity to focus on bringing debt under control. The public library offers books on budgeting, and there are free, online sources as well. If the consumer finds it impossible to stick to a budget, he may investigate a credit-counseling organization or a debt-settlement company, bearing in mind that non-profit or not-for-profit does not mean free.

Credit Counseling

    Credit counseling may work for a consumer who cannot stick to a budget she created. Certified credit counselors discuss the entire financial picture with the consumer, and offer methods to overcome and manage overwhelming debt. The U.S. Cooperative Extension service, generally associated with county governments, may offer classes, information or credit counseling at no charge for residents. Other free counseling resources might include colleges and universities, housing authorities, military bases, credit unions and some houses of worship. If employing the services of a certified credit counselor outside of a free setting, have a clear understanding of the fee before signing a contract.

Debt Management Plans

    Debt management plans should include credit counseling that evaluates an individual's debt situation. A reputable firm should offer the services of a certified credit counselor who reviews an individual's indebtedness before making a debt management plan recommendation. With a debt management plan, the debtor makes periodic payments to the plan administrator who distributes the funds to creditors in a prearranged fashion. Before committing to the plan, a debtor should verify that his creditor accepts the terms negotiated by the debt settlement company. Debt settlement firms may offer an initial credit consultation at no charge, although additional fees may apply for additional services. Have a clear understanding of any applicable fees before signing a contract.

FTC Rule

    On July 29, 2010, the Federal Trade Commission adopted new rules aimed at regulating for-profit debt settlement companies and the fees they charge. The new law, which went into effect on Oct. 27, 2010, bans the collection of up-front fees and limits any payment to the debt settlement agency until the debtor has made at least one payment to the creditor. Other rules require up-front disclosure of costs and repayment criteria, as well as an option for program cancellation and refund of fees paid in advance. The FTC has the authority to impose and govern such regulations under the Fair Credit Reporting Act.

Debt Relief Help in Dallas

If you live in Dallas and cannot pay your bills as promised, you can seek debt relief assistance through the Consumer Credit Counseling Service of Greater Dallas or the United States Bankruptcy Court Northern District of Texas. Your available options include debt negotiation, budget counseling and partial or complete personal bankruptcy.

Financial Counseling

    Nonprofit organizations such as the Consumer Credit Counseling Service of Greater Dallas offer financial counseling to people for a nominal fee. Even if you know you want to file bankruptcy, you still need financial counseling before you can legally file a case. The session will help you determine whether you have exhausted all available options to repay your debts, including slashing your household budget or negotiating with your creditors.

Debt Management Plans

    Your Dallas credit counselor may help you qualify for a debt management plan. Under this plan, you would pay one lump-sum monthly payment to your selected credit counselor. He would distribute it to your creditors as agreed. While people can sometimes renegotiate their debts without a credit counselor's help, it can be stressful and difficult to do so.

Chapter 7 Bankruptcy

    Chapter 7 bankruptcies in Dallas must be filed with the United States Bankruptcy Court Northern District of Texas. Under Chapter 7, a Dallas bankruptcy judge will discharge your obligations to repay most pre-existing debts unless he feels you were dishonest to the court or your creditors. Generally, you must earn less than the state's annual median income level to qualify for Chapter 7; if you earn more money, you can get special permission to file if you prove an inability to partially repay creditors and support your family. As of 2011, the annual median income for a single Texas resident was $38,801, while the yearly level for a family of two was $55,660, according to the U.S. Trustee Program. Families of four could earn up to $66,145 per year.

Chapter 13 Bankruptcy

    Chapter 13 bankruptcy enables Dallas residents to partially repay debts over three to five years. This type of case negatively impacts credit ratings for seven years as opposed to 10 years in Chapter 7. But you cannot include every debt in any type of bankruptcy case. Ineligible debts include child support, alimony, recent tax debts, most federal student loans, court fines and any bills related to a crime.

How To Settle With a Collection Agency

How To Settle With a Collection Agency

Collection agencies purchase debts from other creditors, such as hospitals, libraries and credit card companies, that cannot successfully collect. The company then pursues debtors for the unpaid balances of their former accounts. Collection agencies often offer consumers debt settlement agreements. Debt settlement is beneficial for you, since you can pay off the debt for less than you actually owe, and beneficial for the collection agency, since it turns a profit on a debt another creditor deemed "uncollectible."

Instructions

    1

    Contact the collection agency by phone. The telephone number for the collection agency is located on its debt collection letters. Collection agencies also list their contact information on your credit report.

    2

    Notify the debt collector you speak to that you are calling to negotiate a settlement of your account. Offer less than you can afford on the debt, as the debt collector is unlikely to accept your first offer. Negotiate with the collector until you both can agree on a settlement amount.

    3

    Request that the debt collector send you a formal debt settlement offer for the agreed upon amount via mail or fax or email attachment. You need this documentation for your records. Insist that the offer include the provision that, once settled, the company agrees not to sell the remaining balance to another collector.

    4

    Mail the collection agency a money order in the amount of the settlement. Do not provide the company with a personal check or allow it to draft any money directly from your bank account. Some unscrupulous collection agencies have been known to use consumers' banking information to withdraw the full amount owed from their bank accounts.

    5

    Call the collection agency after 30 days and request a zero balance statement. A zero balance statement protects you in the event the collection agency violates its original agreement and sells the remaining balance of the debt.

Help to Assist With Debt

Help to Assist With Debt

Debt assistance may be necessary if you have been undisciplined in making and sticking to a debt reduction plan on your own, or if the idea of tackling your debt is just too overwhelming. You can seek counseling or hire a third party to help get your debt under control.

Talk to a Credit Counselor

    A credit counselor can guide you through the process of handling your debt obligations. They can offer advice, tips and suggestions for tackling your debt burdens. Speak to friends to get a recommendation or refer to the Better Business Bureau for a reputable organization. You also can visit a nonprofit agency, such as the National Foundation for Credit Counseling, that offers free or low-cost counseling.

Debt Settlement

    If you are too deep in debt to dig out and are considering bankruptcy, seek the option of a debt settlement with your creditors first. A debt settlement allows you or your representative to negotiate a reduced debt amount with your creditors. This new amount should be more manageable to handle, allowing you to pay off your debts.

How to Settle

    You can speak directly with your creditors or seek the help of a debt settlement company. You (or your representative) enter into a negotiation period, which can last about six months. Your creditors may be willing to negotiate a lower amount because they may fear they would receive no money if you were to file for bankruptcy.

Warnings

    If you are to engage in a debt settlement, you may be required to stop payments on your bills for up to six months to show creditors you are behind on your payments. As long as you're making monthly payments, creditors have no reason to believe you will stop. Payment timeliness accounts for 35 percent of your credit score, resulting in a significant dent to your credit score, so expect your score to take a hit. Forgiven debt also will have a negative impact on your credit report. Finally, be cautious when choosing a debt settlement company, as some are not reputable.

Sunday, August 27, 2006

What Happens When You Don't Pay Bills in Collections?

What Happens When You Don't Pay Bills in Collections?

If you don't pay a bill, your creditor will either send that bill to its in-house collection department or transfer the debt to an outside agency for recovery. While a bill is technically "in collections" regardless of whether a creditor's collection department or third-party collection agency owns the debt, the laws regarding debt recovery vary slightly depending on who owns the account.

