Welcome to our website credit and debt managementr.

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

Saturday, June 30, 2007

How Can I Improve My Credit Score if I Paid All My Debts?

A credit score is a three-digit number created from information included in your credit report. While it is impossible to predict the exact impact your credit habits have on your score, you can control whether your credit score increases or decreases. Controlling your debt is the key to maintaining a positive credit rating. Paying off certain debts, however, can be harmful to your score.

Repay All Debt?

    There are two primary types of debt impacting your credit score each month. First, installment loans are repaid in monthly installments until the full amount of the debt is cleared such as with a car, mortgage or student loan. Next, revolving accounts include credit card or lines of credit. A mix of installment loans and revolving accounts make the greatest impact to your credit score each month. Repaying your installment loans in full can reduce your ability to earn the maximum amount on your credit score each month.

Credit Utilization Ratio

    Your credit utilization ratio is the amount of credit you have available relative to the amount you originally borrow. With a credit card, a credit utilization ratio refers to how much you charge to your credit card relative to your available credit limit. The lower your credit utilization ratio, the higher your credit score increases each month. The closer you get towards paying off your installment loans in full, the lower your credit utilization ratio.

Small Payments

    Responsibly using your credit cards is just as important as eliminating debt. Credit cards are not loans. Pay off unaffordable credit card debt and replace it with responsible credit management to improve your score each month. Charge small amounts that can be repaid within one billing cycle to keep your credit utilization ratio low and remain debt-free. Creditors seek low-risk borrowers when issuing new credit accounts. A low-risk borrower does not charge more than he can afford to repay. Repaying your debt in full each month demonstrates to creditors that you understand how to use your credit cards.

Considerations

    Becoming debt-free for the sake of raising your credit score is a contradiction. Credit ratings are determined by how well you manage your loans and credit accounts. Without any loans or credit card balances, your credit score improvements are minimal each month. For a boost in your credit score, you need activity on both installment and revolving accounts. If you get to the end of your installment loan period, you can obtain a small personal loan to continue your mix of installment and revolving accounts. However, this option does recreate debt. Determine whether you prefer the maximum benefit to your credit score or to remain debt-free.

Merchants & Medical Collection

Merchants & Medical Collection

Medical bills can be run up with hospitals, doctors, pharmacists and physical therapists. Medical debt can also result from using medical services such as laboratories and durable medical equipment suppliers like home oxygen tank vendors. All of these medical service providers and merchants can seek collection of outstanding bills and unpaid debts.

Responsibility

    Patients can be held liable for the medical costs that their insurance did not cover. Both parents are responsible for the medical costs incurred by a minor child. If someone dies with unpaid medical debt, the bill can be sent to the executor of their estate.

Medical Debt Collection Laws

    Medical debt collections must follow the Fair Debt Collection Practices Act or FDCPA. Collections can be enforced via lawsuits, liens against property, and wage garnishment. Medical debt collectors for both doctors and merchants must provide a fully detailed bill of the charges when they are seeking payment. According to "Lippincott Williams & Wilkins' Administrative Medical Assisting" by Elizabeth Molle and Laura Durham, hospitals can also collect interest on debt when they extended a line of credit as long as that was disclosed to the patient.

Medical Collection Enforcement Options

    Doctors and medical-service providers can refuse to provide services to those who owe them money unless it is a life-threatening emergency. Medical service providers can also cancel scheduled appointments until payment is made.

Friday, June 29, 2007

Debt Relief Without Harming Your Credit

Consumers who have large amounts of debt sometimes turn to drastic measures to try to get out of it quickly. Depending on what type of debt relief you pursue, it could negatively affect your credit. Even though options like bankruptcy and debt settlement can hurt your credit, a few other options that will not harm your credit score are available.

Credit Damage

    When you have a large amount of debt to deal with, you may not want to pursue certain debt relief options because of the potential impact it could have on your credit. For example, debt settlement is an option that allows you to pay off your debt for less than what you owe with a lump sum. This action can reduce your credit score by as much as 125 points, according to MSN. You could also pursue bankruptcy, but that option can drop your credit score by as much as 240 points.

Debt Management Plans

    One option that will not negatively affect your credit score is a debt management plan. With a debt management plan, you set up a repayment plan with your creditors and then make monthly payments toward your debt. It typically takes three to five years to pay off your debt with this kind of plan. It is usually set up with the help of a credit counseling service. This does not have any direct impact on your credit score.

Debt Consolidation

    In some cases, debt consolidation can be completed without hurting your credit score. If you simply take out a home equity loan or some other kind of personal loan and use the money to pay off your credit accounts, it may not affect your credit score. If you close out all of your credit accounts after you pay them off, it can hurt your credit score because it negatively affects your credit utilization ratio. Leave your accounts open after you pay them off to keep your score from being damaged.

Getting New Credit

    When you use a debt management plan, it will not negatively affect your score, but you may not be able to get new credit while you are on the plan. Many of these plans require you to avoid getting your credit while you are enrolled. After the plan is over, you can get new credit without having to worry about your credit score being affected. During the plan, you have to get used to dealing with cash.

How Do I Lock My Credit Report?

Your credit report is a summary of all of your credit activity over the past 10 years or so, but it's also the key to all of your financial data. With identity theft becoming a real concern for every American, it makes sense to create a system that helps to prevent people from opening unauthorized credit accounts in your name and tampering with your credit in any way. One of the ways you can protect yourself from criminals is by implementing a credit lock or freeze. But is that always the best answer?

Credit Freeze Versus Fraud Alert

    According Liz Pulliam Weston on MSN Money, people sometimes get fraud alerts and credit freezes confused. A fraud alert is a simple flag you can put on your credit reporting account that alerts prospective creditors that you would like the identity of anyone getting a credit account in your name to be confirmed before approving the application. A freeze means that no one, not even you, can apply for credit in your name. A fraud alert can be ignored by creditors and, according to Weston, it often is. A freeze is protected by federal law---the only way you can open new credit accounts when you have a credit freeze is to contact the credit bureaus in advance and give them a series of identification numbers and other information that would be needed to open up your credit profile to add an account. Fraud alerts are free; credit freezes have charges that vary by state.

Locking Your Account

    To freeze (or lock) your credit account, you must first contact each of the three credit reporting agencies and find out their criteria for locking an account. You must then compile all of the information they need and send it to them by certified mail. A credit freeze cannot be executed through an online form.

    After they have received your freeze request, the credit bureaus will issue you a personal identification number that you'll need to give them if you want to lift the freeze from your account. Each time you want to add a credit account to your profile, you will need to request a "thawing" of your report. Thawing can take anywhere from 15 minutes after receipt of an electronic request (you can request a thaw online after you have established a freeze) to up to 10 days. It will cost you to thaw your account, and it will cost you to refreeze it. Charges can range from $10 to $30 per request, depending on the state you live in and which reporting agency you're dealing with. Each agency requires you to process a credit freeze with them individually (a freeze with one agency doesn't automatically freeze all three).

Reasoning

    Locking a credit account is a precautionary measure. The credit companies make their profit by processing your credit information for credit issuers, which is why they charge you to freeze your account. When you lock your credit account, it won't affect your credit score, but it can become inconvenient to try and get credit when your account is locked. If you've had your purse or wallet stolen recently, or if you start seeing strange credit bills in the mail for accounts you didn't open, then you could be the victim of identity theft. Freezing your credit profile is one way to protect yourself.

Thursday, June 28, 2007

Who Is Allowed to Garnish Wages?

Who Is Allowed to Garnish Wages?

Anyone that you owe money to can petition a judge for an order to garnish your wages, meaning that entities as diverse as a credit card company, a former business partner or an estranged spouse can lay claim to your wages. If the judge decides in the creditor's favor, the sheriff will present your employer with an order to withhold a certain amount from your wages.

Creditor

    Anyone to whom you owe money is a creditor (and you are the debtor). While wage garnishing is regarded as a drastic measure or a last resort to get you to pay a debt, anyone that you owe money to can ask the courts for permission to garnish your wages; once they ask, they usually get permission. Companies collecting on credit card debt and former partners asking for child support are two frequent creditors that garnish wages.

Courts

    A creditor can only garnish wages once they have a court order. No one can garnish your wages without a court order. Furthermore, a sheriff or other law enforcement official will present this order to your employer. The creditor cannot come directly to you and demand some of your wages using the court order.

Employer

    Once the sheriff has shown the court order to your employer, your employer will deduct money from your paycheck and pass it on. In fact, your employer will become legally responsible for withholding a percentage of your wages and sending the amount to your creditor. Employers cannot legally fire an employee for having her wages garnished.

Limits

    No more than 25 percent of your wages can be garnished, unless the creditor is petitioning for child support, in which case they can be awarded up to 50 percent of your wages. No creditor is allowed to push your take-home pay below the poverty line. Unfortunately, if you are married, your creditors can potentially garnish your spouse's wages as well.

