July 2007 ~ Credit And Debt Management

Tuesday, July 31, 2007

Can I Get Credit After Completing a Consumer Proposal?

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A consumer proposal is an agreement between creditors and the debtor to consolidate loans into a payment plan that lasts five years or less--usually resulting in repaying less than what the debtor owed. It is possible to get credit after a consumer proposal.

Consumer proposals harm your credit rating a little less than a bankruptcy. Also, they only stay on your credit report for three years. After this three years, creditors will never know you had to negotiate a proposal, according to the Bankruptcy Canada website.

Creditors may take a chance on you after completing a consumer proposal because you have no unsecured debt obligations. If you have started building a good credit rating, you are in better position to obtain credit.

Bankruptcy Canada recommends opening a separate bank account and depositing at least 5 percent of each paycheck. You can secure a loan, using these savings as collateral and to prove you are responsible.

Statute of Limitations to Collect Payday Loans

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Payday loans are a type of short-term debt that could help you come up with cash on a moment's notice. In an emergency, these loans can be very helpful. If you cannot afford to repay them, the lender can take collection actions against you. However, the lender has to act within the statute of limitations when collecting this debt.

Payday loans are a type of short-term loan that involves borrowing against your future earnings. With this type of loan, you typically write a check for the amount you are borrowing and the finance charge. Then when you get paid, the lender can cash the check or take the money out of your bank account, depending on the terms of the agreement. If you cannot afford to repay the loan, the lender can charge extra finance charges and late fees.

As with other types of debt, payday loans have a statute of limitations associated with them. The statute of limitations is the amount of time that a creditor can sue you to collect a debt. The laws concerning statutes of limitations are set by state governments. In some cases, the statute of limitations might only be two to four years. In other states, the payday loan company may be able to come after you for 15 years to collect the debt.

To determine what the statute of limitations is in your state, you need to first determine what kind of debt a payday loan is considered in your state. In most states, this kind of debt is considered to be a written agreement with a definite payment date. In other states, it may fall under some other category of debt. Not all states agree on how debts are classified and because of this, large discrepancies in statute of limitations can be found.

If the debt is still within the statute of limitations, you can expect a payday lender to try every means available to try to collect it. The payday lender will most likely try to sue you while the statute of limitations is in effect. After the statute of limitations has expired, the creditor can still try to sue you, but you can use the defense of an expired statute of limitations. The creditor can also try to collect the debt without the threat of legal action as you still technically owe the debt.

Guide to Credit Debt Consolidation

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Consolidating credit and debt provides a means of simplifying monthly finances and acquiring a lower interest rate on debts. Lower rates allow you to pay off the balance quicker, because you'll spend less money on interest. There are several ways to consolidate debt, and you don't have to own a home to take advantage of consolidation methods.

Assume you have three credit cards with interest rates of 20 percent or higher. This results in three monthly payments, and your minimum payments probably are expensive because of the high interest rate. However, applying for a low-interest-rate credit card and moving the balance from all three cards to the lower interest card may save you money each month. Balance transfers are a quick way to consolidate credit and lower monthly payments. Balance transfers typically require fees that range from 3 to 5 percent of the transfered amount, according to the Bankrate website. Thus, transferring a credit card balance of $3,000 can cost up to $150. Consider this fee when deciding whether to transfer your balance.

Debt consolidation loans approved by a bank or credit union provide enough funds to pay off your credit cards and other types of debts. After eliminating these debts, you forward monthly payments to your bank to pay off the consolidation loan. Like balance transfer credit cards, debt consolidation loans can have lower interest rates than credit cards, and that would mean lower payments. Plus, banks establish a specific term for the loan--perhaps five years. This option allows you to pay off your debt within a specific time frame. Obtaining a consolidation loan involves meeting the bank's requirements, which include have good credit and sufficient income.

Property owners have the option of using their home equity to consolidate debt and get rid of high interest balances. This method requires adequate home equity, and you must prove you have the financial wherewithal to repay the home equity loan or second mortgage. If approved, the mortgage lender issues a check for the amount requested, and you use the money to pay off your debts. If you are considering a mortgage refinance, you may be able to borrow cash from the equity and use this money to pay off debts as well. Cash-out refinances increase your mortgage balance, however, and they may increase monthly payments.

Obtaining a credit card to transfer your balances, applying for a debt consolidation loan or using home equity to consolidate debts require a good credit rating. Individuals who don't meet these requirements have the option of consolidating debt through a debt or credit counseling service. These companies do not lend money to consolidate debts. Instead, they manage your debts for you and establish a relationship with your creditors to obtain lower interest rates on your debts. Debt consolidation agencies place a freeze or hold on your credit accounts to prevent new charges, and you no longer work with your individual creditors each month. You forward one payment to the debt consolidation company, and it makes payments to your creditors. Some consolidation services charge a monthly service fee and/or a setup fee, and other consolidation services operate as nonprofit organizations.

Consumer Credit Laws in Texas

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According to a 2010 article from MSN Money, How Does Your Debt Compare?, Americans spend 43 percent more than they actually earn and carry at least $1,000 in credit card debt on average. In Texas, the Office of Consumer Credit Commissioner (OCCC) regulates credit card practices and provides information to citizens on consumer credit.

Usury is defined as excessive interest rates for loans and credit card instruments charged by a financial institution. Each state regulates lending and credit card interest rates. The Texas Attorney General reports that interest rates for commercial loans have been set at 18 percent annually, but can fluctuate and extend as high as 24 percent in some cases. Interest rates for automobiles have a maximum yearly rate of 27 percent, and pawn shops can charge clients upwards of 240 percent annually. According to UsuryLaw.com, personal loans and credit card transactions for consumers usually remain at 6 percent for Texas residents; however, interest rates tend to vary over time due to inflation.

Texas law limits how much interest a bank can charge that has been chartered to do business in the state. Texas requires all credit card businesses to protect consumers by hiding the last four digits of credit card numbers on all credit/debit card receipts. In addition, businesses in Texas do not have the authority to penalize consumers for actual credit card usage.

Laws pertaining to debt collection under the Texas Finance Code protect residents from unfair and illegal credit card collection practices. Debt collection practices that violate the Texas Finance Code include: threatening to file charges or take criminal action against a consumer when there has been no violation of criminal law, or accusing a consumer of fraud or some unsubstantiated crime. In addition, credit card collectors in Texas cannot harass or abuse consumers by using threatening language or making inappropriate phone calls. Accordingly, Texas law prevents debt collectors from calling consumers before 8 a.m. or after 9 p.m. Consumers with outstanding debt that passes a state's statute of limitations may not have to repay the debt; however, statutes differ among the states. In Texas, the statute of limitations for debt contracts (i.e., oral and written contracts and promissory notes) is four years.

Can a Lien Be Put on Your Property for Credit Debt?

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The ramifications of defaulting on credit card debt and other credit accounts can be significant. Creditors who follow the correct procedures can put a lien on your property, garnish your wages, take money from your bank account and seize any personal property that is not exempt. Each state has specific guidelines and timelines that creditors must follow to collect credit debt.

The lender that initially issued the credit account or a third-party collection agency can file a lawsuit against you for unpaid debt on the account. Winning a judgment court order enables the creditor or collector to take legal steps against your property and your income to satisfy the debt. Judgments automatically attach a lien on your real property in some states. In others, creditors with judgments must make a separate filing to attach a lien to the property. Each state stipulates a specific filing process.

A lien put on real property must be paid at the time the property is sold. Liens are paid satisfied based on the filing date, but they are always paid before the seller receives proceeds from the sale. A lien from credit debt is valid for as long as the judgment awarded to the creditor remains valid. In some states, liens from judgments are valid for up to 20 years. Liens are also listed in the public information section of your credit report. Liens negatively affect your credit score.

Before a creditor can put a lien on your real property, it must win a judgment. Each state has specific statutes of limitation relating to debt from credit accounts. The four classifications are open credit agreements, written agreements, promissory notes and oral agreements. Credit card debts, as well as other unsecured credit accounts, are included in the open credit account category in most states. If the statute of limitations for collecting the type of credit debt that you owe has passed, the creditor cannot win a judgment except by default. Default judgments are awarded if the defendant does not appear in court to present a defense.