Significance

    Leaving bills unpaid damages your credit rating. The extent of that damage, however, differs depending on which creditor is actively collecting the account. If the account rests with an in-house collection agency, your credit report will reflect the series of missed payments leading up to the account being transferred to the collection department. If an outside collection agency owns the debt, your credit report will reflect both the original creditor's missed payment reports and an additional collection account from the third-party agency.

Facts

    You will receive telephone calls and letters requesting immediate payment of the debt regardless of who owns the account. While the Fair Debt Collection Practices Act protects you from threats and harassment from collection agencies during the debt recovery process, the FDCPA's consumer protection regulations don't extend to in-house collection agencies. Because creditors eventually transfer even in-house collection accounts to outside collection agencies, this leaves many consumers confused about their actual rights during the collection process.

Time Frame

    As long as your original creditor maintains its ownership of your debt, it can sue you at any time. Once it transfers the unpaid bill to a collection agency, however, the collection agency can only legally file a lawsuit for a limited period of time. Once your state's statute of limitations for debt collection expires, the collection agency cannot legally file a lawsuit against you unless you make a payment on the debt -- thus reinstating the statute of limitations for collection.

Effects

    Any creditor that wins a judgment against you through a lawsuit can enforce the debt to the full extent of the law in your state. Although state laws vary, enforcement can leave you subject to a wage garnishment or bank account garnishment order. Some states, such as California, allow creditors holding a judgment to place real estate liens against debtors' homes.

Considerations

    Debts don't disappear when you refuse to pay them. Just as in-house collection departments eventually transfer debts to third-party collection agencies, those third-party agencies also sell uncollectible debts to other debt buyers. Thus, an unpaid bill can continue to haunt you for many years to come. In addition, if the original account you failed to pay allowed for the accrual of interest, such as a credit card debt, your debt will continue to grow until you either pay it in full or negotiate a debt settlement agreement.

Can Debt From a Credit Report Keep Going Into Collections?

It's no secret that collection accounts adversely affect your credit rating. Consumer credit reports maintain a record of both paid and unpaid debts to better inform future lenders of any risk they incur by doing business with a particular individual. Because collection accounts can result in prospective lenders turning down your application or charging you higher interest rates, federal law protects you against having these accounts appear on your credit history indefinitely.

Reporting Period

    The Fair Credit Reporting Act sets the reporting period for collection debts at seven years. The reporting period begins not when the collection agency purchases the debt but when the original creditor first writes off the debt. Unethical collection agencies sometimes attempt to circumvent the federal reporting period by reporting inaccurate dates to the credit bureaus. Known as "re-aging," this process is illegal, and should it happen to you, you have the right to file a lawsuit against the collection agency.

Transferred Debt

    Collection agencies do not hold on to consumer debts forever. Like other creditors, collection agencies sell their nonperforming accounts to other debt buyers. If you leave a debt unpaid, this process will continue indefinitely. In this way, your unpaid debt can keep going into collections as it is passed from one collection agency to another. Because collection agencies sell debts, two collection accounts may appear on your credit report for the same debt. Should this occur, you can notify the credit bureaus that both companies are reporting the same account and request that the bureaus remove the more recent of the two reports.

Considerations

    An account does not have to appear on your credit report before being turned over to a collection agency. For example, your utility bills do not appear on your credit report, and paying your utility company on time does not benefit your credit score. If you leave your utility bills unpaid, however, the utility company will sell your account to a collection agency, which will insert a collection record in your credit files.

Repeated Collections

    Depending on the type of collection agency that holds your debt, it is possible for a debt to go into collections repeatedly. If your creditor turns your account over to an in-house collection agency, the creditor still owns the debt. An in-house collection agency is merely a division of the original creditor's business. Thus, paying off your outstanding balance will result in the creditor pulling your account out of collections. Should you then default on payments a second time, the account will again go to the in-house collections department.

Saturday, August 26, 2006

How to Make a Payoff Offer to Credit

Making an offer to pay off a credit obligation can allow you to pay the debt for less than the full balance. The process is known as debt settlement, and is particularly useful for paying off delinquent delinquent credit card balances and other unsecured debts. Creditors and debt collectors sometimes will accept payoff offers ranging from 20 to 70 percent of the balance on delinquent accounts, according to the "Wall Street Journal's" SmartMoney.com. Some people who are battling excessive debt choose debt settlement as an alternative to bankruptcy.

Instructions

    1

    Review billing statements or correspondence from debt collectors to determine the status of your accounts. Payoff offers aren't typically accepted on accounts that are up to date. Creditors and debt collectors simply have no reason to negotiate on debts that the debtor is paying as agreed. Payoffs are usually possible after accounts fall about three months behind.

    2

    Call the debt collector or bill collector if the account is at least three months past due. Tell the representative that you cannot afford regular monthly payments but would like to make an offer to pay off the account. Offer to pay 20 percent of the balance to settle the account. Once you choose to make a payoff offer your goal should be to pay as little as possible to resolve the account. Starting low gives you room to negotiate.

    3

    Increase your offer by 10 percent if the creditor or debt collector turns down the initial offer.

    4

    Follow up with a letter if the debt collector continues to balk at your offer. Increase your payoff offer to 35 percent in your letter and inform the debt collector it's your final offer. Show patience by contacting the debt collector once a month until you have a deal. The debt collector's goal is to collect as much of the balance as possible, but you should stand your ground and pay only what you can afford -- even if the negotiations last for months.

About Uses of Credit by Consumers

About Uses of Credit by Consumers

Credit is an important part of your financial life. Your credit score is determined by your credit history, which is based on how well you handle your available credit and existing debt. If you do not go into a lot of debt, and pay off all debt on time, you likely have a good credit score. A credit score of 660 or higher is considered good, according to Moolanomy. You can check your credit report for free each year at the Annual Credit Report website (see Resources). Consumers use credit in a number of ways.

Credit Cards

    Adults or minors with a co-signer can apply for a credit card, which is essentially a line of credit you can use for purchases from businesses that accept credit cards as a form of payment. Once you use the card, you will receive a bill from the credit card company stating how much money you owe on your credit card balance. If you do not pay the bill in full, then the credit card company charges you interest on your balance until it is paid. Keeping a low balance on credit cards is generally good for your credit score, as long as you make all payments on time. But if you miss payments or drive up the balance toward your available credit limit, your credit score will be negatively affected.

Home and Car Loans

    Consumers also use credit to apply for loans to buy a home or car. People with good credit often get approved for home or car loans with a better interest rate or for a higher amount than people with bad credit scores. If your credit score is low, then you might not get approved at all. You can work to improve your credit score buy getting out of debt and bringing all loan and account balances current.

Other Loans and Purchases

    Your credit score determines your eligibility for a number of other types of loans or purchases. Home equity loans, personal bank loans, business loans or the ability to refinance existing loans are all affected by your credit score. Similarly, many retailers offer the ability to finance purchases based on your credit. For example, you might be able to buy home appliances or expensive electronics from a store if you have good credit, even if you cannot afford the item at the time you buy it. The store will take out a line of credit for you and you then make monthly payments on the account until the item is paid in full. You might also have to pay interest on your balance until it is paid off.

Employment

    Your credit also affects your ability to get a job. Employers have the right to check your credit before hiring you. Not all companies do this or care about your credit, but if you are applying for a job in finance, government or for a role as an executive, you should ensure your credit score is good, because chances are your employer will check your credit report. If the report is bad, it could cost you a job offer.