Wednesday, June 27, 2007

How Does Loan Modification Impact Your Taxes?

A load modification is the result of a negotiation between a borrower and lender, typically over a large loan like a mortgage. Modifications help both sides compromise when the borrower cannot make the current monthly payments. This can save the borrower from foreclosure and credit damage, but the modification may also create tax complications.

Reducing Interest Rates

    The borrower may be able to gain a modification that actually reduces interest rates on a loan. The lender still makes profit, but the monthly payments on the loan go down since a lower rate is applied to the principal each period. This is the key part of the modification process, because the monthly interest payments drop. When the borrower records interest payments on a tax return, this drop affects deductions.

Deducting Interest

    In general, homeowners are able to deduct the interest payments they make on their monthly statements. But when the interest amount drops, the deduction drops as well, which means the borrower may have to pay taxes on a greater amount of income. Homeowners should carefully examine both itemized and standard deduction possibilities. It is possible that a standard deduction will save more money than an itemized deduction if the interest rate has been lowered enough.

Forgiven Debt

    Forgiven debt also affects taxes. Forgiven debt is the amount of money that the borrower would owe to the lender if the loan was unchanged. Sometimes loan modification results in debt settlement, in which the lender forgives a large amount of money. This money counts as income to the IRS and can create an extra tax burden when it comes time to pay taxes. Even the total money saved by lower interest payments may count as forgiven debt and be taxed.

Exceptions

    The IRS responded to the housing market crash in 2007 and 2008 by creating exceptions to its forgiven debt rule, specifically designed to make it easier for homeowners to modify their loans. Borrowers who use the home as a primary residence and got their loan before 2007 may be eligible for this exception, which can help save money on taxes if the modification applies to the mortgage.

Effects of Higher Interest Rates

When interest rates rise, consumers, businesses and the economy are affected in several ways. Rising interest rates affect the spending habits of consumers, businesses and the overall health of the economy. When it comes to interest rates, there has to be a fine balance to make sure the economy functions smoothly.

Consumer Spending

    When interest rates increase, consumers are less likely to purchase products such as automobiles, mortgages and other consumer goods. Higher interest rates means consumers must pay higher finance charges. Two-thirds of economic activity is based on consumer spending and when consumers stop spending the economy slows.

Recession

    If the economy goes into a recession, businesses lay off workers because of the lack of demand for goods and services. To spur demand, businesses will sometimes lower prices. Consumers will delay spending because they will wait to see how low the prices will go. Companies and organizations will lay off more workers because they will try to cut expenses in an effort to maintain profit margins.

Deflation

    An economy can enter a state of deflation, which is a constant downward spiral of prices. As more consumers delay spending while waiting for prices to bottom out, the economy slows even more. There will be more layoffs and more price reductions.

Cost of Funds

    Many companies need to borrow money and accumulate hefty debt loads if they want to continue to do business. When interest rates increase, the cost of borrowing money increases as well, which cuts into the profits of a company. A decrease in profits will cause the price of a company's stock to decrease.

Payment Increase

    A lot of consumers have credit products such as credit cards and mortgage loans that have variable rates. When interest rates increase, a consumer's monthly payments will increase as well in order to accommodate the higher amount of interest that needs to be paid monthly. If the payments on a mortgage increase substantially, many consumers will not be able to make the payments, leading to delinquency and foreclosure.

Bad Debts

    If consumers cannot make credit card payments, credit card companies will probably have to write off a number of accounts as bad debts. In order to stop the losses, many credit card issuers will lower consumer credit card limits as well as the limits on home equity accounts. This will further curtail consumer's ability to spend and throw the economy further into a downward spiral.

Tuesday, June 26, 2007

Maryland Law on Credit Card Debt Upon Death

Maryland Law on Credit Card Debt Upon Death

In most states, outstanding debts are covered by the estate assets during the probate process, or they are written off if an estate is declared insolvent. Maryland handles estate debt in the same manner if the deceased person owned any assets such as a vehicle or real estate.

Probate Process

    The probate process is a legal process that involves appointing an official estate administrator to handle legal paperwork, create a list of assets and a list of outstanding creditors, notify all parties of the death, and ensure valid outstanding debts get paid.

Maryland Estates

    In Maryland, an estate must be opened in probate court if the deceased person owned any real property such as a motor vehicle or real estate. The type of estate case determines the forms and requirements that apply to the case. If the established value of the person's assets is less than $30,000, a small estate can be filed. If the probate-worthy assets are above $30,000 -- or $50,000 when the spouse is the sole heir -- a regular estate case must be opened.

Assets and Debts

    The probate process evaluates all assets and valid debts, then liquidates or sells assets as needed to pay off outstanding debts. Outstanding credit card accounts that are listed on the valid debts of the deceased person will be settled as part of the probate process. Any creditors that feel they have a claim on the estate but are not listed by the executor can fill out the "Claim Against Decedent's Estate" form within six months of the person's death.

Insolvent Estates

    When a deceased person does not have any assets that must go through probate court, or the assets are not enough to cover the outstanding debt, the court may rule that the estate is insolvent. When an estate is insolvent, a portion of the debt may be paid from asset liquidation and any left unpayable is written off by the creditor.

Monday, June 25, 2007

How to Configure Debt Ratio

The debt ratio is a simple percentage used to determine the level of debt a person has compared with the level of income. This number is expressed as a ratio or a percentage. Banks generally use the percentage when figuring a debt ratio for an individual applying for a loan.

Instructions

    1

    Using your calculator, add all of your pre-tax monthly income, including interest on savings, retirement, Social Security and work-related income. Write your total on the paper. For purposes of this example, the total income is $3,000.

    2

    Add all of your monthly debt payments. Include debts such as car loans or leases, personal loans, mortgage, mortgage taxes and insurance, credit cards and medical bills. Do not include monthly bills, such as utilities, health insurance, entertainment or food. Write this total on paper. In this example, the total debt payment is $500.

    3

    Enter your total monthly debt payments into the calculator.

    4

    Push the divide button on your calculator.

    5

    Enter the total monthly pre-tax income into the calculator.

    6

    Push the "total" or "equals" button on the calculator.

    7

    Look at the quotient, or answer, on the calculator. For this example, with income of $3,000 and debt of $500, the quotient reads 0.1666666667.

    8

    Write this number down, rounding the second number after the decimal point if needed. For example, write down 0.17.

    9

    Move the decimal point to the right 2 spaces to find the percentage. In this example, the debt ratio is 17 percent.

Safe Debt Relief

Safe Debt Relief

In these difficult financial times, it's easy to get caught up in the quagmire of credit cards and other debt. You owe money on your car, on your home, to merchants and anyone else that will take a dollar. This is a nation of spenders, and occasionally, you get in over your head. However, you can eliminate both secured and unsecured debt.

Unsecured Debt

    Unsecured debt is that which is owed to collection agencies, on medical bills, on credit cards and anything else that isn't a structured loan. You can go to creditors directly and talk about your debt. Credit card agencies often are willing to settle for less than what they are owed--called a charge-off--but your credit rating will take a hit. Hospitals have programs in which they can forgive charges based on income and other factors. Collection agencies just want their money.

    The other route is an accredited credit counseling agency, which will contact your creditors and negotiate smaller or no-interest balances and set up one monthly payment. The goal is usually to be debt-free in three to five years. One should be wary of credit counseling agencies that charge you large fees and do not negotiate lower payments from your creditors.

Secured Debt

    When it comes to secured debt, fewer avenues are available. You can try and negotiate with the lender to lower your interest rate or extend the loan, but they are under no obligation to do so. In fact, predatory lenders may count on you getting behind as a way to take your property and sell it for profit.

    If working with the lenders has not worked out, the other option is bankruptcy. Whether Chapter 11 or 13, the goal is to wipe your debt clean and give yourself a fresh start. You may lose some property in the deal -- and keep in mind that in most cases, bankruptcy provides no relief from taxes or student loan debt -- but it will reduce your debt significantly. Bankruptcy should be a last option as it will severely hurt your credit score and will be on your credit report for seven to 10 years.

Does a Debt Consolidation Loan Affect Your Credit?

Does a Debt Consolidation Loan Affect Your Credit?

If you're considering debt consolidation, you should first make sure that you're completely committed to paying off your debt and keeping it paid off. The way that you handle a consolidation loan determines how much of an effect it has on your credit score. If you make on-time payments and stop contributing to your debt, a consolidation loan may be the key to climbing out of the hole. However, if you continue to spend, you'll make matters worse and your credit score will take an even further hit.

Inquiry

    A debt consolidation loan requires an application, and the lender must submit an inquiry to the credit bureaus to get a copy of your credit report. Inquiries create a small negative effect on your credit report; however, if you use the debt consolidation loan to clear your debt and stay out of debt, you will boost your score past any points lost during the application process.