Creditors with judgments who have put a lien on your real property can only collect when the property is sold. If the property with the lien attached is your primary place of residence, chances are that your state has homestead exemption statutes to help you protect your equity. If the equity in the property exceeds the homestead exemption amount in your state, the creditor can force a sale to collect the lien. For example, if your states homestead exemption amount is $50,000 and your equity in the property is $45,000, the creditor cannot force you to sell the home to collect on the lien. If your equity is $55,000, the creditor can force a sale.

Is it Better to Pay Off a High-Interest Loan Before a Low-Interest Loan?

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When paying off your debt, there are only a few scenarios in which it is better to pay off a low-interest loan before a high-interest loan. Most of the time, it is a good idea to pay off your high-interest loans before your low-interest loans due to the amount of money you save in interest payments. Which loans you pay off first depend on the amount of the loan and the loan's terms and conditions.

The interest you pay on a loan is compound interest. This means the lender applies the interest rate on your loan to the principal balance as well as the accumulated interest.

Loans have compounding periods in which they calculate the interest charge and add it to your balance. Typical compounding periods for loans are monthly or daily. For monthly compounding periods, the lender calculates your interest payment based on the average monthly balance of your loan. For daily compounding periods, the lender calculates your interest payment based on the average daily balance of your loan. To save money on compound interest charges, pay off high-interest loans first.

A pre-payment penalty is a fee, usually a percentage of the total loan amount, that the lender charges you for paying off your loan early. Lenders put pre-payment penalty provisions or clauses in loan contracts to compensate them for the interest payments they will lose when you pay off a loan early. If you have a large pre-payment penalty attached to your high-interest loan, you may want to consider paying off your low-interest loans first.

If the balance on the low-interest loan is equal to or higher than your high-interest loan, pay off the high-interest loan first to save money on interest payments. If your low-interest loan has a low balance, consider paying that loan off first. Then, take the amount of money you were putting toward the low-interest loan you just paid off and apply it to your high-interest loan. Doing so will help you pay off your high-interest loan faster.

The amount of credit you have outstanding, meaning the amount of money you owe to your creditors, can affect around 30 percent of your Fair Isaac Corporation (FICO) credit score. Paying down the outstanding balances on your loans, whether they have high interest or low interest, helps increase your credit score and improves your overall credit. Additionally, paying off your loans indicates to lenders that you are responsible for the credit that is currently available to you and present a low risk of defaulting on future debt obligations.

How to Review Your Debt Management Plan

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Debt management plans come in all shapes and sizes. Some are Spartan, listing tenets such as allocating every penny of your disposable income to hacking away at your credit card debt. Others offer some degree of flexibility, allowing you to splurge on a vacation to Europe before your car is paid. Though some plans get rid of your debt faster than others, you must choose the plan that fits best with your lifestyle and income. Reviewing your debt management plan ensures that your financial decisions are best for your unique financial situation.

Instructions

Review the credentials of your debt management counselor and of his firm. Bill Westrom, author of the book, Master Your Debt: Slash your Monthly Payments and Become Debt Free, advises asking firms about their many services before deciding on one plan, checking their licenses, reviewing the businesss free literature, inquiring about the nature of the contract required for most debt plans, assessing customer complaints and satisfaction, verifying the fee structure and checking the firms employee compensation figures.

Assess the timelines associated with the debt management strategy. This helps you gain an idea of how long the plan will take to be successful: Will you be debt-free in one year? Two? Five years? If you wish to shorten the time span, measure the trade-offs that will be necessary to pay off the debt faster. Such tradeoffs entail larger monthly payments and less flexibility with your disposable income.

Review the negatives associated with the plan. Steve Bucci, author of the book, Credit Repair Kit for Dummies, lists downsides including an inability to change credit counseling firms upon beginning a debt plan, limited access to credit and a higher interest rate on the debt balance. Given these negatives, Bucci advises against such management services for those seeking a reduced interest rate or a loan consolidation alternative.

Measure the feasibility of alternatives. Play around with your debt management plan figures and check if other methods yield greater cost savings. For instance, check if you can save more money by paying off one credit card with a higher interest rate before another. Ensure you cannot make more money by placing money into an interest-bearing savings account instead of paying off your low-interest student loans. For every financial decision on your debt management plan, verify that it is the most fiscally prudent choice.

How Do I Deal With Paying My Debt?

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If left unchecked, debt can grow old with you. Financial restrictions caused by debt often lead to increased tension and anxiety. However, the negative impacts of debt can be overcome. Creating a plan for paying your outstanding balances in full is the best way to deal with your debt. Seeing the light at the end of the tunnel releases you from uncertainty over your financial future and helps you practice better spending habits. Debt repayment strategies vary by person, but should follow a set of standard guidelines.

Instructions

Assess your monthly budget. Find areas you can cut back on, such as dining out, shopping or other leisure activities. The more expenses you eliminate from your monthly budget, the more money you have to pay down your debt. Set a goal to eliminate your debt by a specific date, and commit to achieving it.

Use a loan repayment calculator or credit card repayment calculator to determine how much you need to pay each month to reach your debt repayment goal. With repayment calculators, the option exists to enter the number of months you want to take to repay your debt or enter the amount you can pay each month and let the program tell you how long it will take you to pay it off. If you choose to enter the length of time you want your debt repaid, adjustments to your budget may be necessary to accommodate the payoff terms.

Pay off your high interest balance first. The loans and credit cards you owe with high interest rates cost you hundreds, sometimes thousands, more each year than accounts with low interest rates. Paying off your costly debt gets the obstacle out of the way, helping you to achieve financial freedom faster.

Continue your modified household budget even after your debt begins to dwindle. Sometimes, when celebrating eliminated debt, it is tempting to start up old habits of overspending. Paid off debt should remain unused until debt from all areas of your finances is eliminated.

Does the Bank Have the Right to Make Me Pay My Long-Term Loan in Full?

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Failing to make timely payments on a long-term loan -- including a mortgage, student loan or deed of trust -- can cause your bank to write the debt off. Your bank may demand payment in full for the debt before writing the loan off as a bad debt. This is well within your lender's rights though is often not exactly what your lender is looking for in terms of a settling your delinquency.

Your bank may demand payment in full for a long-term loan, including a mortgage, if the loan is about to default or if the bank is accelerating foreclosure proceedings. At this stage the bank has the ability only to demand the payment; no one can force you. The bank may also refuse any installment payments you attempt to make on the account. This is a signal that your bank is prepared to write your loan off as a bad debt or is seeking to take possession of your home.

A traditional mortgage requires your bank to obtain a court order to legally take possession of the property. All the bank must show at a foreclosure hearing is your delinquency. If the court rules in favor of your lender, you are issued a notice to make payment of your mortgage in full within a short amount of time -- usually 30 to 90 days -- or lose possession of your home. The bank is free to auction off your home to the highest bidder once this period expires.

A deed of trust empowers the lender to enact foreclosure proceedings without the need of a court order. Your bank has the right to demand payment in full for your mortgage when you default on this type of loan. The bank is usually required to give you 90 days to make payment in full before contacting the deed holder to schedule a trustee sale of the property. You are not forced to make payment in full, but if you don't, you lose your home.

It's important to contact your bank immediately upon receiving a demand for payment in full. Your bank has complete control over when it chooses to write off your long-term loan as a bad debt. Informing your lender of your financial situation may go a long way to staving off that day. You may also be able to make payment arrangements with your bank to bring the loan current without the overwhelming task of paying off the entire balance at once.

Pros & Cons of a Credit Freeze

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According to Bankrate, it is possible for anyone to ask the credit bureaus to freeze his or her credit report. This means that your report can't be accessed by third parties without your consent, according to the Virgina government website. While a credit freeze does have its pros, it also comes with a list of cons--some of which can be very frustrating and time-consuming to a credit-active consumer. These cons may be less so for consumers who choose not to use credit.

One of the biggest benefits of a credit freeze is that you dont have to worry about someone accessing your report who shouldnt. This can happen if someone gets his hands on your social security number and other personal information, which will allow him to pull a credit reportacting as youin order to gain information about your accounts and overall credit rating.

Bank and credit card marketing departments often use a "soft pull" to pre-qualify you for their products. Then they send you an offer that is tailored to your credit standing. If you freeze your report, these outside creditors will no longer be able to pull your report for this purpose, and your mail solicitations may decrease.