How to Pay Back Defautled Students Loans

How to Pay Back Defautled Students Loans

The process to pay back defaulted student loans is called loan rehabilitation. It is not offered by all private lenders, but federal direct loans, Federal Family Education (FFEL) loans and Perkins loans can all be rehabilitated. If you have a private loan, you will have to contact your individual lender regarding the opportunity to rehabilitate the defaulted debt. If you have a federal loan that can be rehabilitated, the steps to do so are fairly uniform across the diffetent loan options and fairly simple to accomplish.

Instructions

    1

    Assure your loan qualifies. You must have a direct loan, FFEL loan or Perkins loan.

    2

    Inform your lender of your intent to rehabilitate the loan to ensure you qualify.

    3

    Make nine payments in full within 20 days of the due date within a 10 month period for direct anf FFEL loans. For a Perkins loan, make nine on-time payments.

    4

    Check the status of your loan with the U.S. Department of Education.

    5

    Check your credit score to ensure it reflects the fact the loans are no longer in default.

Will Debt Negotiation Affect a FICO Score?

Debt negotiation is the same as debt settlement and has a profound affect on a FICO score. Debt negotiation allows you to resolve a debt for less than the full balance, but the process hurts credit significantly. FICO is a computer model for determining credit scores -- three-digit numbers ranging from 350 to 850. The higher the number the better, with scores of 720 or greater leading to the most favorable interest rates on credit cards and other loans. People in debt negotiation likely will find it impossible to maintain a high FICO score while paying off debts.

Process

    Debt negotiation is possible only after a credit card or other unsecured debt is seriously past due -- usually by three months or longer. At that point the creditor may agree to negotiate a settlement ending the debt. According to SmartMoney.com, credit card companies sometimes agree to settle delinquent credit card accounts for 20 to 75 percent of the balance.

Reporting

    Card companies and other creditors report account status information to the major credit bureaus each month. That means they notify the credit reporting agencies each time the debtor misses a payment. The FICO scoring model treats missed payments seriously, with a drop in score possible each month the debtor fails to make a payment on time. That's one reason why debt negotiation hurts scores. A credit card company or other unsecured creditor simply will not negotiate a current debt. There's no advantage for the creditor to do so. People calling debtors to negotiate a current debt are usually told they're not eligible for a settlement or negotiation.

Outcomes

    A debtor's FICO score may have dropped significantly before the creditor is willing to negotiate. Some debtors negotiate settlements when accounts are past due for six months or even longer. By that time it is likely that the debtor's credit score has fallen below 620 -- the cutoff for so-called "good" credit.

Considerations

    A drop in credit score isn't an issue for some people in debt negotiation. That's because they may already have bad credit when they decide to negotiate payoffs. People who have a high FICO score have much more to lose in debt negotiation. A person with a 700 FICO score who decides to negotiate one or more debts could theoretically lose more than 100 points off the FICO score before the process is complete. However, someone starting debt settlement with a 500 credit score may experience little drop in score because the score is already poor.

Friday, August 25, 2006

Free Credit Counseling Vs. Debt Relief

If you have a number of delinquent bills and notices of default, you have some choices to make. Avoiding your debts is not the solution. Help exists for those who need it, and some of it is provided by nonprofit organizations. Verify the organization's record with the Better Business Bureau before making payments, however. The debt industry is riddled with scam artists.

Varieties of Debt Relief

    After gathering your outstanding bills, you must evaluate the level of help you need. Do you have enough income to make the minimum payments and need just a little help? If so, credit counseling -- and possibly a debt management plan -- may be adequate.

    If you're overwhelmed by debt, are several months behind in payments or have accounts that have gone to collection, you may need to consider a more serious remedy, such as settlement (or even bankruptcy). Your credit will suffer significantly if you take those actions, but you could be free of debt much faster.

Credit Counseling and Debt Management Plans

    There are several credit counseling agencies, but the National Foundation for Credit Counseling (NFCC) is America's oldest. Before investigating settlement or bankruptcy, call the NFCC for a free debt and budget evaluation. You may find that a debt management plan (DMP) is what you need to get back on track.

    In a DMP, the counselor negotiates with your creditors on your behalf. Although the accounts will be closed, your interest rates and possibly your payments may be reduced. Fees are minimal (and in some states, nonexistent), and everything typically is paid in full within five years if the DMP is followed.

    Of each option, DMP participation has the least damaging effect on your credit. Check your credit report to make sure the closed accounts are listed as closed "at the consumer's request."

Debt Settlement: Scam or Not?

    Negotiating a debt settlement with the creditor is a legal remedy for a delinquent borrower. Often, outstanding bills are settled for 30 or 40 percent of the amount owed, a huge savings. The most favorable deals are arranged for those who can pay settlements in full with a single lump sum payment. However, staggered payment arrangements sometimes are possible.

    The biggest drawback to settling a debt is the effect it has on your credit. Accounts are closed by the lender and usually are noted on your credit report as "settled," not "paid in full." If you are planning to apply for a loan over the next two or three years, it will be difficult to obtain approval.

    Consumers should thoroughly investigate the settlement company they're considering hiring. Many settlement companies are reported to be sham operations that charge thousands in fees and disappear before a settlement has been reached. The Better Business Bureau's "Find Business Reviews" webpage is helpful in determining which companies are legitimate and reliable. Contact your state Attorney General's office as well to request background information on the company in question.

Bankruptcy

    If all else fails, bankruptcy is your last resort. It should be avoided if possible. It's devastating to your credit rating and difficult to recover from, and you'll probably need to hire an attorney. However, bankruptcy actions stop collection calls and foreclosure proceedings. It also wipes out many types of debt, such as credit card debt. Your employer-sponsored retirement assets are protected, as well. IRAs also may be protected, depending on where you live.

    Before filing for bankruptcy, you must participate in counseling. You must pass a means test to determine whether your income is low enough for you to qualify for Chapter 7 bankruptcy. Consider also whether your employment will be affected. Bankruptcy has far-reaching implications.

Thursday, August 24, 2006

How to Get Credit Card Debt Forgiveness

How to Get Credit Card Debt Forgiveness

Credit card companies forgive large portions of credit card debt in return for payment plans. When a credit card company sells a delinquent account to a collection agency, it typically only earns a tiny portion of the total amount owed on the account. This creates a high incentive for the company to forgive large portions of debt for customers who are 60 days late or more on payments.

Instructions

    1

    Contact your credit card company if you are 60 days late or more on your payments. Credit card companies are not likely to reduce the balance of your account or freeze your interest rates unless you have proven yourself incapable or unwilling to make minimum payments over an extended period of time. In many cases, banks will send out debt forgiveness agreements to customers already delinquent on payments.

    2

    Ask a customer service representative at your credit card company what the conditions of the debt forgiveness will be. In most cases, they will require that you recommit to a payment plan to reduce the balance of your card. Your interest rate may be frozen and the size of the balance may be reduced. You most likely won't be able to use the credit card again, but the company will give you a boost in your efforts to get out of credit card debt.

    3

    Request that the debt forgiveness agreement be mailed to you in writing. Don't start sending any payments until you have agreed to and signed a contract from your company. Send appropriate payments once you do so.

    4

    Report the forgiven debt as income when you file your taxes for the year that you received it. Unfortunately, the Internal Revenue Service counts all forgiven debt as additional income, so in effect you will still need to pay some of the amount of the debt. The lender will send you a 1099-C form notifying you of the cancellation of debt to simplify the process.