Positive Effects

    Because a debt consolidation loan wipes out the balances on your existing accounts, it appears as though you've paid off those accounts in full. This might bring up your credit score. Also, if you make on-time payments to the loan each month, eventually the history of timely payments will also add points to your score.

Negative Effects

    According to Chris Viale, general manager of the nonprofit credit-counseling agency Cambridge Credit Corporation, 70 percent of people who take out debt consolidation loans find themselves in the same or more debt two years later. You must fully commit to paying off your debt to avoid sinking your credit score even further. Since the loan effectively clears your balance, you may feel inclined to use the newly freed credit. When you have difficulty making those payments, you will spiral further into debt and your credit score will plummet even faster.

Considerations

    Although many debt consolidation lenders advertise loans with rock bottom low interest rates, it is important to realize those rates are only for people with very high credit scores. Ask for a quote and compare the interest rates with your existing accounts to make sure you're actually getting a better deal. Also, a debt consolidation loan is a turn off to lenders, and it may be difficult to get new credit once the loan appears on your report. Lenders want customers who can pay off their debt; a consolidation loan is a red flag that you've had difficulty making payments in the past.

What Happens If Child Support and Other Debts Are Garnished From Your Wages?

Wage garnishment is often the last resort for a creditor if a debtor is not responding to his collection attempts. He can file a lawsuit and obtain a writ of garnishment, which allows him to garnish a debtor's wages or bank account or filing a lien against his property. Wage garnishment allows creditors to start receiving debt payments sooner than with other collection options.

Wage Garnishment Process

    If you default on your credit obligations or child support payments, a debt or child support collector may sue you in court and obtain a garnishment permission to withhold debt payments from your paycheck. When your employer receives a garnishment order, he must comply with it and withhold the determined amount from your paycheck and mail it to the judgment creditor or the court clerk, who then forwards it to the judgment creditor. Wage garnishment continues until the debt has been paid off.

Child Support

    If you are a non-custodial parent, you must pay child support to the custodial parent to take care of the child. The court determines the payment amount, according to your and the custodial parent's financial situations and state laws. If you don't pay, the state may seize the funds in your bank account or garnish your wages. Depending on your state laws, wage garnishment for past-due child support can be as much as 50 percent of your disposable wages if a worker is supporting a second family, or 60 percent if a worker is not.

Wage Garnishment

    According to federal garnishment laws, a creditor can garnish as much as 25 percent of your paycheck but must leave you 30 times the federal minimum wage for your basic needs. While some states follow federal garnishment laws, others set their own limits and exceptions to garnishment procedures. Some states, such as California, allow a debtor to contest wage garnishment in court and ask for a reduced payment if wage garnishment creates a financial hardship for him.

Debtor's Options

    If garnishment hasn't started, you can avoid it by negotiating a debt repayment or settlement with the creditor. Once your employer starts withholding garnishment from your wages, your creditor may not be open to negotiations. He may demand a full balance payoff plus the court fees and accrued interest charges. If you cannot pay off the balance and have other debts you cannot pay, you may consider filing bankruptcy. However, bankruptcy does not discharge past-due child support.

Sunday, June 24, 2007

How to Settle With Capital One

How to Settle With Capital One

Debt is a financial issue and concern for many people. If you have found yourself with lingering credit card debt and an inability to pay off that debt, you should settle your accounts to clean the slate of outstanding monies due. When attempting to settle a debt with Capital One, understand that the status of your account will determine how your settlement and payoff will be processed.

Instructions

    1

    Determine the status of your account. Read through your last statement sent to you directly from Capital One. Look at the total balance due, your credit limit, the amount of available credit and any recent late fees or charges. Note that if your account status is current and up to date, and not listed as past due or delinquent, you will have to pay off the total balance listed to Capital One to satisfy the debt.

    2

    Go back through statements if your account is past due and note the last time you made a payment to Capital One. Note whether your last payment was more or less than 180 days ago. For accounts past due for more than 180 days, your account has been written off of the books at Capital One as a delinquent debt and will be processed first through internal collections and then potentially through an external collections agency. Understand that debts that have been written off are still your responsibility, and you must satisfy those debts in full.

    3

    Contact Capital One directly by calling the customer service number listed on the back side of your credit card or account statement. Speak to a customer service representative about your account. Ask the agent to transfer you to someone in the delinquent accounts department. Write down the name of the agent, date and time of the call.

    4

    Ask the delinquent account agent how to settle your debt. The first option you will be given is to pay off the entire amount. Ask for an alternative option, one where the total debt is reduced. You will get push back, as Capital One is not going to reduce your total debt right away. Ask if late fees and accrued interest charges on the delinquent account can be removed. Ask for a payoff figure and request a payment plan for that exact amount, with no additional interest charges.

    5

    Request to be transferred to a supervisor or manager at Capital One. Speak to the alternative agent regarding a reduced payoff amount. Take extensive notes and make sure you record who you spoke with and when. Follow up with all requests by Capital One for additional information and if you reach a settlement agreement, request the terms and conditions be sent to you in writing before payment is made.

    6

    Understand that you may need to repeat the process of calling Capital One and speaking to several agents until you reach a settlement agreement. You do not have to accept the first settlement offer presented to you, but keep in mind that as time passes, your account becomes increasingly delinquent and interest charges will continue to accrue and accumulate.

Saturday, June 23, 2007

What Do I Need to Do to Get My Credit Straight?

What Do I Need to Do to Get My Credit Straight?

A good history of using credit wisely isn't just your ticket to the finer things in life such as a newer car or bigger home. Good credit affords you the basics --- it affords you the luxury of renting an apartment without hassle and signing up for utilities without making a huge deposit. If your history of repaying loans and credit card balances is far less than stellar, set the record straight by trouble-shooting potential "black marks" that have the potential to linger on your credit report for years.

First Steps

    When it comes to your credit, knowledge is power. The three major credit bureaus --- Equifax, Experian and TransUnion --- each have their own unique way of tallying up your credit score; however, it's often your FICO score, derived from the scoring method devised by the Fair Isaac Cooperation, that prospective lenders defer to most frequently. Lenders also refer to the credit reports maintained by each of the three credit bureaus, which give the lender a snapshot of how you manage debt. Thirty-five percent of your credit score looks at your payment history, and another 30 percent looks at how much debt you owe compared to your available credit limit. Late and skipped payments paired with maxed-out credit card limits spell disaster for your credit.

    To find out why your credit score is flagging and what you can do to give it a boost, order your credit reports from each of the three bureaus. The federal Fair Credit Reporting Act authorizes you to receive one free copy of these reports per year. You can order your credit reports online through the government-authorized (website annualcreditreport.com), by calling 1-877-322-8228 or by filling out the online request form and sending it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, Georgia, 30348-5281. (Ref 1, 2, 3, 4, 6)

Tidying Up Your Credit

    Lowering the balances on secured credit lines and making timely monthly payments may all you need to get your score back in the black. Avoid applying for too many credit cards and loans in a short period of time --- these show up on your credit reports as "inquiries" and may suggest to prospective lenders that you're in dire financial straights. A short history of using credit can also lower your score, although this can be offset by making timely payments on existing loans and credit cards. A healthy blend of credit card debt and installment loans, such as a loan for an automobile or college, can also boost your credit score.

    However, you may not be able to do anything about the negative records that show up on your credit history except wait until they expire and drop off your credit history. A typical example of a negative record is an unpaid credit card balance turned over to a collections agency. Other negative information shows up in the form of court-reported public records such as foreclosures, bankruptcies and liens.

Dealing With "Black Marks"

    There's no legal method to remove accurate negative information from your credit report. Beware of companies that claim they can clean up your credit for a fee, because they're likely promising you the impossible. By law, you're entitled to dispute negative information reflected in your credit reports with Experian, Equifax and TransUnion that is inaccurate. One instance in which you would dispute negative information is if a perpetrator of identity fraud opened several credit card accounts in your name without your knowledge. Negative records that accurately depict your history of credit use remain on your reports for seven years in most cases. However, some public records, such as bankruptcies, remain on your credit history for 10 years. Judgments can remain on your credit reports for seven years or until the statute of limitations in your state expires, whichever is longer.

Other Tips

    A FICO score of over 700 tells prospective lenders that you can be trusted to manage your debt. However, a score under 600 suggests that you might need to straighten up your credit history. If you can't adjust your personal budget so you're able to pay bills promptly and in full every month, ask for help. A reputable credit counseling service offers you a variety of services, from helping you develop a tighter budget to offering a debt management plan in which the counseling service negotiates a repayment plan with your creditors.

How to Calculate Recurring Costs

How to Calculate Recurring Costs

When calculating a monthly budget for either a household or a business, tally your recurring expenses before including items that could fluctuate in cost. Recurring costs continue until a debt is paid or until services are no longer used. For instance, your cable television provider might debit your bank account or credit card for as long as you receive service. Alternatively, your bank might debit your account until the final installment is paid for an auto loan. As an example of a nonrecurring cost, gasoline usage might vary, making it more difficult to calculate or project.