Creditors and collection agents use credit reports to review your spending habits or to track you down. Freezing your report may not be a successful way to keep current creditors and collection agents who are after you for past due bills from accessing your credit report. According to Experian, companies that you have a previous credit relationship with may still have access to your report after the freeze.

Since your credit is frozen, lenders with whom you apply for credit may not be able to see it in order to approve you for credit. This can cause an automatic denial. Even if they are able to eventually access your report, your freeze can slow this process down, according to Experian.

In order to remove a freeze, you need to have the ID number and password given to you by the credit bureau at the time of your freeze, as well as proof of your identity. This may entail sending in a copy of your drivers license with a statement that you want your freeze removed. This can take time and become a hassle, especially if you have misplaced your ID number and password.

Tips for Building a Credit History

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Your credit score determines whether you will be approved to borrow money, and it determines the interest rate you are charged for borrowing money. Credit scores range from 300 to 850, with higher scores being preferable to lower scores. The majority of Americans have scores in the 600s or 700s, according to WhatsMyScore.org. The difference between a low credit score and a high credit score can mean many thousands of dollars over the course of your lifetime, so it is important to understand how to build a credit history properly to achieve a high score.

The best way to build a credit history is to understand the factors that lenders will use to judge you. Most lenders use your credit score to evaluate your credit worthiness. Credit scores are calculated by each of the three major credit bureaus-- Equifax, Experian and TransUnion, using a formula created by the Fair Isaac Corporation. The formula considers five factors: your payment history (35 percent), your borrowing behavior (30 percent), the age of your credit history (15 percent), the different types of credit you use (10 percent) and the number of inquiries (requests for your credit report from perspective lenders) in your report (10 percent).

A history of on-time payments, with no bankruptcies or judgments against you, is essential to having a high number for your payment history. Maxing out your credit cards (borrowing up to the maximum amount available to you) lowers the portion of your score concerning your borrowing behavior, while having a low debt-to-credit ratio (borrowing less than you have available) raises this component of your score. Having a long history of credit is better than a short history of credit for average age of cards. Having a mix of different types of debt (including secured debt like mortgage and car loans and unsecured debt like personal loans) is better than only having credit card debt. Finally, it is better not to open too many accounts in a short period of time, as this will result in too many inquiries on your record and a lower score in this area.

Once you understand how your credit score is determined, you can use this knowledge to build a credit history. Building a credit history can't happen quickly. It takes time for a long history of on-time payments to build up, and for the average age of your credit cards to become long. However, behaving responsibly from your first interaction with credit will ensure that ultimately you will end up with a high credit score. Open credit cards slowly, so you do not have too many inquiries on your record. Charge amounts that are lower than your credit limits, and pay the balance on time and in full.

As you use your credit cards responsibly, call your lenders periodically and ask them if they will raise your credit limits. Often, creditors will do this without pulling your credit report (which would result in an inquiry) if you have been a good customer and have a good payment record. This can improve your debt-to-credit ratio.

Take on several different types of debt--when you buy a car, take out a car loan even if you plan to pay it in full the next day. This record of a paid loan will help lenders to see that you can be responsible with different types of credit.

Each time you make a decision when it comes to borrowing, think of how that decision will affect the five factors that make up your credit score; the result will be a strong credit record and a high credit score.

For the most part, there are few shortcuts to building a credit history. However, the best available shortcut is to take advantage of someone else's credit history. You can do this by becoming listed as an authorized signer on someone else's account. When you become listed as an authorized signer, no inquiry is required. However, the credit card shows up on your credit report. If that card has longevity, this can make your average age of credit longer (15 percent of your score). If the card has a good payment record, this will improve your payment history (35 percent of your score). If the card has a high credit limit and a low balance, this improves your debt-to-credit ratio (30 percent). But be sure that any card that you become listed on as an authorized signer is in good standing and will have a positive effect on your credit report. In addition, practice responsible behavior with that card, since the person listing you as an authorized signer is trusting you with the responsibility of having access to their credit account.

Is Settling Credit Cards Bad for Credit?

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Credit reports can be considered adult report cards. Loans, employment and rental agreements are based on your credit score. The ability to pay off a credit card shows your reliability to pay back other loans. Sometimes settling a credit card debt is the only alternative. Before you settle a credit card you should understand the effect it could have on your credit standing.

Having a account as "Settled" or "Settled was 30 Days or More Past Due" will inhibit your chances to obtain credit in the future.

You can settle your credit card balance and negotiate your credit rating. Credit agencies and collection companies are willing to delete or erase all negative notations associated with the account and state the account as paid in full instead of "Settled."

After settling a credit card debt you are no longer responsible for the balance. Credit card companies can legally send the remaining debt to a collection agency, though, if the agreement is not in writing.

The credit rating you negotiate depends on how a settlement will affect your credit.

Settling credit cards are only beneficial if you have a very high balance and APR, or if you're in a hardship situation. Get all settlement offers in writing on the company's letterhead.

Can I Write a Letter to Creditors After a Judgment Has Been Made?

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If you don't pay a debt, your creditor can go to court and ask for entry of a judgment in a certain amount. Once the judgment is entered, the creditor has the right to use various methods to get its money back -- for example, by taking the funds in your bank accounts or retaining a portion of your wages. Even after the judgment, you can still write a letter to your creditor to negotiate.

Before you start negotiating with your creditor, you need to determine the amount of money you can afford to pay. You can offer to pay once as a lump sum or prepare a series of smaller payments. After putting down your payment plan in writing, you can attach it to your letter and send it to your creditor. Because a debt collector may handle your debt instead of your original creditor, you may have to ask the court to give you the contact details of your creditor.

Once your creditor gets a judgment, the law caps the interest rate that your debt can accrue. For example, your creditor can only charge the short-term Treasury rate plus 3 percent in Ohio. The sooner you pay off your loan, the less interest you have to pay. Depending on the result of your negotiations, your lender may also be willing to accept a lower amount as full payment of your debt.

Your creditor has already spent effort and money on getting the judgment. Collecting the judgment requires your creditor to dedicate even more resources to get the amount you owe. Going through legal processes to collect a judgment incurs expenses and causes delays. Discounting your debt in return for voluntary payment may help your creditor minimize its expenses and use its resources for other purposes.

When you reach an agreement with your creditor, ask that your creditor agree to the new terms in writing. Then, keep a copy of the agreement in case a conflict occurs in the future. You may benefit from consulting with an attorney who specializes in consumer rights law in your state to determine the proper course of action. For example, the attorney would know whether your creditor has violated any judgment collection restrictions.

Nonprofit Credit Repair

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Individuals who are deep in debt or have less-than-perfect to poor credit scores often seek out professional advice from nonprofit credit repair agencies. These organizations provide debt repayment plans, budgeting help, credit raising advice and creditor mediation services to financially embattled persons, often at low cost. While several legitimate credit counselors exist, the Federal Trade Commission says many so-called credit repair agencies engage in deceptive practices and outright scams.

Individuals may find themselves in certain situations in which receiving nonprofit credit repair counseling is a legal requirement. Federal law mandates an individual filing for Chapter 7 or Chapter 13 bankruptcy protection complete a credit counseling course from a nonprofit credit counselor. Persons must present certificates of completion from nonprofit credit counseling courses when filing their cases in local bankruptcy courts.

Credit repair counseling scams seek to take advantage of financially stressful situations to extract money from uninformed individuals. The Federal Trade Commission outlines many characteristics of credit repair scams. One such characteristic is outlandish claims such as "legally create a new credit profile," "erase bankruptcies, foreclosures and charged-off accounts from your credit report" or "100 percent guaranteed fix to bad credit," all of which are impossible. Additionally, the agency states credit repair agencies that ask for upfront payment, do not inform individuals of their rights or advise persons to dispute all information on their credit reports are likely scams. Scams need not be for-profit businesses - even credit repair agencies registered as nonprofit organizations may be scams.

Consumers can face significant fallout from using scam nonprofit credit counseling agencies. In addition to losing money -- sometimes as much as thousands of dollars -- individuals could also face prosecution and prison time from following the advice of unscrupulous credit repair outfits. For instance, some illegitimate credit counselors may advise individuals to apply for federal Employer Identification Numbers and use them as their Social Security Numbers, which is a federal crime.