New York Laws on the Statute of Limitations for Credit Card Debt

New York Laws on the Statute of Limitations for Credit Card Debt

If you live in New York and have some bad credit card debt, check the dates on your account. It may be that your debt is past the statute of limitations, which provides you with a defense against a lawsuit. It is important to remember, though, that the statute of limitations does not prevent a creditor, or a collection agency, from continuing to contact you about the debt.

Credit Card Debt

    New York's statute of limitations for collecting credit card debt is six years. This six-year time period begins 30 days after you made the last payment on your account. Within this six-year period, a creditor or a debt collector can use all legal means to collect the debt, which may include assigning or selling your debt to a third-party collection agency or even filing a lawsuit against you. After this time period expires, it is very unlikely that a creditor will file a lawsuit against you. If the creditor does do this, you can ask the court to dismiss the lawsuit on the grounds that the debt is past the statute of limitations.

Judgments

    The statute of limitations on judgments is a different matter than the statute of limitations on debt. If a credit card company does file a lawsuit against you and does win its case, you will have a judgment against you. This is an amount of money that the creditor has the right to collect from you via legal means, which includes garnishing your wages and bank account, plus seizing your property and assets. The statute of limitations on collecting a judgment in New York is 20 years, and it can be renewed by a judge upon request by the creditor.

Collection Efforts

    While most collection agencies and creditors are unlikely to try and collect a debt once it is past the statute of limitations, some will try anyway. In some cases, a creditor or collection agency will file a lawsuit even if the debt is past the statute of limitations. If this happens, be sure to go to court and ask that the case be dismissed. If you don't go to court, the creditor or collection agency can be awarded a default judgment against you.

Fast Ways to Eliminate Debt

Fast Ways to Eliminate Debt

Most households incur large amounts of debt before the homeowners even realize how far deep in debt they even are. Paying minimum payments on credit cards or using them to pay household expenses is common. But debt can effectively be reduced--even eliminated entirely--with a bit of planning and some determination to do so. Below are four ways to reduce and eliminate debt as soon as possible.

Accountability

    Be accountable for daily, weekly and monthly expenditures. Make a budget and take note of where deviations from the budget are made on a regular basis. Cut back on unnecessary trips to the store, purchases that are non-essential and household expenses such as cable television that may be eliminated to save money that can be used to pay down debt.

Sell Items

    Sell an extra car, boat, motorcycle or other large item to help pay off debt. Have a yard sale and sell unwanted or unneeded household items. Use the money from the sale of these items to implement the snowball technique as described below.

Move Credit Cards

    Move higher-balance credit cards to credit cards with lower interest rates to save on the amount of interest paid over time. Check the agreement for the new card to make sure that the low interest rate isn't only in effect for a short time and then will revert to a higher interest rate than what you currently pay when the introductory time period is up.

Snowball Effect

    Pay the credit card with the smallest amount off first. Use the payment that used to be reserved for this card to pay on the next lowest card until that one is paid off. Continue working up the list of credit cards until each one is paid off completely.

Wednesday, August 23, 2006

Unsecure Line of Credit Problems

If you are a small business owner you are going to need credit at some point in time. An unsecured line of credit may be just what you need to keep your business afloat. When you have an unsecured line of credit there are some problems you will encounter such as less-than-favorable terms and conditions. You can use this credit line to meet payroll, purchase supplies and pay vendors. A business owner may be required to meet stringent conditions for approval.

High Interest

    An unsecured line of credit is riskier for lenders because there is no collateral or security for the loan. The rate of interest will be higher for this type of loan, which means you pay more in finance charges over the term of the loan. The longer your term, the more you pay in finance charges. Additional loan payments can help pay the loan off faster and save you money in finance charges.

Limited Funding

    When you are approved for an unsecured line of credit your credit limit will be very conservative, therefore you won't receive as much money. If you are looking to make a large purchase for equipment, an unsecured line of credit may not be sufficient to get the job done. A limited credit limit is one way lenders have of limiting their risk and exposure. If a business owner is looking to expand the business they may not be able to because of the limited amount of funds received.

Business History

    To get approved for an unsecured line of credit a business needs to have a sufficient business history and credit history. A lot of businesses don't have this type of history--which makes approval difficult. You must have a history of making on time payments with other creditors that is sufficient for a lender to consider for credit approval. A lender will look at the longevity of a business as another determinant of its creditworthiness.

Recession

    Whenever there is a recession it becomes more difficult to get approval for an unsecured line of credit. If there is a slowdown in economic activity, a lot of lenders have a fear of delinquencies and default; therefore they are very hesitant to extend credit to small businesses. Without the necessary lines of credit, many businesses cannot continue to operate because they are unable to meet their everyday expenditures.

Bankruptcy

    Another problem for a lender is bankruptcy. If a business owner files a petition for bankruptcy and the lender has no collateral. Chances are they will receive nothing from the business owner. Many lenders are making the requirements a little stricter by asking for income verification or tax returns in situations where they may not have made this a requirement.

Tuesday, August 22, 2006

Which States Protect Your Wages From Being Garnished?

Which States Protect Your Wages From Being Garnished?

When wages are garnished, it means that a creditor has ordered your employer to divert some of your earnings to repay a debt. Federal laws limit the amount of money that can be garnished from an employee's earnings. Some states also have garnishment laws. When the state law conflicts with federal law, the law that results in the lower garnishment amount prevails. Some states do not allow garnishments to pay commercial debts. All states allow garnishments for child support and back taxes. These garnishments can exceed federal limits. Bankruptcy judges can also order garnishments above federal law.

No Garnishment

    South Carolina, North Carolina, Texas and Pennsylvania do not allow commercial creditors to garnish wages. Florida allows garnishment in some cases, but does not allow garnishment of wages if a person is the head of household. In all of these states, wages may be garnished for child support and back taxes in these states.

Federal Law and Close to It

    Several states look to federal law when determining wage garnishments. Under federal law, about 25 percent of an employee's disposable earnings "or the amount by which an employee's disposable earnings are greater than 30 times the federal minimum wage." What this means is that for low wage workers and part-time workers, the portion of wages that cannot be garnished is equal to 30 times minimum wage. Arizona, California, Colorado, the District of Columbia, Georgia, Idaho, Iowa, Kansas, Michigan, Mississippi, Montana, Nevada, Ohio, Oklahoma, Rhode Island, Tennessee, Virginia and Wyoming follow federal law. In Connecticut and Maine, 25 percent of disposable wages is exempt from garnishment, but for low-wage workers, 40 times the minimum wage is exempt. Florida follows the same rules as Connecticut and Maine, unless the person is a head of household, in which case no wages can be garnished.

75 Percent Exempt

    Some states exempt 75 percent of wages from garnishment orders. This amount would typically be lower than garnishments allowed under federal law. These states are Alaska, Alabama, Maryland, Louisiana, New Mexico, Oregon, North Dakota, Minnesota, and Washington. In Vermont, 75 percent of wages above federal minimum wage is exempt. Several of these states -- North Dakota, Oregon, Washington, and Minnesota -- exempt 40 times the federal minimum wage, an added protection for low-wage workers.

Cash Limits.