Instructions

    1

    Gather your bank statements, payment receipts and credit card statements. Check your financial records against your credit report. View the expenses reflected on your credit report at annualcreditreport.com to ensure you have included all of your monthly expenses if you aren't confident they are all included in your bank and credit card statements.

    2

    Review your expenses to locate items that have recurring costs. For instance, your bank statement might reflect a $300 debit for your auto loan payment, and your credit card could reflect a $100 monthly payment for auto insurance costs. To estimate your monthly recurring costs, these types of continuous expenses should be included in your monthly budget. Items that are not deducted regularly or whose cost varies month to month should not be included in this tally.

    3

    Add your ongoing expenses together to obtain your monthly recurring costs.

Friday, June 22, 2007

How to Dig Your Way Out of Student Loan Debt

How to Dig Your Way Out of Student Loan Debt

The cost of higher education continues to climb each year and few students can afford to attend college without some type of financial aid. As a result, two-thirds of undergraduate students who graduate with a bachelor's degree have an average student loan debt of just over $23,000.

If you're one of those graduates with a mountain of student loan debt, it's natural to want to pay off those loans as soon as possible. Student loans have repayment schedules that span several years, but you can take steps now to dig yourself out of student loan debt ahead of schedule.

Instructions

    1

    Locate all of your student loans. You cannot start paying off your student loans until you know how much you owe. This isn't completely up to you, your lenders will start sending you repayment information as soon as you graduate or drop below half-time student status. However, if you don't receive statements or repayment information, visit your school's financial aid office. Advisors will be able to look in your records and determine your student loan lenders.

    2

    Consolidate student loans. Consolidating your federal student loans into one loan allows you to lock in a fixed interest rate that will save you hundreds of dollars in interest over the life of your loan. If you have private student loans, you must consolidate those separately from your federal student loans. Private student loans are credit=based and typically have higher interest rates than federal loans. However, even if the interest rate is higher, you'll save money by consolidating your private student loans together because you'll make one payment instead of several separate payments.

    3

    Make the maximum payment you can afford. Student loans are different from other loans because lenders offer several repayment options based on your income. However, you must make larger payments in order to make a dent in your student loan balances. By paying the maximum amount you can afford, you cut down on the principal of your student loans, decreasing the balance and the amount of interest that can be charged.

    4

    Put extra money toward your student loans. If you really want to decrease your student loan balance quickly, be sure to pay as much as you can each month in addition to your regular payment. Consider taking on an extra part-time job and putting all of your income toward your student loans, or sell some of your unused belongings and put the proceeds toward your loans. You might be inconvenienced in the short-term, but you'll pay off your student loans faster and have the peace of mind that comes from being debt free.

How to Get Personal Grants to Pay Off Debts

Paying off debt is an essential part to achieving financial freedom, but the process can be long and difficult. Debt relief does exist however, in the form of personal grants. While these grants can come from the US government or private lenders, those from the government are the easiest to locate. Here is how to both find and get personal grants to pay off debts.

Instructions

    1

    Gather records of your bills and debts. This can include medical bills, mortgage records, student loan payment statements, and work-related expenses.

    2

    Search for personal grants at the government's website (link provided in the Resources section for your convenience) and at community, county, and state offices. The local library and hospital is also a good place to search. The best way to find non-government personal grants is to ask local businesses and charities. The search process can be painstaking but in order to get personal grants to pay off debts, these grants must first be found.

    3

    Determine eligibility. Once you've compiled a list of available personal grants, compare the list to each of your bill and debt records to see which grants may help you pay off debt for that item. Write down these grants. If you're unsure as to whether you qualify for a particular grant based on your records, add it to the list anyway.

    4

    Apply. Go through the list of grants that you feel you may be eligible for and complete the application process for each one. For the grants that you're unsure about with regards to eligibility, apply even if there is an application fee. Again, this may be time-consuming and tedious but your hard work will definitely pay off even if you get just one grant.

Thursday, June 21, 2007

What Are the Pros & Cons of Debt Reduction Companies?

People dealing with out-of-control debt may attempt to pay down balances on their own. When they are unable to put a dent in enormous balances, however, some consider employing the help of debt reduction companies. There are benefits and disadvantages to using professional help for debt problems. Before contacting a company for assistance, know the pros and the cons.

Consolidation

    The ability to consolidate debt is a huge advantage to working with a debt reduction company. To manage debt and ultimately help you reduce balances, debt reduction companies simplify your finances by merging your different credit accounts into one bill. This removes the hassle of working with numerous creditors each month and keeping up with various accounts.

Lower Interest Rate

    Interest rate reductions on credit cards are key to eliminating debt faster and lowering the amount of interest paid throughout the life of an account. Consumers can contact their credit card companies and ask for a rate reduction. Credit card companies, however, aren't obligated to meet these requests. On the other hand, debt reduction companies have ongoing relationships with different credit card companies, and one call from a debt reduction company to your card company can result in better rates and lower minimum payments.

Pay Bills for You

    Another major benefit of working with a debt reduction company is that they make all your monthly payments for you. Once debts are combined or consolidated, the chosen debt reduction company will send you a monthly statement each month. These companies apply the amount paid each month to all your credit accounts. No longer will you send individual payments to all your creditors. This system works well for individuals who have difficulty managing several credit accounts.

Third Party Assistance

    Despite the benefits of working with a debt reduction company, there are risks associated with this chosen method. Using a company to help manage your debts can suggest poor debt management skills and desperation. Although credit card companies readily negotiate with debt reduction companies to lower your rate and payment, your card company will attach a note to your credit file that reads "third party assistance." Thus, future creditors reviewing your credit report will see that you requested help in the past, and they may deny your credit application.

Payment Issues

    Another drawback to using a debt reduction company is that they may pay your creditors late, which can harm your credit score. Stay on top of your debt reduction company to ensure that they forward payments to your individual creditors on time. Contact your creditors frequently to check the status of your account. You can stop using a debt reduction company at any time and regain control of your credit accounts if you suspect mismanagement of your debts.

How to Find the Last Date Paid on a Bill

How to Find the Last Date Paid on a Bill

Some parts of a billing statement aren't hard to figure out -- the amount due, for example, and the date when it's due. Other parts, such as the date and amount of your last payment, are sometimes left out. The last date of a payment shown on a billing statement depends on many factors, such as the time it takes for you to send the payment, the time it takes for the company to receive the payment, and the time it takes the company to record the payment. Checking your account online or going over your recent paper bill statement will usually give you the payment information you're looking for.

Instructions

    1

    Check your account online. Log on to your creditor's website using the username and password that you chose when you registered your account. Most business websites have a button you can click to access your payment history. When possible, print out your payment record and keep it in a file folder. If you're having a hard time finding your payment history, call the customer service number listed on the website.

    2

    Opt to receive paper copies of your bills. Many companies are trying to save money by going paperless. Paper copies of statements are usually easier to read and understand, and some creditors include the date and amount of your previous payment.

    3

    Contact your creditor. Ask for a copy of your recent billing statement showing the date of your latest payment. The company's customer service representative can also confirm the amount and date of your most recent payment.

    4

    Check your last payment on a bill through your bank's website. Banks typically offer free online bill payment services if you have a checking account with them. If you pay your bills online using your bank's service, you will have built a payment history for your bills that you can access anytime.

How Creditors Determine Credit Scores

If an individual has taken out some form of credit, such as a line of credit with a credit card company or a loan to purchase a house, he has a credit report. This report is a file of information related to that person's lending habits, including how much debt he has, what loans he has taken out, and whether he has paid his loans back. Credit reporting bureaus use this information to formulate a person's credit score.

Accumulating Information

    Credit reporting bureaus collect information in several ways. In many cases, creditors will report information pertaining to an individual -- such as a record of the loans they have extended to borrowers and whether the person has paid back the loan -- directly to the bureaus. The bureaus may also collect certain kinds of public records, such as records of foreclosures, bankruptcies and civil judgments, all of which harm a person's credit score.

Score Factors

    Credit reporting bureaus process the information contained in credit reports to determine a person's score. Some of the factors that have more weight when determining a person's score are the length of the individual's credit history, the ratio of his debt to his available credit, and his history of paying back loans. When creditors update these companies on a person's loan, the companies will shift the score accordingly.

The Big Three

    Each of the three major credit reporting bureaus -- Equifax, TransUnion and Experian -- share information, but the way in which they process this information varies. While one bureau may give greater weight to one factor, such as the length of an individual's credit history, others may put more emphasis on another factor, leading to different scores from all three bureaus.