Individuals who need credit repair and advice services can easily spot legitimate nonprofit credit counselors. All legitimate nonprofit credit repair or counseling agencies are registered with the United States Trustee Program, an arm of the U.S. Department of Justice. An individual can obtain a list of these agencies by visiting the Trustee Program's website or sending an email to www.ust.cc.help@usdoj.gov. Also, according to an article from CBS News, legitimate credit repair agencies are usually members of the National Foundation for Credit Counseling and/or the Association of Independent Consumer Credit Counseling Agencies. Additionally, an individual can visit the Better Business Bureau website and type in the name of the credit repair agency he is considering using to see if any consumer complaints exist.

What Debts Can Be Reported to a Credit Bureau

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Credit bureaus are agencies that monitor someone's overall credit history. Banks, creditors or lenders can report a delinquent debt to a credit bureau for most types of debts, including credit cards, mortgage or rent payments or a variety of other loans. When a delinquent debt is reported to a credit bureau, the person who owes that debt takes a negative hit on his credit report. He can fix the negative mark by paying off the debt or becoming current on payments.

Missing or late payments on your credit card debt will most likely be reported to credit bureaus soon after the payment due date passes. One late or missed payment will result in a minor negative drop in your credit score, which you can correct quickly to bring the score back up. But, several missed payments, or a missed payment that is several months old, will result in larger drops in your credit score. The best way to avoid this is to make all payments on time. Set up an auto pay system from your bank account so you do not have to remember to pay manually each month. Also, if you think you will miss a payment, call your credit card company before the due date and ask for an extension or alternate solution. If you have a good payment history, they will likely work with you to avoid a negative credit score.

Mortgages are another type of debt that will be reported to a credit bureau if your account becomes delinquent. Like credit card companies, mortgage companies will likely work with you to avoid the negative score on your credit report if you call them in advance, before you miss a payment. They can arrange payment plans to help bring your account current and avoid any negative reports to a credit bureau. Landlords can also report late or missed rent payments.

Student loans also can be reported to credit bureaus if you miss or are late on your monthly payments. Student loan companies offer a few options for people struggling to make payments, such as refinancing the debt to reduce monthly payment amounts, forbearance to get a few months off from the payments with no impact on your credit report or deferred payments to delay upcoming or past due payments. Call your student loan company to see which options are available to you to avoid negative credit scores.

Other debts can also be reported to credit bureaus, such as debts to banks, lenders or other documented debts. Several services and companies exist to help people report outstanding debt to the credit bureaus. Some people will send you a letter threatening to report your debt to the bureaus as an attempt to get you to make a payment. They may or may not actually report the debt, as the process to report a debt can be tedious for someone not used to doing it.

What Is a Secured or Unsecured Loan?

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A loan is an amount of money you receive from another person with the understanding that you will pay the money back. You can receive a loan from a bank, a corporation or another human being. Secured loans and unsecured loans are two basic types of loans; they are different in that the lender has different remedies available if you miss payments.

An unsecured loan is a loan that a lender gives you without asking for anything in return except your promise to repay. Debt you incur by using your credit card is unsecured debt. Medical bills and personal loans are also unsecured. A loan is always unsecured unless the lender takes steps to secure it.

A secured loan is a loan that is backed by an interest in property. The property becomes collateral, and the lender takes a security interest in the collateral. If you default on the loan, the lender can take the collateral to satisfy the debt. Home mortgages and car loans are common examples of secured debts.

If you miss payments on an unsecured debt, like a credit card, the lender can make a demand for you to make the payments. The lender can then file a lawsuit against you if you still do not pay. Once the court enters a judgment in favor of the lender, the lender can use the judgment to garnish your wages or your bank account. For example, if you have a credit card with a $3,000 balance and you stop making your payments, the credit card company can sue you. The credit card company can obtain a judgment in the amount of $3,000 plus interest and take money from your bank account or your paycheck until the judgment is paid in full.

If you default on a secured loan, such as your mortgage payment or your car payment, the lender can take the collateral. For example, if you default on your mortgage payment, the lender can foreclose on your house and sell it. If you default on your car payment, the lender can repossess your car and sell it. Once the lender sells the property, the title is free of the security interest, or lien, and the debt is no longer secured. If the lender sells the property for less than what you owe on it, you will then owe an unsecured debt for the difference, which is called a deficiency balance. The lender can collect on the deficiency balance the same way unsecured lenders collect -- by filing a lawsuit, obtaining a judgment and garnishing your wages and bank accounts. For example, if you stop making your car payment and you owe $7,000 on the car, the car lender will repossess the car. If the lender then sells the car for $4,500, the security interest is gone, but a balance of $2,500 remains. The lender can then sue you for the $2,500 unsecured debt.

How to Repair Horrible Credit

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Credit history has a direct affect on your credit score, says Entrepreneur Magazine in an article about personal finance. Employers, insurance companies and lenders use credit scores to evaluate application materials. Even if you have horrible credit, there are steps you can take to repair it. Cleaning up credit won't happen over night. However, making a few changes will repair horrible credit over time.

Instructions

Request a copy of your credit report. The first step in repairing horrible credit is reviewing your credit report. A free credit report can be obtained from Annual Credit Report. Circle problem areas, such as late payments, accounts in collections and other credit blemishes.

Settle accounts in collections. Contact creditors to resolve delinquent accounts. Ask to set-up repayment plans. Some creditors may consider taking cash settlements (less than the amount owed) for debt obligations. Settling these accounts will help repair your credit.

Set-up automatic payments with your financial institutions. Payment history has a large effect on your credit score, according to Entrepreneur Magazine. Setting up automatic payments each month will ensure you don't make a late payment again.

Pay down debt obligation balances. High balances on revolving credit (such as equity lines of credit or credit cards) can drag down your credit rating. Entrepreneur Magazine says that balances should stay below 35 percent of the total available credit to improve your credit rating. If you have trouble finding funds to pay off debt, consider cutting back on transportation or entertainment expenses. Carpooling or scaling back on eating out could save you hundreds of dollars monthly.

Keep old accounts open. Paying off accounts is an accomplishment. However, don't close these accounts. The credit bureau favors consumers with a long credit history. Keep old accounts open. If you use the accounts, pay them off each month to avoid getting into additional debt.

How to Reduce Payment Letters to Creditors

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Struggling to keep up with payments on debt is a common problem in today's economic environment. Fortunately, creditors will reduce payments in certain circumstances. It is best for a debtor to put the request in writing, explain the situation that warrants a reduction in payment, outline a proposed payment plan and provide any other information that is useful to the creditor in making a decision. Creditors will sometimes take reduced payments if they are confident you will default on the debt anyway.

Instructions

Send a letter to the creditor. Although you can call and negotiate payment reductions, it is best to have a written record of your request.

Identify yourself and the debt that you currently have. Also include any account numbers or other information that will help the company identify the debt. List the principal amount of the debt, the interest rate and your regular payment.

Explain the circumstances that make you unable to keep up with your current payment. For example, if you have lost your job or had a drastic change in your financial situation it should be explained in detail. It is important to explain some factor that has changed since you entered into the contract to repay the debt.

Tell the creditor what you are able to pay. The creditor may not lower your payment to what you say you can pay, but it helps to explain what you can afford. For example, you could say that although you can't afford to pay $500 per month, you are able to pay $350 per month.

Thank the creditor in advance for its consideration of your request and provide the best way for them to contact you.

Debt Relief Guide and Information

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While getting into debt can seem devastating, there are options available to help you through the difficult times. Although there are legitimate companies that will assist you in getting out of debt, there are also bogus businesses trying to make money from your misfortune. Being cautious when dealing with any company is in your best interest.

When it comes to finding a way to get relief from your debt, it's important to do your homework. There are unscrupulous businesses out there willing to take advantage of desperate people who are caught up in the debt cycle. Before getting involved with any business or individual that makes promises to get you out of debt, check references, do an Internet search to make sure the business is legitimate and get any promises or guarantees in writing. If there is an up-front fee required from you to get out of debt, consider that a red flag. In fact, as of October 27, 2010, telemarketers working at for-profit businesses selling their services for debt relief over the phone are no longer legally allowed to charge a fee prior to the company successfully renegotiating the debt of the consumer and a written contract being signed by both the debt relief company and the debtor.