    Some states do not base garnishments on a percentage of earnings. Rather, they allow garnishments for all amounts above a certain threshold. In Arkansas, $500 of a head of household's weekly wages are exempt from garnishment, and $200 for a single person. In Massachusetts, creditors can garnish everything above $125 per week. In Utah, $142 is exempt from garnishment

Others

    The remaining states allow garnishments for various amounts. In Delaware, 85 percent of earnings are exempt. In Hawaii, 95 percent of the first $100 a person earns is exempt, 90 percent of the second $100 and 85 percent of the remainder is exempt from garnishment. In Illinois, 15 percent of gross income or 45 times the minimum wage -- whichever is greater -- is exempt from garnishments. In Missouri, 90 percent of a head of household's wages are exempt, 75 percent if the worker is single. Nebraska exempts 75 percent of a single person's wages from garnishment, but 85 percent of a head of household's. In New Hampshire, the amount that is exempt is 50 times the minimum wage. In New Jersey and North Dakota, creditors can take up to 10 percent of a person's gross wages. In South Dakota and West Virginia, 20 percent of a person's wages are exempt. In Wisconsin, 80 percent of earnings are exempt.

How to Turn a Debt Snowball into a Debt Avalanche

How to Turn a Debt Snowball into a Debt Avalanche

The debt snowball has been popularized by financial guru Dave Ramsey as a debt reduction strategy for people with multiple sources of debt. The debt snowball is a fine strategy for those who need the incentive of eliminating the number of debt sources, but it is not the most effective way to manage debt. A more effective way to pay down debt that will save money and time is to use a debt avalanche.

The debt snowball strategy is to pay off debts by focusing on them one at a time from the lowest balance to the highest. This has the benefit of making the payer feel good about eliminating debt each time one is paid off and then using that money to work on the next debt. Like a snowball getting bigger as it rolls downhill, the payments get bigger as each source of debt is eliminated.

However, by using a debt avalanche instead, you will pay off your debt quicker and with less money going to interest. The debt avalanche improves on the debt snowball by factoring interest rates into your debt reduction strategy. Follow these steps to start a debt avalanche that pays down your debt quicker and with less interest.

Instructions

    1

    Collect your debt information

    Make a list of all of your debt sources along with the following information: balance, monthly minimum payment and interest rate. For example:

    SourceBalanceInterest Rate Min Payment
    Debt A$5005%$25
    Debt B$100010%$50
    Debt C$200015%$100

    2

    Determine how much of your budget can go towards paying off debt. For example: $250 a month

    3

    Put your debt in order from highest interest rate to lowest.

    Source Balance Interest Rate Min Payment
    Debt C $2000 15% $100
    Debt B $1000 10% $50
    Debt A $500 5% $25

    4

    Pay the minimum amount for each debt every month, except the one at the top of your list with the highest interest rate. After paying the minimum for the other cards, pay the rest of your budgeted amount to the first card with the highest interest rate:

    SourceBalance Interest Rate Min Payment Monthly Payment
    Debt C$200015%$100 $175
    Debt B$100010%$50 $50
    Debt A$5005%$25 $25

    5

    Repeat the process every month, paying the most money to the debt with the highest interest rate and making the minimum payments to the other debts, until all of your debts are paid off.

    6

    If you applied the debt snowball to the simple above example you would have paid off your debt in 16 months and paid interest of $279. When you use the debt avalanche, you pay your debt in 15 months and only pay $235 in interest. That means getting out of debt one month faster and a savings of $44!

Monday, August 21, 2006

Techniques for Collecting Debt

Techniques for Collecting Debt

Techniques for collecting on a debt vary from creditor to creditor. If you owe money and you default on the account, you can expect your creditor to begin relentless debt collection efforts. Some creditors stop collection attempts after six months of non-payment, while other creditors continue on and use the courts for help in recovering defaulted funds.

Collections Department

    The majority of credit card companies and banks have a collections department. Individuals employed in this department frequently contact past due account holders to schedule payment arrangements. Creditors vary, and some sell delinquent accounts to collection agencies after charging off the debt. Collection agencies can call, write or file a lawsuit to receive past due funds. Once a past due account reaches a collection agency, a collection account appears on the debtor's credit report.

Judgment

    It is smart for consumers to avoid a credit judgment, which is an order to pay a past due debt issued by a judge. Judgments are irreversible, and once the reporting agencies receive information about a judgment, this negative item remains on credit reports for seven years. Threatening a lawsuit and potential judgment may prompt some debtors to pay their old debt.

Wage Garnishment

    In states where wage garnishment is legal, a creditor can speak with the court and ask permission to garnish a debtor's wages. The court grants a wage garnishment following a judgment. This debt collection technique helps creditors acquire past due funds because employers deduct a percentage from the debtor's paycheck, and then sends the deducted funds to the creditor. Wage garnishments persist until creditors receive sufficient funds to settle the account, or until a debtor contacts the creditor on his own to pay the remaining balance.

Bank Seizure

    Another technique available to creditors after obtaining a judgment is a bank seizure of levy. This debt collection method gives creditors authorization to freeze or remove necessary funds from a debtor's personal bank account. All funds in the account become the creditor's possession, and creditors use these funds to pay off the past due debt. Debtors lose complete access to the bank account until the creditor reverses the freeze. Creditors need permission from a court to seize or levy bank accounts.

The Legal Responsibility of Repaying a Debt

The Legal Responsibility of Repaying a Debt

When you accrue debt, either by taking out a loan or making purchases on a line of credit, you have a legal responsibility to repay your lender. If you dont abide by the terms of your contract, you could end up in court.

Significance

    Your contract with a lender enables it to take legal action against you if you fail to adhere to the repayment terms listed.

Facts

    According to the Federal Trade Commission, consumers who share joint accounts are legally responsible for any debts incurred under the account, even if they did not make the purchases or had no knowledge of the purchases.

Features

    If your lender has collateral, it can legally seize the item when you dont pay your debt. If it doesnt, it may sue you. A court that acknowledges your legal responsibility to repay the amount your lender claims you owe will grant the lender a judgment against you.

Effects

    The court will help your lender enforce your legal responsibility to repay a debt by granting it the right to garnish your wages or bank accounts following a lawsuit.

Warning

    You could end up with a legal responsibility to pay debts that arent yours. If a lender sues you and you do not respond to the lawsuit, the court will automatically decide in the lenders favor and grant it a judgment against you.

About Unsecured Debt Consolidation Loans

About Unsecured Debt Consolidation Loans

Unsecured debt consolidation loans are a means for consumers to combine their unsecured debt into one monthly payment. Unsecured debt refers to credit cards, student loans and anything else not secured with collateral. Companies offering unsecured debt consolidation loans also do not require collateral for the loan. Carefully research any company offering these loans before you sign on the dotted line.

Function

    Making several payments monthly to high interest credit cards among others can be alleviated by taking out one loan and paying off all of your other unsecured debt, leaving you with one monthly payment. Often, these payments are lower than the combination of your current bills, making this an offer worth considering.

Features

    Unsecured debt consolidation loans do not ask for any collateral for your loan. This means that your house, car and mother-in-law are safe from repossession. The repayment period is fixed so you know when you will be debt-free. The added bonus of having only one payment each month makes these loans attractive to many consumers.

Effects

    Debt consolidation companies advertise that they can pay off your debts quicker, with less hassle and with lower monthly payments. On the surface this looks positive but you must consider how they operate. One of the methods they employ is to contact your creditor and negotiate lower interest payments and even lower payoff amounts, something you could also accomplish with a phone call.