Considerations

    Although credit reporting bureaus are private companies, the way in which they determine a person's score is regulated by a number of federal laws. For example, these bureaus are forbidden from listing negative information about a person, except the record of a bankruptcy, on a report for more than seven years. After seven years have elapsed, the information must be removed from the credit report and can no longer harm the individual's score.

Wednesday, June 20, 2007

FICO Facts

The terms FICO score and credit score are often used synonymously to describe a numerical score that credit reporting agencies calculate based on an individual's credit history. FICO scores are used by lenders to assess the risk of lending to different individuals. Understanding a few basic aspects of FICO scores can potentially help you improve your score.

Why are They Called FICO Scores?

    FICO scores get their name from the Fair Isaac Corporation, which created the formulas and software used to determine the scores. According to MSN, the three major credit-reporting agencies, Equifax, Experian and TransUnion, use the software created by FICO to calculate the risk of lending to a particular borrower based on his credit history.

What Scores are Possible?

    FICO scores have minimum and maximum achievable score. According to MSN, a FICO score ranges from 300 to 850. The majority of people are likely to fall somewhere in the middle, such as in the 600s and 700s rather than at the extreme low or high range. Bankruptcy and foreclosure causes scores to be lower than the average.

What Impacts a FICO Score?

    A variety of credit information goes into the calculation of a FICO score. According to Bankrate, 35 percent of a FICO score is based on your debt payment history, 30 percent is based on how much total debt you have compared to your credit limit, 15 percent is based on the length of your credit history, 10 percent is based on newly acquired debt and the final 10 percent is based on other factors, such as the type of debts you have. In general, paying off debts on time, having a low debt to credit ratio, having a long credit history and a small amount of newly acquired debt all tend to increase FICO scores.

Why is it Good to Have a High FICO Score?

    Having a high FICO score can be advantageous in several ways. A high FICO score may allow you to be approved for loans and credit cards that you might not get with a lower score. Higher FICO scores may also allow you to get a lower interest rate on debt, meaning you pay less for the loans and credit you receive. Insurance companies may use a score similar to a FICO score to determine insurance rates.

How to Change a Name With the Credit Bureaus

When it comes to your credit report, even the slightest error can greatly impact your credit score and whether you will be approved for credit. When you formally change your name (even if you just drop the middle initial or adopt a nickname), it's a good idea to update that information with your credit bureaus and creditors.

Instructions

    1

    Make copies of your marriage certificate, divorce decree, certificate of naturalization, court order or any other relevant document that shows that your name has been legally changed.

    2

    Send a letter to each of the credit bureaus (Equifax, Experian and Trans Union) requesting that they change your name. Include documentation. Find a sample letter below.

    3

    Contact the Social Security Administration and inform them of your name change.

    4

    Contact each of your creditors, along with your bank, and inform them (in writing) of your name change. Be sure to include relevant documentation proving your name has been changed. Refer to the sample letter below.

    5

    In a month or two, pull your credit report to make sure that the changes have been made.

How to Negotiate Your APR with Credit Card Companies Yourself

How to Negotiate Your APR with Credit Card Companies Yourself

A ridiculously high APR on your credit card equals higher minimum payments. And with so much of your monthly payments going to the interest, it can take longer to pay down the debt. People with a good credit history can ask for a lower APR. Credit card companies want to make money, so they are not always willing to lower the interest. But with persistence, you can negotiate a better rate.

Instructions

    1

    Improve your credit score. A low FICO score and bad credit habits do not warrant a better APR on credit cards. Obtain a copy of your credit report and check your FICO score. If necessary, clean up your report before asking for a better interest rate. Reduce debt and start paying your bills on time.

    2

    Call the customer service number. Speak with your credit card company to see if your APR can be reduced. Simply asking for a lower rate can often work in your favor.

    3

    Display a good attitude. Credit card companies are less likely to work with argumentative or nasty individuals. Be polite and professional on the telephone. Ask to speak with a supervisor if the customer service representative is unable to assist you.

    4

    Bring up your history with the company. Persuade credit card companies by underscoring your history with the company and your perfect payment record, if applicable.

    5

    Be ready to walk away. If you can't negotiate a lower APR, respectfully express your readiness to leave the credit card company and consider other companies. Your credit card company may strike a deal to keep your business.

Can a Collection Agency Add Interest to My Debt in Michigan?

Often, a person's debt will be transferred to a collection agency. Instead of trying to convince the debtor to pay back the debt himself, the creditor who was originally owed the bill will either sell the debt to another party or have them attempt the collection on commission. While a collection agency in Michigan is allowed to enforce the terms of the debt, it is not allowed to add interest that is not called for in the original debt contract.

Debt Transfer

    Just because a person owes a debt to a particular creditor, this does not necessarily mean that the debt will stay with that particular creditor. In fact, it is common practice for creditors to sell debt, particularly debt they cannot collect. When a debt is transferred to another party, the originally creditor is replaced and the new creditor receives the rights accorded to it by the debt contract.

Debt Contracts

    Often, the contract from which a debt derives -- for example, a loan contract or a bill -- will contain clauses that allow the creditor to assess penalties if the debtor fails to pay the debt back on time. For example, most credit card companies specify in contracts that they are allowed to charge late fees to a debtor if he misses a payment, as well as raise the interest rate attached to the loan's principal.

Michigan Law

    Under Michigan law, a collection agency is only allowed to collect the money agreed to under the contract that led to the debt. So, if a contract allows the creditor to fine the person for late payment or raise the interest rate on the outstanding balance, the collection agency can do this, so long as the contract is legally written. However, it cannot arbitrarily add interest, even to cover expenses of collecting the debt.

Penalties

    Attempting to charge a debtor with extra money is a violation of federal law, specifically the Fair Debt Collection Practices Act. Any lender who illegally attempts to pass on costs of the collection or attempt to charge the debtor more money than he owes under another pretext may face civil penalties. These penalties may not just be paid to the government but may actually go to the debtor as compensation for damages.

Disadvantages of Credit Card Overspending

Disadvantages of Credit Card Overspending

The easy availability of credit cards and their widespread acceptance at stores makes it simple for consumers to overspend. Through 2010 credit card approval remained within reach of many people despite the effects of a brutal housing crisis and recession in the U.S. starting around 2007. The stores and credit card marketers tout low monthly payments, but abuse of the cards through repeated overspending can cause serious problems, even bankruptcy.

Excessive Debt

    Impulse buying can lead to overspending on credit cards, and some people fall into the trap of keeping balances on multiple cards. Then making even the minimum payments could prove difficult after a job layoff or illness. Problems may continue to mount with job loss or illness, with possibly even more reliance on credit cards instead of personal savings. The result: excessive accumulated debt that could take years to repay.

Credit Scores

    Excessive debt can cause credit scores to drop. Generally, creditors like to see you spend no more than 30 percent of your available credit--on each individual credit card account. Spending more than that could be interpreted as living on credit or being irresponsible with your spending.

Credit Use

    Overspending on your credit cards could cause you to use a large part of your available credit. Then, if you make only the minimum monthly payments, you could find yourself lacking enough available credit when you need it most--during an emergency such as an unexpected home or auto repair.

Tuesday, June 19, 2007

How to Negotiate a Settlement for Medical Debt

How to Negotiate a Settlement for Medical Debt

Medical bills can easily run into the thousands of dollars. If you don't have insurance or your coverage is limited, you may find yourself buried in debt if you have an accident or suffer a serious illness. Many people don't realize that doctors or hospitals may be able to negotiate the amount of your medical debt or the payment plan to make it more manageable for your budget. The negotiation process is not difficult if you speak to the right person and make a reasonable settlement offer.

Instructions

    1

    Determine whether you need to negotiate a reduction in the overall debt amount, a payment schedule, or both. Sometimes you can pay the full amount of the medical debt, but you just need some time to do it. Sometimes the amount is so large that it would be virtually impossible to pay it in full. Know exactly what you need to make the situation manageable before you start negotiations.

    2

    Contact the doctor's office or hospital before your medical debt is turned over to a collection agency. Once the debt is turned over to an outside collector, the doctor or hospital can only expect to receive a fraction of the amount billed. Rather than taking that step, the billing party might be willing to compromise and collect a smaller amount from you that will still be higher than what could be expected from a professional collector.

    3

    Make sure you are speaking with someone who has the power to do negotiations and give approval to a settlement. When you're talking to a hospital, you may need to speak with a supervisor rather than a billing clerk. When you're dealing with a doctor's office, you might need to talk to the office manager or the doctor herself. Don't waste your time talking to someone who cannot say "yes" to a settlement.

    4

    Lay out your offer and express your willingness to put it into writing. Be specific about the lump-sum settlement or payment plan you are offering. If you are willing to sign a contract, it will show your good faith. Make sure the billing party agrees to sign it, too; in this way the doctor or the hospital is also bound to the agreement.

Can They Garnish My Wages for Not Paying a Credit Card?