Depending upon the kind of debt you have, you might qualify for enrollment in a loan repayment assistance program. For example, if you took out a loan to get your law degree, some states have loan repayment assistance programs that will allow you to do community work in exchange for having a portion of your loan forgiven. States participating include Arizona, Florida, Iowa, Kentucky, Maine, Indiana, Louisiana and several others. In addition, there are loan repayment assistance programs for doctors and teachers, as well.

One common practice that you can use to help reduce debt on your own is to use the snowball effect on your bills. For this to work, you need to pay the minimum balance on all of your credit cards --- except for one. On that card, you're going to want to pay off more than the minimum. Most times, you should use the card that you can pay off the quickest. Once that card is paid off, you'll take the next quickest to pay off that credit card and apply the money that you would have paid off with the first card to this card. This accelerates the paying off process.

It's important to realize that you have the ability to negotiate with creditors on your own behalf. You don't need a company to intervene. In fact, since companies have to pay a fee to work out reductions through a debt relief company, those businesses might prefer dealing directly with you to get a reduction in either interest rates or the loan payment schedule.

Can You Divorce Your Wife to Save Her From Filing for Bankruptcy?

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Debts that one or both spouses can't repay create stress in a relationship, and divorce and bankruptcy may be inevitable conclusion. Whether it is better to file for bankruptcy before or after divorce depends on your personal financial circumstances, the laws of your state and the other issues looming in your divorce. Divorcing your wife may not save her from filing bankruptcy, depending on the disposition of your marital debts.

Both spouses are fully responsible for payment of jointly held credit cards and loan accounts. Although a divorce court may assign these debts to one spouse or the other, credit collection companies are not bound by these agreements and may collect from either spouse, according to the Rutgers Extension Money2000. If a husband agrees to take on all of his wife's debts in a divorce, but then is unable to pay them off, his wife may still need to file for bankruptcy.

Whether divorce will relieve a wife of the husband's individual debt depends on where you live and the nature of the debt. In community property states -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin -- debt accumulated by one spouse in his or her name individually during the marriage is still considered joint debt, according to the Federal Trade Commission. In other states, if a collection action has already started for an individual debt and joint assets have been attached, divorce will not necessarily remove that asset from the creditor's clutches. In some states, a court may consider one spouse's debt to be joint marital debt if it was incurred for medical expenses or contributed essentials to the household.

Lenders do not have to agree to switch joint credit card, mortgage and other loan accounts to one spouse, but may require that spouse to reapply for financing based on his or her own individual credit, according to the Federal Trade Commission. If a sole spouse can not get the credit on his own credit record, that account may need to remain jointly held, or the spouses will have to find some way together to pay it off, such as selling a house to clear a mortgage. Filing divorce to relieve a wife of her husband's debts may not be beneficial if she cannot obtain credit or refinance the mortgage based on her own income and credit record.

Married couples can file bankruptcy jointly, saving the expense of two filing fees and two sets of paperwork after divorce, according to Attorney Douglas Jacobs at Bankruptcy Law Network. A joint bankruptcy can also address individual debts from before and during the marriage, as well as debts incurred during the marriage. However, considering both incomes together may exceed the threshold for allowing Chapter 7 bankruptcy filing, which would allow full discharge of the debts, and you might not be able to support a Chapter 13 bankruptcy repayment plan while supporting two households after divorce. Joint bankruptcy will also affect both of your credit records, while one spouse filing bankruptcy after divorce will affect only that spouse's credit record. Consult a knowledgeable attorney and financial professional to help you determine whether divorcing before filing bankruptcy is the better course for you and your spouse.

Will a Good Income Get Me a Bank Credit Card?

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When you apply for a bank credit card, you are essentially applying for a loan with a flexible, also called revolving, line of debt. To qualify for this loan, you have to prove to the bank that you are a low-risk borrower. Though banks use different methods to determine how credit-worthy you are as a borrower, most will start with your income as a primary factor.

When you apply for a bank credit card, the bank typically asks you to detail your income. This includes income from almost any source, such as wages, retirement benefits or income from rental properties and real estate. Regardless of the source of income, the bank wants to know this information in order to determine your ability to pay back the money you borrow.

Apart from your income, banks issuing credit cards also inspect your credit report and your credit scores. Your credit score tells the bank how well you've used credit in the past. With a high score and a high income, you'll have little difficulty obtaining a bank credit card. However, if you have a high income and have a low credit score, it may be much harder for you to get a credit card or to obtain a card with a competitive interest rate.

If you have a high income and apply for a bank credit card, you have a much better chance at obtaining a higher credit limit. In the same manner in which a bank evaluates your credit worthiness, is also evaluates how much money it should make available to you on the credit card. This is known as a credit limit, or credit line. In general, banks issue credit cards with the highest credit limits to those borrowers who have both a high income and a high credit score. If either of these is low, you are unlikely to get a high credit limit.

Even if you have a high income, a bad credit score could prevent you from getting a card at all, or only allow you to get a card with high interest rates or fees. In order to qualify for a better card, you have to prove to lenders that you are responsible. You do this by engaging in responsible borrower activity, such as paying all your bills on time. Once you raise your credit score, you can then get a better deal on credit cards.

The Dangers of Excessive Debt

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Debt impacts individuals' lives in a myriad of ways and can ruin relationships just as fast as credit ratings. Excessive or unmanageable debt can claim your earnings, ruin your credit score, prevent you from accessing money in the future and potentially result in foreclosure or bankruptcy. Furthermore, debt impacts individuals' emotional health and is a leading cause of divorce.

Excessive debt can grow through late fees and interest payments, compounding the problem. Furthermore, every month that a borrower does not keep up with payments negatively affects his credit score, and the damage often takes years to repair. Most people eventually need and can responsibly manage loans in order to buy a house, a car or pay for school. Lenders often refuse loan applications to applicants with low credit scores or charge the applicant much higher interest rates.

If an individual incurs excessive debt and defaults on a secured loan, such as a mortgage, a car note or even furniture, the lender can take back the purchase and auction it to cover the loan. According to the website Foreclosure Questions, a homeowner generally has only 90 days, after missing a payment, to contact the lender and pay before foreclosure or repossession begins. Not only can a person lose her property due to excessive debt, but between late charges and legal fees, the debtor can end up paying a lot more than if she had kept up with monthly payments.

If a person incurs so much debt that he has no hope of paying it off, he can file for bankruptcy protection. During bankruptcy proceedings, the individual's assets are auctioned off and the proceeds given to creditors. Debtors who file for Chapter 13 bankruptcy must also come up with a payment plan for their creditors. Bankruptcy dramatically affects credit scores, and individuals that have gone through bankruptcy have difficulty accessing any kind of credit or even trying to rent a house or apartment.

Excessive debt can result in losing your belongings, your home and the ability to access credit in the future. These circumstances can also cause considerable stress and can lead to depression. According to "USA Today" and "The Wall Street Journal," marriage counselors and debt consultants agree that excessive debt definitely damages relationships and is a leading factor in divorce.

Credit Card Limitations

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Credit cards give consumers the flexibility to make purchases with money they don't have. Some credit card companies even offer cards with promotional periods of zero percent interest, which can allow you to put off paying for purchases for several months at no extra cost. Despite the convenience they offer, credit cards are subject to several important limitations that can reduce flexibility and increase costs.

Credit cards have maximum balance limits that govern how much you spend. The balance limit on your credit card can make it impossible to fund larger purchases. Credit limits can change based on your credit history. If you have been a good customer for many years, your credit card company may decide to raise your limit. Credit card issuers may also decrease credit limits.

While credit cards often allow consumers to pay for goods and services without cash, hard currency is sometimes required. Credit card holders often have the option of withdrawing cash with their cards, which is known as a cash advance. Credit cards may impose different limits on cash advances and credit. For instance, if your card has a $5,000 credit limit, you still might only be able to take out $500 in cash advances. According to Bankrate, cash advances are also subject to additional costs such as upfront fees and high interest rates.

Credit card companies make money by charging interest on funds borrowed and by charging fees on credit card use. If you exceed the limits of your credit card, you will likely incur finance charges. It can be easy to exceed limits if you don't keep tabs of your current credit balance; always keep track of your current balance to avoid going over your limit. Exceeding the limit by just a few dollars could result in costly charges.