Considerations

    Accepting a loan to pay off unsecured debt may be a smart financial move, but you should carefully consider all of the implications. Debt consolidation loans may offer lower monthly payments, but they will likely cost you more in the long run. Aside from the fees for the consolidation loans, you will often pay higher interest rates over the course of the loan. Keeping your credit cards after they have been paid off leaves you vulnerable to getting in over your head again. Save one card for emergencies and cut up the rest so you won't be tempted.

Benefits

    If you can save a few hundred dollars each month and you don't mind paying more for your debt overall, then a debt consolidation loan may work well for you. One monthly payment saves time and you only have one creditor to deal with. If you are experiencing harassing phone calls from your unsecured debt holders, then a debt consolidation loan will stop the phone calls.

Does Debt Consolidation Increase a Credit Score?

Does Debt Consolidation Increase a Credit Score?

Debt consolidation is a money management tool designed to help consumers pay down and eliminate debt. According to the American Consumer Credit Counseling Agency, a debt management program can have an adverse effect on a consumer's credit score initially. Over time, however, the credit score will generally improve.

Process

    Debt consolidation programs are not designed to improve credit, although an increased credit rating can be the result of proper money management. Consumers enroll in debt consolidation programs by providing consolidation companies with their budget and credit information. The companies then contact and work with creditors on the consumers' behalf.

Advantages

    Debt consolidation programs help consumers manage and eliminate debt over time. One of the biggest advantages of enrolling in a debt consolidation program is that it allows debtors to pay many if not all of their financial obligations in one large lump sum every month. Delinquent accounts are often reaged, meaning they will show current on the consumer's credit report, boosting the credit score over time.

Drawbacks

    Debt consolidation programs can appear negatively on your credit report. According to Money Management International, "if your budget does not permit you to pay full payments, for a period of time some of your creditors might report you are not paying as originally agreed."

Do Debt Relief Negotiations Affect Credit Ratings?

The first question asked when someone is considering a debt relief negotiation is, will this affect my credit ratings. While you may feel that debt relief negotiation is the best solution for your debt situation, it might not be the best choice if you value your credit rating.

You and Your Credit Score

    Your credit score, or FICO score, is a number based on several factors; however, the exact algorithms are a trade secret:

    1. Payment history, 35 percent
    2. Amounts owed, 30 percent
    3. Length of credit history, 15 percent
    4. New credit, 10 percent
    5. Types of credit used, 10 percent

    While the above items are a portion of how your score is built, it is clear that how you pay your bills is a strong indicator on your FICO score. In this example we don't see how using a debt relief negotiation company affects your score, but if you are thinking of using debt relief negotiation, then you are having trouble paying your bills on time, which has a negative impact on your score.

What is Debt Relief Negotiation?

    Debt relief negotiation is a process of negotiating with your creditors to establish a lower payment, interest rate or payoff amount on your past due debts. While you can hire a company to do the negotiations for you, you could also do this yourself.

    1. Gather your past due bills.
    2. Figure out what you can afford to pay.
    3. Call each creditor individually and begin your negotiations.

    This is a long process, but it will be worth it if you are able to negotiate down your debt, payments or interest rates in the long run. Doing this yourself also gives you an amount of control to negotiate how this information is put in your credit file. For example, as part of your negotiation, you can can request your bills be reported as "paid as agreed" or other positive marks on your credit. If your request is denied, at least you asked.

Does Debt Relief Negotiations Affect Your Credit Score?

    Your credit report will be negatively impacted when you use a service for debt settlement or debt negotiation. The use of a company is placed on your credit report as a third-party negotiator involved with your unpaid bills. If you feel you have no choice but to utilize a debt relief negotiation to get ahead on your finances, then choose a company you trust and feel comfortable sharing your financial details.

Sunday, August 20, 2006

Easy Tips for Fixing Poor Credit

Easy Tips for Fixing Poor Credit

There are no quick fixes for poor credit histories. However, past mistakes can have less of an impact for people who make a plan to improve their current credit rating. Understanding how lenders and creditors view a person's creditworthiness and how credit management impacts credit scores are keys to improving ratings.

Debt Reduction

    You can improve your credit rating simply by not accumulating more debt and reducing the debt you already have. Lenders and creditors consider debt utilization to judge your creditworthiness, which essentially involves looking at how much of your credit lines you use. A debt-utilization ratio that's under 30 percent is usually viewed favorably. For example, if you have a $1,000 credit card limit, you should keep your card balance under $300. You can boost your credit rating quicker by paying as much as you can to reduce the balances on credit cards that are close to their limits to improve your debt-utilization ratio.

Higher Credit Limits

    Try to get your credit-card limits raised, but don't use up the additional credit. Higher credit limits also can improve debt-utilization ratios, but this method is not advisable for people who have trouble controlling their spending. Call your card issuers and ask for higher credit limits. They may decline your request, but your debt load will have less of an impact on your credit rating if you are able to get your credit lines increased. However, don't open new accounts. Credit inquiries are usually posted to consumers' credit reports when they apply for new accounts as card issuers examine their credit histories. Too many inquiries can count against you and lower your credit score.

Secured Credit Cards

    A secured card can help rebuild credit histories for people whose creditors have closed their accounts or placed them in collections. Secured credit cards require making a deposit into an account that is used by the card issuer to establish the depositor's credit limit. Deposits vary among issuers, but a $500 credit limit could be established with a $500 deposit. Handling a secured account responsibly by paying the bill on time and not exceeding the limit can help establish a positive credit history. The card issuer you select needs to report your account activity to credit bureaus for this method to be effective.

Saturday, August 19, 2006

Laws Against Creditors Calling Your Place of Employment

Laws Against Creditors Calling Your Place of Employment

When the economy sours, debt collectors turn up the volume with harassing phone calls---often at work, where the embarrassment factor is greatest. However, the Fair Debt Collection Practices Act (FDCPA) forbids those calls from continuing, once a debtor asks them to stop. A collector may also not threaten potential legal actions such as wage garnishments, nor pass itself off as an attorney or government representative.

Fair Debt Collection Practices Act

    The Fair Debt Collection Practices Act is the primary law governing debt collectors' behavior, according to the Federal Trade Commission (FTC), the consumer agency that is responsible for enforcing its protections. A collector may not call a debtor at inconvenient hours or places, including at work, unless the debtor agrees to it. However, the law also requires the debtor to notify collectors of their violation, either orally or in writing.

Ending Further Harassment

    For best results, the FTC recommends sending a certified letter to the debt collector. According to the law, the letter must go out within 30 days, according to the FTC. Once the collection agency receives the letter, it must stop all further contact. The law only permits two exceptions---to inform the debtor that further contact will cease, or to outline specific actions being contemplated by the collector, such as lawsuits.

Debt Collector Tactics

    The Fair Debt Collection Practices Act also outlines what a debt collector can do when dunning a debtor. A collector may not contact third parties, except to obtain a debtor's home address, phone number and place of employment, according to the FTC. The law also bars a creditor from passing itself off as an attorney or representative of government agencies. Collectors may also not claim to be pursuing legal actions, such as seizing property or garnishing wages unless those processes are already underway.

Other Restrictions

    A collector may call to verify employment, but cannot ask about income, nor try to elicit other personal information. A debtor is not obliged to discuss bank account details or whether she is a homeowners or a renter. The Fair Debt Collection Practices Act also prohibits a collector from engaging in unfair practices, according to the FTC. Examples include requesting post-dated checks for payment, or trying to collect additional fees and interest on top of the original debt.