When you apply and get approved for a credit card, it is with the understanding that you will repay all charges you make on your account plus interest. If you fail to pay as agreed, you have defaulted on your agreement. If you ignore the bills the creditor or its collection agency sends you, it can take measures, such as wage garnishment, to recover the unpaid debt.

Determination

    A creditor or debt collector can garnish your wages if the state you are paid in allows it. Some states, such as South Carolina and Texas, do not allow creditors to garnish wages, but many do. Creditors that cannot garnish in one state may be able to do so in another. For example, a Texas creditor can seek to your garnish wages if you work in a state that allows it. If the state does not allow wage garnishments, some creditors use other methods to collect the debt, such as freezing the debtor's bank account.

Process

    To garnish wages, a creditor must first file a lawsuit against you. The court serves you with papers and includes information on how you can respond the suit. File an appeal if you have objections to the suit. The court will schedule a hearing for you to attend so you can plea your case. If the court agrees with the creditor, it issues a judgment against you. If you do not pay the judgment, the creditor can apply for a wage garnishment with the same court, if the state allows wage garnishments.

    The court or the creditor send your employer the wage garnishment so it can begin withholding from your wages.

Limit

    Title III of the Consumer Credit Protection Act sets the federal limit for wage garnishments. Your employer cannot withhold more than the lesser of 25 percent of your disposable income or the total by which your disposable wages exceed 30 times the federal minimum hourly wage. Your disposable income is your pay before legally required deductions are subtracted. State law may set a lower limit; your employer should use the lesser amount.

Considerations

    If the garnishment is preventing you from affording basic necessities, such as food and shelter, contact the issuing court and file a hardship claim. The judge may order you to pay a smaller amount. Check your local courthouse for the statute of limitations---the time frame in which a creditor can seek judgment and enforce it via garnishment.

Consumer Protection

    The Fair Debt Collection Practices Act, which the Federal Trade Commission enforces, forbids debt collectors from using unfair, deceptive and abusive methods to collect a debt. Disallowed practices include harassment, making false statements and stating that will garnish your wages unless the law allows this course of action and the collector plans on enforcing it.

Monday, June 18, 2007

Do-It-Yourself: Debt Settlement Advice

When you have reached the point where you can no longer afford to pay your credit card debt, then one of your options is debt settlement. If you were to pay a professional financial firm to negotiate your debt for you then you would be subject to an account setup fee, an ongoing monthly cost and a percentage of the money saved, according to the MSN Money website. You can take the DIY approach to debt settlement and save yourself the fees.

Taxes

    In order to prepare yourself to negotiate a lower pay-off amount with your creditors, you first need to understand the tax implications of settled debt. According to the Money-Zine website, the money that a creditor forgives in a debt settlement action is subject to federal income tax. For example, if you started with $15,000 in debt but got the creditor to agree to a $5,000 settlement, then that $10,000 difference is subject to income tax. IRS publication 908 describes how to claim the difference as income on your federal tax return.

Be Professional

    There are no state or local laws that mandate that a creditor must accept a debt settlement from you. You may find that many of your creditors will be reluctant when approached with the idea of settling a debt. However, if you explain your situation honestly, and have documentation to back up what you are saying, then you can increase your chances of getting a negotiated agreement. For example, if you send the creditor copies of your unemployment payment reports to prove that you are currently unemployed, then the creditor would be more apt to discuss a settlement with you.

Do Not Wait

    Do not put off contacting your creditors to discuss debt-negotiating terms. If you know you are going to run into payment problems, then call your creditors right away. There may be programs or options that creditors are willing to give people who take the initiative and still have accounts in good standing as opposed to people that wait too long, according to the Consumer Reports website.

Have a Plan

    Prior to calling your creditors, figure out how much you can afford to pay back and have an offer in mind. Do not speak to the general associate that answers the phone when you call; ask to speak to a manager. If you can visit a local branch of the creditor then that would be even better. Be prepared for your creditors to say no. You may get some that say yes, and some that say no. However, try to have an option available if they say no. Some options include a debt consolidation program, debt counseling or bankruptcy in extreme cases.

Can Minimum Wages Be Garnished?

Can Minimum Wages Be Garnished?

Debtors who default on their debt are sometimes subject to wage garnishment. Wage garnishment can be a scary and restrictive process, and no matter how you're involved with it, you must understand its rules. There are limits on how much of a dent garnishment can make in someone's wages, but the limits vary by state.

Wage Garnishment

    Wage garnishment is a last-resort approach taken by creditors whose debtors have not taken other steps to pay back their debt. By filing a successful court order, creditors can legally oblige a debtor's employer to remove funds from the his wages to pay the debt.

Exemptions

    People working minimum-wage jobs are subject to wage garnishment, but not all funds can be garnished. The employer must leave enough funds in the paycheck, for example, so the employee can pay the usual legal obligations: taxes, insurance, Social Security and the like. Deductions that are not legal obligations, however, like union dues, are not protected from wage garnishment.

Federal Restrictions

    Both state and federal laws set limits on the percentage of a debtor's wages that can be confiscated through garnishment. According to Title III of the federal Consumer Credit Protection Act, garnishments are limited to the lesser of "25 percent of disposable earnings or the amount by which disposable earnings are greater than 30 times the federal minimum hourly wage." Thus, a worker making $300 a week after taxes would only have to pay 25 percent of those earnings -- $75 -- in garnishment.

State Restrictions

    Depending on where you work, your garnishments may be subject to additional restrictions or specifications under state law. Whether you are garnishing or being garnished, know your state's laws on the matter. See "Resources" for an overview of all state garnishment laws.

The Minimum Qualifications for a Credit Card

A credit card can be either beneficial or detrimental to your financial situation depending on its use or misuse. According to statistics compiled by Hoffman, Brinker and Roberts, credit card debt in 2010 totaled $886 billion among U.S. citizens, a number expected to increase to $1.177 trillion in 2011. Because of the responsibility required to manage a credit card, an applicant must meet minimum requirements to qualify for one. Specific numbers vary by issuer, but they can be broken into general categories.

Age

    To be the sole borrower on a credit card, an applicant must be 18 years of age in the United States. Some companies allow a borrower under 18 if he has a parent or legal guardian co-sign for him. The limits are usually much lower than those for someone over 18. Another option is prepaid credit cards. A parent or guardian can purchase a card. The amount used to purchase the card is the amount of "credit." For example, if the parent purchases a card for $500, the credit limit is $500. These two options are the only ones available for those under 18. Once an individual reaches 18, he can apply for a card on his own.

Credit Score

    Your credit (FICO) score plays a major part in the credit card approval process. There is no stronger indicator of ability to repay credit than your credit history. Borrowers with poor credit, typically 620 and below, find themselves unable to qualify. Even if the credit card company approves them, they likely face extremely high interest rates and low limits. While score is a major factor, there are other red flags on your credit report. Late payments and too many applications in the past 12 months work against you.

Income Level

    One provision under the Credit CARD Act of 2009 is a guideline for proof of income. Essentially, a credit card applicant must prove he has the means to pay the monthly credit card bill. This provision prevents applicants with low income from taking out multiple cards, running up the debt and finding they are unable to pay it back. The decision to verify the income ultimately lies with the issuers. They may request documents including, but not limited to, pay stubs, W2s, tax returns, credit reports and account statements.

Other Creditors

    Another major factor in qualifying for a credit card is the number of other obligations on your credit report. Multiple credit cards do not work against you if you carry low balances. Multiple cards that are nearly maxed out, however, can work heavily against you. If you are near the top of your limit on your other cards and only make the minimum payment each month, it looks bad. It tells the prospective issuer that you are likely just to run up their card and leave the balance near the top. It can be very difficult to get approved in this situation.

Sunday, June 17, 2007

What is the Meaning of Secured and Unsecured Debt?

Unsecured debt is debt that doesn't have collateral attached to it. That is, the creditor doesn't have anything to take from you should you fail to make payments. Credit cards are an example of unsecured debt. Secured debt has collateral attached to it. Creditors can seize assets if you don't pay the debts. Home loans are examples of secured debt.

Advantages of Unsecured Credit

    Unsecured credit is beneficial for young people just starting to build their credit histories. For example, when they get credit cards, they can buy books for school, clothes and other necessary items without worrying if they have enough money. In addition, they learn financial discipline as they pay the monthly bills.

Disadvantages of Unsecured Credit

    The problem with unsecured credit is that if you don't pay your debts, not only will it remain on your credit report for seven years, but you will have difficulty receiving credit for long-term goals such as a new house or a building for a new business. To avoid this, you should have only one or two credit cards so it will be easier to make the payments.

Advantages of Secured Credit

    Secured credit allows you to make bigger purchases such as a new car or home. With secured debt you don't have to worry about having to pay so much money out of your own pocket, and this can relieve stress. In addition, if you continue to make timely payments on secured loans, your credit rating increases.