Limitations and additional costs are key components of the basic function of credit cards. Specific terms and limitations will vary from one credit card to another. It is important to carefully read credit card contracts so that you understand all the limitations and potential costs ahead of time.

Why You Should Only Carry One Credit Card

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You would be surprised how much money, hassle and worry you save yourself with a one-credit card rule. More cards add themselves to your wallet every day, from bank to store loyalty program cards, and cutting back can make your life easier to manage.

The more cards you have with you, the easier overspending becomes. Buying an expensive item you don't need is sometimes more" acceptable" when you have several credit cards to chose from. A one-card limit reminds you that you cannot spend freely and should stick to your original budget. Tracking where your money goes is easier if you do not use multiple cards regularly, helping you pinpoint unnecessary spending.

You save money on interest and help your credit score if you actively plan ahead and select a single card to use. Line up all of your credit cards and note the current credit limit, balance and interest rate for each. Select the card with the limit you need and the lowest interest rate, but don't forget to check how much of the credit line you've already used up. Keeping your balance under 30 percent of your credit card line improves your credit score, according to MSN Money columnist Liz Weston.

A stolen or lost wallet is a nightmare to begin with, but the situation is worse if you had multiple credit cards with you, especially when you are traveling. You must contact each credit company to report your card stolen or lost, and the more places you have to call, the more information you have to gather. The longer the lapse between a theft and your call, the more time the thief has to run up a bill in your name. A thief who has access to various cards has more personal information about you, and he may use the data to commit identity theft.

Some emergencies require immediate access to a larger line of credit, such as your furnace dying during a cold snap. Keeping one card with you lets you save another card for unexpected expenses. Carry a card with a lower limit for small purchases so you have a card with enough credit available for large necessities.

Negatives of Settling Debt

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Borrowers who find themselves unable to meet their obligations may consider settling their debts with their lenders. Debt settlement is a process whereby you negotiate with your creditors an amount to pay them to satisfy the loan. The amount that you are able to negotiate depends on your lender, but can be as little as 50 percent of the amount you owe. Settlement is generally an option for unsecured debt, such as credit cards and personal loans, and does have some negative consequences.

As of 2010, settlement companies can no longer charge an up-front fee for their services, but the fees can still be substantial. The Federal Trade Commission requires that providers who settle multiple debts for a consumer prorate the fee per settlement to keep it proportional to the total fee of settling all debts at once, but settlement companies will still charge fees to establish an account, monthly service fees and a percentage of the amount they save you. According to the United States Government Accountability Office, a company in Arizona advertised its successful settlement of a New York couple's debt although by the time the company added its fees to the settled amount, the couple paid more than 140 percent of the original amount of the debt.

According to the U.S. GAO, FTC and state investigators have found that more than 90 percent of consumers do not successfully complete the programs that settlement companies offer, even though the company may advertise high success rates. Some settlement companies claim that they are providing services for government programs even though there are no government programs for debt settlement as of 2010.

Since most lenders will not negotiate a settlement until the consumer is behind on payments, you will be reported to the credit bureaus for late payments and nonpayment. If a settlement is made, the debt may show on your credit report as settled for less than owed, which will further damage your credit rating. Your credit rating controls your future ability to receive credit offers and the interest rates you will pay for credit. A low rating can make it very difficult to obtain credit.

The IRS considers any amount of debt that is forgiven or written off by the lender to be income to you. The lender will send you a Form 1099-C that lists the amount of the canceled debt. You must declare this amount as income and pay the appropriate taxes on it. Consult a tax professional advice about the insolvency exemption to this rule.

Alternatives to debt settlement include contacting your creditors to work out a modified payment plan, credit counseling, debt management plans and bankruptcy. If your inability to pay is temporary, receiving a modification may be your best option. If it is not temporary, you must analyze your situation to determine your best course of action.

What Does DFD Mean on a Credit Report?

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Credit reports have a number of notations with each account. Some notations are completely written out, but others are left as abbreviations, and you might not be able to tell what the credit report actually means. These abbreviations are entered by the credit reporting agency or the creditor itself, depending on the credit report that you are reading.

Your credit report is a collection of information supplied by your creditors, collection agencies and public records to credit reporting agencies. These reporting agencies use the information on your credit report to produce a credit score, which gives a general view on your overall creditworthiness.

Each credit account has a number of different notations designating account information. The type of account information that is provided ranges from the name of the creditor to the balance on the account. Additional notations on the account are also included in the comments section of the credit account. This notation area usually provides information about the status of the account, such as whether an account is charged off.

A DFD notation on a credit report stands for date of first delinquency. This abbreviation is used on accounts that have late payments, are charged off or otherwise have a negative status. The date of first delinquency is the exact date when the account went into a negative status.

The date of first delinquency determines exactly when your credit account is going to fall off of your report. Most negative accounts are reported for seven years after the date of first delinquency. The DFD is also factored in for the statute of limitations for the account. Each state has laws set into place that limit the amount of time a creditor or collection has to take action against a delinquent account. Once that time passes, a debtor cannot be sued for the delinquent account.

Spouse Relief From Student Loans

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Student loan debt is almost a rite of passage in America. With increased college enrollment and skyrocketing higher education costs, many students come out of undergraduate and graduate programs with overwhelming debt. At times, lenders will try to pass off these debts, if in default, to spouses and family members. There are clear restrictions, and you should take swift action if you are a victim of harassment.

Before making any moves, double-check all loan paperwork to determine the obligated parties on the promissory notes. If you, the spouse, are an obligated signer on the loans, you will have no legal recourse. In this case, you must pay the lenders or the government, or work out a payment arrangement. Even though you may not be the primary signer on the account, all obligated signers are responsible for the repayment of the loan.

Lenders and the federal government do not have the ability to collect payments from a borrower's spouse if that spouse is not listed as an obligated signer. Before taking legal action, be sure to call all lenders (and your spouse who owns the debt, if she is alive), and let her know that you are not a signer. Many lenders have automated dialing systems that call delinquent borrowers. Your phone number might be listed as the contact phone for delinquent accounts.

Contact the FTC (Federal Trade Commission) if lenders are harassing you about spousal student loans. (Check the Resources section for the FTC's complaint site.) If the FTC does not resolve your claim fast enough or to your satisfaction, seek legal advice from a consumer law attorney. Be sure you have all necessary paperwork (including any correspondence from lenders) before you meet with an attorney----the faster you can handle the claim, the cheaper the legal expenses will be.

How Do I Make a Payment on the Salute Credit Card?

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Salute credit cards are unsecured accounts with the capability for cash advance. These cards historically were designed for borrowers with poor or no credit payment history. As of August 2010, however, Salute is no longer issuing new credit accounts. However, the company obviously is still accepting payments on open accounts. If you have an open Salute card with a balance, you have several payment options: pay by mail with a statement, pay by phone or pay online.

Instructions

Find all the information related to your Salute account. This includes your account number, expiration date, security code (the three-digit number on the back of the card), balance and payment amount. You can find most of this information on your monthly statement.

Enroll in online banking with Salute. You will need your account number, expiration date, name, address, email address, Social Security number, date of birth and primary contact number. Choose a user ID and password. This is required to make a payment online.

Log on to the Salute credit services website (see Resource 1). Click on the "Make a Payment" tab at the top of the screen. Log in to your secure account. Enter the payment amount. Choose the method of payment--debit card, credit card or electronic check. Enter the account numbers required for payment. Confirm the accuracy of the information and click "Submit." You will receive an email confirmation.

Mail in a payment. Make sure to put the Salute credit card number in the check memo. Send the check with the monthly statement. Send the check to the following address:

Salute Card Services

P.O. Box 105555

Atlanta GA 30348-5555

Contact the toll-free number on your monthly statement. Ask to speak with an account servicing representative. Make sure you have your account number, user ID and password handy. Ask to make a payment. You will likely need to pay a service fee for this payment. Ask for a confirmation number after you supply your bank account number for payment.

How to Stop Creditors Without a Lawyer

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Stopping creditors from calling and sending threatening letters is not as complicated as the credit repair lawyers and other fee-based businesses would have you believe. There are simple ways to stop creditors without the use of a lawyer. These steps are things you can do on your own, without spending large sums.