Remedies And Limitations

    The Fair Debt Collection Practices Act's provisions only apply to collectors working for collection agencies, not the original creditors themselves. As of 2010, New York is the only state that also prohibits original creditors from calling. If harassment continues, the debtor can file a complaint with his state consumer agency, or the FTC. A debtor can sue the collection agency---and the creditor that hired them---for up to $1,000 in his local small claims court.

Friday, August 18, 2006

How to Apply for Credit Card With Fair Credit Score

It is not hard to find credit cards to apply for with fair credit scores.

Instructions

    1

    One way to be able to apply for a credit card is to watch your mail for current cards offer.

    2

    If you do not currently receive credit card offers you might want to open a store credit card as then the credit card companies will come out in the masses and send you credit card applications that are based on your financial history.

    3

    These pre-approved credit cards can offer many advantages to those who are wanting to build their credit scores and start a credit history.

    4

    It is a good idea when applying for a credit card to read all of the fine print. Reading the fine print can ensure that you know the terms and conditions that apply to the credit card before you agree to carry the card.

    5

    Some cards have annual fees if your credit is less than perfect but even if some do have annual fees it might be a smart choice to wait it out for one without an annual fee.

How to Find a Trustworthy Debt Consolidation Firm

How to Find a Trustworthy Debt Consolidation Firm

Debt Consolidation companies help those in debt to reduce their monthly payments and manage their debt by consolidating all debts into one monthly bill. Unfortunately, there are many fraudulent debt consolidation companies out there. Follow these tips to thoroughly research debt consolidation firms and find a trustworthy company.

Instructions

    1

    LOOK FOR AFFILIATIONS: A trustworthy debt consolidation company will seek to reach certain quality standards that qualify it for various professional affiliations, such as the International Association of Debt Arbitrators, the Association of Settlement Companies and the U.S. Organizations for Bankruptcy Alternatives. Look for these memberships on the company's website, and make sure to verify that the membership is legitimate by contacting the association or checking the listings with the Better Business Bureau.

    2

    DO YOUR RESEARCH: Visit the websites of the Better Business Bureau and your state Attorney General. Both sites will contain records of any consumer complaints filed against the company and will have resources to help you confirm any claims about affiliations and certifications made by the debt consolidator.

    3

    WATCH OUT FOR RED FLAGS: Some companies present signs that they may be less than trustworthy. Be leery of a company that asks for large upfront fees, posts an ambiguous fee structure or that can't be reached during normal business hours. See the article on "How to Recognize Debt Consolidation Scams" for more tips on common debt consolidation scam red flags.

    4

    RECOGNIZE SIGNS OF A TRUSTWORTHY DEBT CONSOLIDATION COMPANY: One promising sign of a trustworthy debt consolidation company is the offering of workshops or personalized services related to financial management. Financial advisors who are seeking build their reputation as financial planners and consultants will have a clear motivation to serve their clients well. This also shows were a legitimate income stream may be coming from if the firm is promoting free debt consolidation services. In addition, a credible firm will spend time getting to know your individual financial situation. If the company attempts to rush you into making a commitment, take this as a red flag. Legitimate firms will also be able to offer you some free resources about financial management if they determine that consolidation may not benefit you.

California Credit Card Relief Programs

Unpaid, delinquent credit card debts can lead to civil lawsuits and wage garnishments filed against Californians. Several types of debt relief options, ranging from nonprofit credit counseling services to federal bankruptcy assistance, can help Californians get out of credit card debt faster while protecting many of their personal assets.

Credit Counseling

    Credit counseling is required before filing for bankruptcy or requesting a debt management plan, according to the California Department of Justice. Debt management plans enable Golden State residents to repay their credit card debts at reduced interest rates; during the plan, the consumer issues one monthly payment to the credit counselor. The counselor then distributes the funds as agreed to creditors, also taking a modest administrative fee. Before enrolling in a debt management plan, Californians should thoroughly investigate the credit counseling firm to ensure its representatives have a history of responsibly handling payments.

Bankruptcy and Your Assets

    Before filing any type of bankruptcy, consider the fate of your assets. If you have lived in California for at least two continuous years, you can use asset exemption laws to keep some of your personal property, notes Bankruptcy Action. Depending on your age, medical status, family situation and what type of assets you have, as of 2011 you can potentially keep anywhere from $75,000 to $150,000 of personal property as well as all insurance and pension benefits.

Chapter 7 Bankruptcy

    Chapter 7 bankruptcy enables you to permanently discharge many of your pre-existing debts, unless you lied to get credit cards or used them right before filing a case. Generally, you must earn less than California's annual median income level to file a Chapter 7 case. As of 2011, the annual figure for a single resident was $48,009, while the level for a four-member California household was $78,869, according to the U.S. Trustee Program. A Chapter 7 filing erases your credit card debts but damages your credit rating for 10 years.

Chapter 13 Bankruptcy

    People earning more than California's annual median income level can partially reduce their credit card debts under Chapter 13 bankruptcy. Chapter 13 creates a partial debt repayment plan carried out over three to five years; during this time, a California resident cannot get any new credit without a bankruptcy judge's consent. Also, judges can require Chapter 13 filers to use part or all of their tax refunds toward credit card debt repayment.

Why Do Consumers Get Into Debt?

Debt can lead to garnishment of wages, loan defaults, higher interest rates and poor credit scores. In general, debt is something you want to avoid, although certain types of debt are unavoidable. People fall into debt for myriad reasons, from job loss to overspending.

Credit Cards

    Credit cards can seem enticing. After all, a credit card allows you to make purchases without having to initially spend your own money. Additionally, many credit card companies offer cash back, travel and entertainment awards to draw customers. Credit cards also serve as a primary way to build credit, but in the hands of someone who lacks financial discipline, credit cards quickly drive a person into debt. Once people fall behind on their credit card payments, they often can't afford anything more than the minimum payment. The minimum payment satisfies the credit card companies, but it tacks on more interest and makes it nearly impossible to catch up to the actual balance. In December 2010, the total credit card debt in the U.S. was more than $2.4 trillion, according to the Federal Reserve.

Loans

    The largest purchases people make, such as a home and car, normally require that person to take out a loan to pay for the purchase. Most people don't have an extra $200,000 laying around to buy a home, so naturally they must apply for a mortgage loan, putting the person in debt. Loans present a fixed expense problem. For example, if someone is in debt because he spends too much in entertainment each month, he can change his spending habits and begin to save money. A loan, however, is a fixed payment; you can't change the payment from $300 per month to $50. So, when someone can no longer afford the loan payment, their debt increases until they can catch up. In the third quarter of 2010, mortgage debt totaled more than $13.9 trillion, according to the Federal Reserve.

Poor Spending Habits

    Some people struggle with financial discipline, and once poor spending habits begin, it's difficult to reel those habits in. Poor spending habits often accelerate credit and loan problems because the person's available funds dwindle and they find it more difficult to make timely payments.

Unemployment

    While unemployment insurance can keep someone above water for a little while, it doesn't provide the person with the same level of income he had when he was employed. The loss of expected income can quickly lead to debt from credit card, loan and regular bill payments. Additionally, if the person cannot find a job, they risk losing their unemployment benefits. The duration of unemployment benefits varies state-by-state, but generally the maximum number of weeks ranges from 46 to 79, although extensions are available. Some people do not qualify for unemployment insurance, which hastens debt for individuals or families who have a lot of bills to pay.