Disadvantages of Secured Debt

    Secured debt becomes a source of stress when you make late payments or stop paying altogether. The creditors usually call frequently and send letters, but they also can seize your house or car because you put them up as collateral.

Considerations

    Consider the pros and cons of secured and unsecured debt before signing up for credit. Take into account your income, financial maturity and financial literacy when choosing secured or unsecured debt.

How to Remove a Cosigner From a Loan

When you need a loan before you have enough positive credit history to qualify, you can get someone to cosign with you. This person agrees to make payments on the loan if you fail to. The loan, along with all of the payment history, appears on both your credit report and the cosigner's credit report. This debt liability could affect the cosigner's ability to obtain credit on his own, so the cosigner might want to be released from the obligation. There are two major methods to remove a cosigner.

Instructions

Apply for Release

    1

    Make consistent on-time payments on your loan for at least one year. Some lenders want to see two or more consecutive years of on-time payments, but you can at least ask after one year.

    2

    Check your credit report and see if there are any errors on it. If there are, follow the instructions on the credit report to dispute them so they will not affect your credit score. The lender will check your credit to ensure that you are responsible enough to handle the loan on your own before releasing the cosigner.

    3

    Contact your lender and ask for an application for cosigner release. Not all lenders offer this, but if they do, it is the simplest way to remove the cosigner.

    4

    Fill out the application for cosigner release and mail it back to the lender. You should receive a decision shortly.

Refinance Loan

    5

    Follow the procedure above to attempt to get the cosigner released. If your lender does not offer cosigner release or if you do not qualify, your only option is to pay off the loan and get a new one on your own -- also known as refinancing.

    6

    Look at your most recent loan statement to find the outstanding balance. This is the amount you will need to refinance.

    7

    Call your current lender or another lender and ask about the procedure for applying to refinance your loan.

    8

    Fill out the required documents to apply for the refinance. If you get it, this will pay off the old loan and release the cosigner, leaving you with a new loan without the cosigner.

About Different Types of Credit

About Different Types of Credit

Credit, in a modern sense, refers to the process of a lender or creditor giving a loan to a borrower. The concept is deceptively simple and its contemporary application involves interest rates, credit ratings and other arbitrary terms. Today, credit can be separated into several types, mostly depending on how the borrower is expected to pay back the loan.

History

    Although credit as we think of it today refers to credit cards and bank dealings, the process of borrowing and lending currency has been around for centuries. Installment credit has existed in the United States since the time of the Pilgrims, when if one had a debt with a local merchant, he would pay it back as soon as possible in monthly or weekly payments.

Types

    Many types of credit exist. Credit cards allow you to borrow money from the card issuing company. You can use the cards to purchase goods and services, or oftentimes for a cash advance. You can elect to repay the full amount owed each month, or just pay a portion and agree to interest charges on the remaining balance. Popular credit card types include Visa and Mastercard. Charge cards, such as the American Express card, are very similar to credit cards, however you must repay the total amount owed each month. Store credit cards are issued by department stores and other retailers. You can only purchase goods from a particular store or set of stores with each card. The interest rate for store cards is generally higher than other credit cards. Personal loans are another type of credit. These loans are usually for one big item, a car for example. They feature fixed monthly payments of a set amount to be paid over a particular period of time. Mortgage loans are used to purchase property. Like personal loans, they have fixed monthly payments. The interest is lower than other types of credit and the payment period is very long--often 15 or 30 years. Other types of credit include line-of-credit loans, overdraft bank account coverage, short-term pay day loans and others.

Features

    Loans can be set up to be paid back in one lump sum by a specific due date or in several regular payments or installments. With loans, you normally are asked to sign a contract. With installment credit to purchase a car or appliances, you are oftentimes expected to make a down payment. You then agree to pay installments each month for a specified number of months. Finance and interest charges are included in the payments. When using credit cards, they can act as an interest-free loan until the end of the month. However if you don't pay in full, interest charges apply. Interest on credit cards and store charge cards is often 15 percent or more annually.

Benefits

    Different types of credit allow people to have financial flexibility. Not many people have the money to pay for large purchases, such as a house, in full. By taking out a mortgage loan or car loan, you can provide a home and transportation for your family and pay back the lender over time. Credit cards and other types of credit can be important, particularly when unexpected expenses arise.

Warning

    If you borrow money and are unable to make loan or credit card payments, you run the risk of getting lost in massive debt. When applying for credit, be sure that you have the means to make your payments in a timely manner. The effects of not paying on time are that the company will charge late payment penalties and report the late payment to credit agencies. If you have a history of late payments, it will be difficult to secure more credit in the future. According to the Federal Reserve, consumer credit as of May 2008 totaled $2.57 trillion, with revolving credit (primarily credit cards) making up $962 billion of that. When overwhelmed by debt, many people turn to bankruptcy. When using credit cards and taking out loans, be sure to manage your money wisely and make payments on time or early whenever possible.

Saturday, June 16, 2007

Which Credit Card Is Best for Me?

Which Credit Card Is Best for Me?

Picking the right credit card can be confusing because of the many options. Not only are there different cards from different banks but within many banks there is more than one credit card being offered with different features. Understand the options, and you can pick the card that best meets your needs.

Shop Multiple Cards

    Consider card offerings from more than one financial institution. Don't rely on mailed-in offers. Be proactive and call several financial institutions to find out what is the best offer they have. Let the credit card company representative you are talking to know you are looking at several companies and want the best deal. The representatives have been trained to sell you the most profitable card for the credit card companies and will not necessarily offer you the lowest-rate card unless you ask for it.

Interest Rate

    One of the key considerations is the interest rate the card is offering you. Although it may seem simple to compare rates, many rate structures are more complex. Some rates may be for an introductory period only. The rate on a balance transfer may be different from the rate calculated on a direct purchase using the card.

Other Hidden Charges

    Familiarize yourself with other charges such as late payment fees, over limit fees and additional balance transfer charges. These less obvious charges can make the true interest rate you are paying on your card become much higher than you are aware of

Rewards

    Many cards offer rewards. Consider each and determine which are important to you in terms of simple convenience and direct or indirect dollar savings. Cards can offer a direct cash back savings, discounts on purchases, accumulated frequent flyer mileage and a variety of gifts. Don't be swayed by gifts only in making your credit card decision because other factors such as interest rates over the long term are more important.

Transaction Reporting

    If you will be using your card for business, reporting could be important. Some cards provide a year-end summary of purchases by category and in date sequence order. Others provide the ability to download your purchases into an accounting program or spreadsheet. This makes it easier for you to prepare tax returns or provide transaction data to your accountant. It also helps you make sure that you take all of the business tax deductions you are entitled to.

Friday, June 15, 2007

5 Easy Types of Debt Relief Systems

5 Easy Types of Debt Relief Systems

Paying for a new home, car or a vacation may seem more like a wish than a goal if too much of your paycheck goes out to consumer debt. Debt elimination programs can work to your advantage and create some breathing room between your income and expenses. These programs also can get you out of debt years sooner and make the difference in thousands of dollars paid in interest.

Debt Management

    A debt management company forms an agreement with the customer's creditors to lower interest rates and fees. The plan is explained to the client, who accepts or declines it. The debt management program starts with a single monthly payment made to the debt relief company. The company then makes a payment to the creditor. Creditors receive 100 percent of their money, so this has a positive impact on the client's credit score. The management company often provides support and resources to assist clients in managing their money so they're more likely to pay on schedule. Most companies have a minimum balance requirement, and the balance often needs to be with two or more creditors.

Unsecured Loan

    The client applies for a personal loan from a lender, usually a bank or credit union, to pay off all his creditors to get a lower interest rate on the debt. The new deal will get the customer out of debt sooner with less money paid and provides for a single payment each month. An unsecured debt-elimination loan is usually capped at $25,000 for those with good credit.

Debt Settlement

    With debt settlement, a client makes monthly deposits to a settlement deposit account in an amount she can afford. The client stops paying the creditors, and the settlement company negotiates with her creditors for a lower amount to repay. When settlements are reached with creditors, settlement payments are paid into an account the customer set up.

Credit Counseling

    An agency will form an agreement with your creditors to lower interest and fees on your behalf. Once the client, settlement company and creditors reach an agreement on a payment plan, the plan goes into effect. The client pays the debt relief company, which then pays the creditor. Having the debt relief company there to manage the debt repayment gives creditors reassurance that they'll get their money each month.

What Is Paid After a Foreclosure?

Foreclosure is a procedure a mortgage lender can use to recover your mortgage balance if you are unable to make your mortgage payment; however, lenders typically only foreclose as a last resort. This is because the costs of foreclosure average about $60,000 per home, according to Jonathan D. Epstein of "The Buffalo News." Several costs are paid after the foreclosure sale.