Instructions

Do not talk to creditors via the telephone. They are using scare tactics and bullying to get you to pay them. Tempers and issues can best be handled via the mail.

Understand how the collection agency works and its possible motivations. The original debt is usually sold to a collection agency for only 5 to 10 cents per dollar. The original credit granter was paid and wrote off the debt on its taxes. The collection agency will try to collect the full amount at a 90 percent profit.

Understand how collection agencies use fees and interest. Most often, collection agencies will add on fees and continue to add interest, making the amount larger. Any amounts the agencies claim are likely exaggerated and mostly profit. You can't negotiate with the original creditor because your account has been written off its books.

Get your credit report. This step is essential in fighting creditors. There is a free website that allows you to order your credit history once a year from all three credit reporting agencies. This is a federal law. You are guaranteed a free credit report each year if you request one.

Gather all collection letters and past bills you have. Each letter should have a statement advising you of the ability to dispute the claim for up to 30 days. Dispute every charge. This dispute forces collection agencies to show evidence of their claim and the original amount owed. In many circumstances, this will result in the issue disappearing. For the creditors that remain, you now have a 30-day deadline to gather up steam.

Read the credit report. If you find anything that doesn't look right, dispute it immediately using a device called a credit report letter. Check the Resources below for this. With this letter, you will inform the creditors that you have a copy of your credit report and proceed to cite specific accounts or errors on the report. Ask that the information be corrected, removed or resolved as quickly as possible. Sending the credit report letter will stop the calls while the claim is investigated. It will also start a paper trail, which you will need as proof of work.

Prepare a second letter stating that you are aware of the original charges, and that the collection agent has bought the account for a fraction of its value. Offer to pay from one third to one half of the amount due or offer payments you can afford.

For creditors that still claim payments due, send the second letter. This starts the negotiation process and also stalls their collection efforts, as they now must reply and negotiate with you. Do not take their phone calls for any reason.

Continue all discussion via mail and paper trail. Eventually, you will be able to either erase or lower the payment amount.

Minnesota Statute of Limitations on Wage Garnishment

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When a debtor fails to pay his debt obligations, creditors can seek a garnishment judgment against him. Once a creditor obtains a garnishment judgment, the creditor has a prescribed period of time within which to collect the debt. There is a limit on the amount a creditor can collect during a work week or pay period. Regarding limits on the amount a creditor can garnish, Minnesota's laws are more favorable to debtors than Title III of the Consumer Credit Protection Act, the federal wage-garnishment statute.

Minnesota's limitations on wage garnishment are codified in the Minnesota Code Section 571.922. Pursuant to the Minnesota Code, creditors may garnish up to 25 percent of a debtor's disposable earnings or the amount by which a debtor's disposable earnings exceed 40 times the federal minimum wage. Disposable income is defined as whatever wages remain after "legally required deductions" such as state and federal taxes, mandatory retirement and Social Security.

According to Minnesota's consumer credit laws, the statute of limitations on consumer debt, such as credit-card debt, is six years; the statute of limitations for contracts is also six years. This means that creditors have six years in which to bring an action for garnishment if a debtor has defaulted.

In Minnesota, after a creditor has successfully obtained a judgment for garnishment, the creditor has 10 years in which to begin garnishing the debtor's paychecks. This 10-year statute of limitations results in creditors waiting for a debtor's earnings to increase, as creditors assume a debtor's earning potential will increase over time. The higher the debtor's disposable earnings, the more a creditor can collect.

In Minnesota, although creditors are not permitted to garnish more than 25 percent of disposable income, child-support withholding percentages can be as high as 50 to 60 percent. Additionally, child-support withholdings take priority over consumer-credit withholdings. A creditor who has obtained a garnishment judgment must wait until all child-support deductions are made.

What Does a Credit Card Company Do If a Bill Is Not Paid?

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Credit card companies have specific policies and procedures for customers whose bills are past due, ranging from late fees to wage garnishment.

The first thing credit card companies will do is apply a late fee to the account. Late fees are levied once per billing cycle.

Some credit card companies will freeze the credit limit on your card, and you may be unable to use the card until the past due amount is paid. When this happens, the bill is usually more than 30 days past due.

Credit card companies recognize that unexpected life situations happen and may offer their customers different payment methods to help. Customers may be allowed to pay via phone, Internet or at a physical location near them.

When accounts reach 60 days past due, card companies will attempt to call you at home, work and at any other number you provided, in an effort to collect the past due amount.

Credit companies can choose to close your account permanently and may begin to take legal action, such as garnishing your wages.

What Is the Installment Debt?

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Installment loans are debt that is given from a financing company that allow you to make regular payments based on agreed-upon terms until the entire principle and any interest is paid in full. Many consumers at some point may apply for an installment loan if they cannot afford to pay the entire amount of the item in full. Debtors must take into consideration how much they can truly afford and have the resources and income to repay the loan.

Installment debt may be offered on different products. For example, a car and a home are considered installment debt. When purchasing a home or car, a down payment is sometimes required, which helps pay down the principal. The installment debt can have payment arrangements of weekly, biweekly, monthly, quarterly or annually. Most installment loans become legal by signing a contract which binds you to the loan.

Your interest rate determines how much, in addition to the principle, you will pay when the loan is paid back in full. For example, a consumer who purchases a car at 15 percent interest will end up paying hundreds or thousands of dollars more in the interest rate compared to a person who has a 5 percent interest rate on the same model. When requesting an installment loan for your intended product, shop around until you find a company willing to offer you the lowest interest rate for the item.

Your credit score not only determines your interest rate for the installment loan, but having an installment loan on your credit can actually help you maintain or increase your credit score. Credit scores can be as low as 300 to over 800, and the score is determined by the three credit bureaus: Equifax, Experian and Transunion. Credit scores are measured on how well you can timely pay different types of loans. This can include installment loans, revolving loans such as credit cards, and other types of credit. The more you pay your loans on time, the higher your credit score will be, which can then allow you to obtain a lower interest rate in the future.

Your amortization schedule shows you your payments each month for the entire life of the loan and how much of the amount goes to principle and interest. For example if you have a $10,000 loan and your monthly payments are $200, in the beginning of your loan, $180 may go toward your interest while the remaining $20 goes toward your principal. As you approach the end of your loan, more money will go toward the principle and less toward the interest.

In order to save money over the life of your loan, use payment calculators from sites like bankrate.com to find out how much money you will save and how quickly you can pay off a debt by paying more than the minimum amount due each month.

Can a Creditor Sue Me for Unsecured Debt?

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An unsecured creditor grants you a loan or line of credit based on your income, credit rating and the amount of debt you carry. Unsecured debts don't require that you use your assets as collateral. This process is riskier for the lender since it cannot seize your assets should you fail to pay what you owe. Although the creditor cannot seize your assets, it has the legal right to sue you for any unsecured debt you leave unpaid.

Your state's statute of limitations for debt collection lawsuits determines whether a given creditor has the right to sue you. State laws differ, but most statutes of limitations fall within the four to six year range. MSN Money notes that after the statute of limitations passes, your creditor still retains the right to pursue you for the unsecured debt you owe, but it loses its right to file a lawsuit against you.

Although the law doesn't permit creditors to file lawsuits after your state's statute of limitations passes, that does not mean that your creditor won't do so. If you do not respond to the summons and use the statute of limitations as a defense against the lawsuit, the court will grant your creditor a default judgment. The judge at the hearing has no way of knowing that the statute of limitations on the debt has already passed unless you bring it to his attention.

Some states give creditors who win a judgment against a debtor in court the right to place a lien against the debtor's assets. Creditors can secure a previously unsecured debt through a property lien. If a creditor places a lien against your home, for example, you cannot refinance the property without first paying off the debt. Although you can legally sell property that carries a lien, most lenders won't grant a buyer a loan to purchase your home until you pay off any outstanding liens. Creditors can also use their court judgments to garnish your bank accounts and wages.

A lawsuit is a risk you face when you stop making payments on your unsecured debt -- but it isn't a certainty. New York's Neighborhood Economic Development Advocacy Project notes that lawsuits are expensive for creditors, and many pick and choose their lawsuits carefully. In general, you face a greater risk of being sued if you owe more than $1,000 or the creditor in question has a history of frequently suing debtors.