Thursday, August 17, 2006

What if I Close My Account Before My Payday Loan Is Due?

What if I Close My Account Before My Payday Loan Is Due?

Payday loan companies pitch their services as a lifeline for struggling consumers, but unless the consumer is very careful with these financial products, they could end up making a bad situation worse. The interest on payday loans is substantially higher than other types of consumer credit. What's more, the payday loan companies require access to your checking account to ensure they'll get their money -- and if the account overdrafts, the debtor's problem gets worse. Some people elect to close their checking accounts to avoid the spiral, but this strategy is fraught with danger.

Payday Loan Process

    A typical payday loan provides a consumer with an immediate cash payment -- usually between $100 and $1,000 -- in exchange for a lump-sum payment with interest automatically debited from the customer's checking account in one to four weeks. Most payday loans include a provision to make an interest-only payment, deferring the principal balance for three or four pay cycles for a "refinancing fee." Consumer's Union notes that "the interest rates for such transactions are staggering: 911 percent for a one-week loan; 456 percent for a two-week loan, 212 percent for a one-month loan."

Checking Account Access

    Because the payday loan company requires either a personal check or electronic banking data before it will approve the loan, the consumer will face an automatic payment on the loan's due date irrespective of his account balance. Although some payday loan companies allow the customer to postpone or refinance an outstanding note, an interest payment will still be assessed. If the customer's bank balance cannot cover the outstanding payment, the payment may bounce or be paid and leaving the customer with a negative balance and fees from his bank.

Financial Effects of Closure

    If a customer elects to close his bank account before a payday loan comes due, the payday loan company will still pursue collections. These companies often work with aggressive debt collectors to recover the outstanding balance. Sometimes the collector will even take a debtor to court, creating a civil judgment that affects the debtor's credit score and permits the collector to pursue wage garnishments or bank levies. Most outstanding payday loans, even if left uncollected, will linger on the consumer's credit report for a minimum of seven years, substantially lowering his overall credit rating.

Legal Effects of Closure

    A payday loan is a loan with a loan contract. If a customer closes his bank account before an agreed-upon payment clears, then he is in default and is subject to civil complaints. In addition, in many states, issuing a check (or agreeing to an electronic debit) good for a certain date, then closing the account before that date, is considered fraud and could expose the customer to criminal penalties including prosecution for passing bad checks.

What Does MR Mean on a Credit Report?

What Does MR Mean on a Credit Report?

All consumers have credit reports that detail their history as a user of various kinds of credit, ranging from bank accounts to mortgages. These credit reports contain specific information reported to the credit reporting companies, though it isn't always clear what the numbers and letters mean. Knowing what is in your credit report and how it impacts your life can help you get a better grasp of your financial health.

MR Designation

    Whenever a creditor reports a credit transaction to one of the three main companies that creates consumer credit reports, the reporting creditor includes certain details. These include such details as any balance you carry on a credit card, the status of your account and the last activity date. The reports also include "MR" details, which stands for "Months Reviewed." This is a number that indicates how many months the account history has been reported, according to the Consumer Credit Counseling Service.

Credit Scores

    Credit reports and the information contained within them do not always have an impact on your life. If, for example, you do not apply for a loan or want a new credit card, your credit score might play only a minor role in your finances. However, credit scores are based on the history contained in your credit report, and creditors use credit scores to determine a variety of credit terms. A MR information on your report can lower or raise your score, depending on the circumstances.

Months Reviewed Impact

    Your credit score is based on a number of factors, including how much you use your credit and how long a history you have had with a particular creditor. If, for example, you have had an account open for a long time, this generally shows that you are a stable consumer credit user and will likely cause your score to go up. A higher "Months Reviewed" number can help increase your score, while a lower one might lower a score.

Mistakes and Changes

    Any time you look over your credit report and find a mistake, you have the right to challenge the information and demand that the credit reporting company change. If, for example, you've had an account for a year but the credit months reported information only shows that you've had it for a month, you can have it changed. You must contact the credit reporting company in writing and show proof that the entry is in error before you can get it changed.

Credit Solutions to Change Your Life

Bad credit can negatively affect various areas of your life from personal finances to job opportunities. People with bad credit cannot easily qualify for financing, and getting loans may require finding a co-signer, paying higher interest rates and receiving undesirable loan terms. Solutions to help fix your present credit standing can open the door to better financing opportunities.

Debt and Credit

    Getting rid of your debt or at least lowering your credit card balances can greatly improve your credit history. This move helps build a better credit score, and with a higher rating, you can qualify and receive favorable rates and terms on mortgages and installment loans. Having a good credit score also helps you secure cheaper insurance rates. If you apply for a job with a bank or credit union, a good score can help get your foot in the door. Pay more than your minimum and stop charging to erase balances.

Bill Payment

    Give your credit score a boost with on-time payments to mortgage companies, auto lenders and credit card companies each month. Payment history makes up 35 percent of your credit score, and this is the biggest factor affecting your personal rating. Break the habit of paying bills at the last minute, which can result in accidentally forgetting and submitting the payment past the due date. Open statements early and write down due dates or consider automated payments to help fix a bad payment history.

Frequent Monitoring of Credit

    Taking a look at your credit reports at least once a year can help solve credit problems and help you qualify for loans easily. Lenders decide credit and loan approvals after evaluating your credit reports. A bad credit report with judgments, liens or collection accounts can harm your chances of qualifying. Get your reports from Annual Credit Report and diligently dispute errors made by creditors and lenders to help improve your score.

Pay Old Debts

    Creditors and lenders will remove negative items reported in error. But if you have legitimate charge-offs, collection accounts and judgments, these entries can blemish records for up to seven years. Work to get these items deleted by paying off the old debt, and then asking the reporting creditor or lender to either delete the negative remark, which helps improve your score, or update the status of charge-offs and collections to "paid."

How to Make Additional Payments on My Loan

How to Make Additional Payments on My Loan

The overall cost of any loan varies based on the amount of interest paid over the life of the loan. The longer the term, or length, of the loan, the more money the borrower spends on interest. One way to reduce the overall cost of the loan is to make additional payments on the debt. The more payments made prior to the due date, the shorter the term of the loan. This can make a big difference. For example, with a 30-year fixed mortgage, one extra payment per year reduces the term by seven full years.

Instructions

    1

    Create a family budget. Look at your most recent checking account statement. Write down each expense and lump those expenses into categories (such as food, entertainment and household expenses). If you do not have a checking account, write down each expenditure spent for a whole month to use as the basis of your budget.

    2

    Look for areas in your budget where you could trim expenses. For example, research cheaper cable or cell phone plans.

    3

    Create a savings fund by including it as a line item in your budget to save at least one extra loan payment per year. Use the budget cuts created in the previous step to help fund this project.

    4

    Use the savings fund to make a minimum of one extra loan payment per year. If you simply make an extra payment and do not designate it towards principle reduction, the payment will be applied to future payments. This means that you will always be one month ahead on your loan. While this may help you if you mistakenly miss a month's payment, it will not reduce the overall interest paid on your debt. To reduce the principle and shorten the term of the loan, designate the payment as a principle reduction payment. This means that the extra monies paid will lower the principle and not be applied to future payments.