Mortgage Balance

    After a foreclosed home is sold through an auction or a real estate agent or broker, the proceeds of the sale are used to pay for your mortgage balance. If money is left over, the lender will pay you the difference, minus other costs associated with initiating and completing the foreclosure.

Deficiency

    A foreclosure sale may cover the balance of your mortgage if you had paid down a substantial portion of your balance before going into foreclosure. However, if you owe more on your home than the foreclosure sale price, the lender will hold you responsible for the difference, called a deficiency. You will have to pay the deficiency to the mortgage company to pay off the loan, even though you no longer own the home.

Foreclosure Costs

    After a foreclosure, you may be responsible for the lender's costs associated with executing the foreclosure action. These costs may include attorney's fees, auction fees, Realtor commissions, appraisal costs and insurance on the home for the time between the foreclosure action and the sale. In some states, the mortgage lender must file a foreclosure action in court; if your lender executes judicial foreclosure, you will typically be responsible for court costs. Your lender may add these costs to your deficiency amount.

Considerations

    If you do not pay a deficiency amount after foreclosure, the lender may sue you for the deficiency, depending on your state's laws. After obtaining a judgment for the deficiency, the lender may garnish funds in your bank account and liquidate your personal property. In most states, it may also garnish up to 25 percent of your wages to pay the deficiency amount.

Is Bill Consolidation a Good Idea?

Is Bill Consolidation a Good Idea?

Most people start out with a desire to keep up with their bills and pay them on time. Unfortunately, life sometimes gets in the way of doing so, and it's all too easy to end up with debts that are difficult to pay. When this happens, some people seek out debt consolidation options in order to avoid simply defaulting on their bills.

Significance

    Whether or not a bill consolidation program or loan will be good for you depends on a number of factors. All types of debt consolidation loans have both pros and cons that must be considered carefully in terms of your unique situation. According to MSN Money, for example, a person may take a home equity loan in order to consolidate his bills. This offers him the ability to pay one bill each month instead of several. In some cases, home equity loans may even offer lower interest rates in comparison to the total interest rate on multiple bills. However, if the person defaults on the loan, he risks losing his home (see Resources below).

Types

    Among the many types of debt consolidation options are signature loans, credit card programs, debt consolidation mortgages, mortgage refinance loans, debt consolidation counseling and loans that borrow from a person's retirement fund. To determine which one might be best for you, you have to consider the interest rate you'll be paying and the overall amount you'll be paying over time. In some cases, the interest rate may be so high that you end up paying a dramatically different amount than you would have if you stuck with paying your bills individually. According to MSN Money, it may be better to make better payment arrangements with each creditor, in some cases, than to end up with a much more costly loan (see Resources below).

Considerations

    As far as debt counseling is concerned, you may do well with a company that can develop a solid plan for getting you out of debt. Such counseling programs can help you to pay off your bills within 3 to 6 years. These programs may not only help you to work out a plan with your creditors, but they may also pay the bills for you, using your money. However, if they fail to pay your bills on time, you could rack up late fees and take a hit to your credit score. Additionally, credit counseling agency fees may just add to your expenses.

Prevention/Solution

    According to Bankrate, it's always a good idea to check into the reputation of the company you're planning to deal with when you're seeking debt consolidation programs and loans (see Resources below). Check with the Better Business Bureau to find out whether or not the company has been accused of having abusive lending practices or misappropriating money provided for bills. No matter how good a bill consolidation program sounds, you'll want to skip it if there are blemishes on the company's record. Since there are so many companies that help with bill consolidation, you should have plenty of choices.

Warning

    In deciding whether or not bill consolidation is a good idea, you always have to consider the risks. With debt consolidation loans that involve your home, consider the risk of foreclosure if you cannot meet your new loan payments. With loans from your retirement account, consider penalties you may be charged. According to SmartMoney, you may have to pay taxes and a 10-percent penalty for withdrawing money from your retirement fund early, at least in some cases (see Resources below).

Thursday, June 14, 2007

How to Fix Credit With Restoration to Reestablish Credit

Credit restoration can be an extended process that requires regular attention and disciplined behavior. Many individuals choose to work to repair their credit themselves while others enlist credit restoration services, debt consolidators, credit counselors, life coaches and therapists to assist them in their efforts to restore reestablish their credit. The core principles for restoring good credit are living within your means and paying off or settling existing debts as quickly as possible.

Instructions

    1

    Attempt to avoid bankruptcy by any means necessary. Bankruptcy remains on your credit report for ten years. You are required by law to report your bankruptcy whenever asked on documents like loan and job applications. All liquid assets are also seized and redistributed after a successful personal bankruptcy filing. The bankruptcy can be denied, wasting effort and legal fees.

    2

    Contact any creditors directly with which you have late or delinquent accounts. If you have a late account, ask them to remove the late payment entry from your credit report in return for a payment. If the account is delinquent, try to settle the debt. Begin negotiating at 10 percent of the total debt amount, but expect to pay 25 percent or more of the debt. Get any agreement to settle debts in writing from the creditor.

    3

    Make all debt payments on time after clearing up any delinquent or defaulted accounts. The majority of your credit score is made up of making payments when requested. Keep credit card balances as low as possible to maintain good credit. It may take years, but your credit will be reestablished if you demonstrate a sustained pattern of meeting your contractual obligations.

    4

    Pay all bills on time. Delinquent bills will not necessarily appear on your credit report, but if they go to collection, it will manifest and damage your score. Set up automated bill payment plans to ensure that you don't make mistakes when paying your bills.

    5

    Check your credit report regularly for errors. Common mistakes include confusing the credit entries of family members with similar names and mistaken dates. Dispute erroneous entries on your credit report with relevant credit bureaus and include copies of any documentation you may have supporting your claim.

How Long Will Credit Repair Take to Increase My Credit Score?

How Long Will Credit Repair Take to Increase My Credit Score?

Credit repair may immediately impact your credit score in a small way; however, drastic changes in your score will take time. The amount of time depends on the circumstances surrounding your low score. The more drastic the circumstances, such as bankruptcy or foreclosure, the longer they take to overcome. In the meantime, continuing to improve your score in small amounts through credit repair will help your cause.

Factors

    The primary factor influencing the length of time it will take to improve your credit is the type of negative information on your report. If your score is low because you are carrying too much debt, you can immediately improve your score by paying off the debt. If your score is low because of missed payments, the negative information will disappear after seven years, depending on your state, but your credit can go up in the meantime if you pay your debts. If, however, the negative information on your report takes drastic debt counseling to fix, such as a bankruptcy or foreclosure, you will be facing a much longer road.

Regulation

    Two types of regulations affect the length of time it takes to improve your credit. Regulations limit the statute of limitations on debts. After a given period of time, typically six to 10 years, depending on the debt and state, a lender no longer has a right to attempt to collect from you. If the debt has been handed to a collections agency, the agency does not have a right, either. Always verify the statute of limitations when a lender attempts to collect. If the debt is past the statute, immediately ask to have it removed from your credit score and tell the collector to stop contacting you. The second regulation affecting your improvement time frame is the statute of limitations for information on your report. This is generally between five to 10 years, and it varies state-by-state as well. Many states allow for bankruptcies to stay on a credit report longer than defaults or missed payments. Know your state's laws and contact the credit bureaus if a report is past the statute.

Solution

    Take steps to remove incorrect information on your credit report. The Consumer Protection Agency and the Federal Trade Commission both offer solutions to predatory lending and misinformation. Notify your lenders and the credit bureaus in writing if you notice errors, and keep a copy of all communication for your records. If you feel an agency attempting to collect does not have the right to do so, you have the right to request verification of the debt and the agency's right to collect that debt. The agency must respond within 30 days or cease collection. These protections are on the books to help you repair your credit. Use them wisely, and you will be able to boost your score quickly.

Best Practices

    While consolidation and settlement can adversely affect your score, a number of best practices in credit repair will improve your score. Time is the best remedy. While you wait, apply the best practices to help boost your recovery. First, pay down your existing debts. Pay down high interest rate debts first, and make all payments on schedule. Second, reduce the amount of credit and debt available to you to an appropriate level. For example, if you have six credit cards totaling a $20,000 limit but only earn $30,000 per year, your score may be suffering. Close high interest rate cards and those you do not often use. Aim for available credit between 10 and 20 percent of your income. Finally, take new debts only if they build your assets. For example, do not take debts to purchase clothing. Instead, take a car loan or a computer loan. Aim to build your net worth through borrowing.

Warning

    When you enter credit repair, be sure to avoid taking steps that can adversely affect your score. For example, some credit repair companies advertise consolidation or debt settlement. If you close a loan early through one of these methods, the lender will may report negative information to the credit bureaus. You broke your contract by repaying the debt early. Only take these steps if your lenders agree to report your loans as satisfactorily closed. Further, avoid taking new loans to pay off old loans. This can keep your debt levels high, which will not help improve your credit score.