Some creditors will drop a pending lawsuit if you make payment arrangements before the hearing date. If you have a solid defense, such as an expired statute of limitations in your state, you can also appear in court and fight the lawsuit. If you choose to actively contest the lawsuit, your creditor must prove in court that you actually owe the debt. Not all creditors are capable of doing this -- especially if the debt has been sold repeatedly.

Balance Transfers and Credit Scores

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Transferring credit card balances to a new card or an existing one can be effective way to manage your credit card debt and minimize interest payment. However, each new credit card application will have a negative effect on your credit score that must also be managed.

Opening a new credit line for a balance transfer will lower your credit score immediately. The formula used to calculate a credit score considers new lines of credit as an indicator that the person may be taking on more debt, which would increase a lender's risk. New accounts make up about 10 percent of your credit score. When the transfer is made between two existing cards, there is no drop in score because the average age of your accounts decreases.

The drop in your credit score can be temporary if you make your payments on time and don't use all the credit available in the account. Once you demonstrate there is little risk with the additional credit because you make on-time payments, your score will return to its previous level. As long as you continue to make on-time payments, the number of credit accounts you have won't have a large impact on your credit score. Another short-term drop in your credit score comes when the application for a new card is made. Each time you apply for a credit card, the card issuer will look at your credit history. These inquiries will cause a drop in your score of a few points. It is a short-term drop that should only affect your score for a few months.

While moving debts between cards with balance transfers can help keep your interest rate low, it also could help improve your score in some instances. If you use a new credit card to make your balance transfer, the new account and its credit limit increases your available credit overall. One factor in determining your credit score is debt-to-credit ration or credit utilization ratio, which is the amount of debt you carry relative to your available credit. A low debt-to-limit ratio raises your credit score, and by increasing your available credit with a new credit card account, you will lower your debt-to-credit ratio, assuming your don't increase your debt.

While there are benefits to making balance transfers, you will typically pay 3 percent to 4 percent of the balance transferred as a fee to the company. The raises your amount of debt, which can pull your credit score down because your credit utilization ratio increases. However, paying down your debt will accomplish the same thing as increasing your credit limits without adding to your total debt. Also, if you keep your debt low enough to pay it off each month, you would not have to pay any interest.

What Is a Guarantor Signature?

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When trying to get a loan or some other type of credit, the lender will evaluate your credit history to make sure that you are a potentially good borrower. If you do not have a sufficient amount of credit history or you have a poor credit history, getting a guarantor could help your chances. When a guarantor signs a document, he guarantees that he will pay the debt if you default.

A guarantor is an individual who signs a loan or lease document in addition to the primary borrower. If the primary borrower defaults on the obligation, the guarantor will step in and pay for the debt. Guarantors are sometimes used in rental agreements, on student loans, with mortgages and auto loans. When a guarantor signs the agreement, she does not have a responsibility to make the payments unless the primary borrower no longer can afford to do so.

A guarantor signature can also be used in business applications. For example, a startup company may be unable to secure credit because of a lack of business credit history. To solve this problem, the owner of the company may become a guarantor for the new company. The owner will have to personally sign for business loans and if the business defaults, he will have to come up with the money personally.

If you need to get credit, using a guarantor can significantly increase the chances of getting it. When you use a guarantor, the creditor will not only evaluate your credit, but will also evaluate the credit of the guarantor. If the guarantor has good credit and a steady income, this will increase your chances of getting approved. If you need to rent a property, the guarantor could help you get the house or apartment you need.

One of the potential drawbacks of using guarantor is that it puts another individual at risk for your decisions. If you are unable to continue making the debt or rent payments, someone else will suffer for this. In many cases, a family member volunteers to be a guarantor. When the individual defaults on the debt, it puts the family member in an awkward situation. She has to pay the debt or it will hurt her credit as well.

Do Satisfied Credit Judgements Need to Be Removed to Improve Your Credit Score?

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Your credit score is determined using positive and negative items on your credit report. The more positive items and the fewer negative items you have, the higher your score will be. Having a judgment issued against you will cause your credit score to go down. However, paying off this debt after the judgment will raise your score, although it will not be raised to the point it was before the judgment was issued.

Credit reports contain information that credit reporting bureaus believe have bearing on your creditworthiness. If you have information added to the report that suggests you are not creditworthy, your score will go down. Any information that is not included on the report cannot affect your score. So, all negative information must be entirely removed from the report for it to cease counting against your score.

An unpaid debt is one of the most negative pieces of information that you can have on your credit report. Having this on a credit report suggests to a potential creditor that you're not capable of paying back debts that you take out. If you have a credit judgment issued against you, then this too will appear on the report and have a similar effect on your score.

When you satisfy a credit judgment, this information will be reported to the credit reporting bureaus. Credit reporting bureaus look more favorably on satisfied credit judgments than outstanding ones. This is because these debts have been paid off. Although you may have been late in paying the debt, you are still more creditworthy than a person who has not yet satisfied a judgment.

Satisfying a judgment and having this satisfaction listed on your credit report will raise your credit score past the point when the judgment was unsatisfied. However, the score will still be lower than it would have been had you never had the judgment issued against you in the first place. However, federal law requires that this negative item be removed from the report within seven years time, after which it can longer harm your score.

Why Is it a Bad Idea to Do a Cash Settlement?

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Many people who have excessive debt decide to do a debt settlement. These can turn out to be bad in certain cases. You need all the facts before you negotiate with a creditor for a settlement.

When you do a debt settlement it lowers your creditor score anywhere from 45 to 125 points. This information remains on your credit report for seven years. It will be difficult to get credit in the future with favorable terms.

You may have to pay taxes on debt that is forgiven. If you have a debt of $8,000 and you settle for $5,000 you may have to report the $3,000 as taxable income when you file your taxes. This applies to forgiven debt of $600 or more.

If you don't have proper documentation regarding your settled debt some collection agencies will still try to collect the balance even though you settled. Collection agencies purchase debt from other agencies and they may try to get you to pay.

When you settle your debts the only way to avoid reporting it as taxable income is if you filed bankruptcy or if you were insolvent when you settled your debt. The IRS has determined that insolvency is a situation where your liabilities exceed your assets.

If you want to settle your debt because you want to get out of paying you must first ruin your credit. A creditor will only settle with you once your account is 90 days past due.

If you use a debt settlement company you may have to pay an excessive amount of fees.

Welcome to our website credit and debt managementr.

Tuesday, July 31, 2007

Time Frame

Considerations

Expert Insight

Payday Loans

Statute of Limitations

Type of Debt

Collection Actions

Monday, July 30, 2007

Credit Card Options

Debt Consolidation Loan

Home Equity

Debt Consolidation Services

Usury Laws

Credit Cards

Debt Collection

Sunday, July 29, 2007

Judgments

Liens

Statute of Limitations

Collecting on a Lien

Saturday, July 28, 2007

Understanding Interest Payments

Pre-Payment Penalties

Loan Balance

Credit Benefits

Instructions

Friday, July 27, 2007

Instructions

Thursday, July 26, 2007

Demanding Payment in Full

Judicial Foreclosure Proceedings

Non-Judicial Foreclosure

Contacting Your Lender

Keep Your Report from Fraudsters

Keep Your Report from Marketers

Collection Agents and Creditors May Still Have Access

A Freeze Can Slow Down Credit Approval

A Freeze Can Be Difficult to Remove

Wednesday, July 25, 2007

Understand How Your Score Is Determined

Use Your Knowledge to Borrow Responsibly

Shortcuts

Facts

Benefits

Misconceptions

Significance

Considerations

Tuesday, July 24, 2007

Process

Benefits to You

Benefits to Your Creditor

Considerations

When Credit Repair is Required

Characteristics of Scams

Consequences of Using Scam Credit Repair Organizations

How to Find Legitimate Credit Counseling Agencies

Monday, July 23, 2007

Credit Cards

Mortgages

Student Loans

Other Debts

Sunday, July 22, 2007

Unsecured Loans

Secured Loans

Default on an Unsecured Loan

Default on a Secured Loan

Instructions

Instructions

Saturday, July 21, 2007

Fees

Loan Repayment

Snowball Effect

Negotiations

Jointly Held Debt

Individually Held Debt

Reassigning Credit

Joint Bankruptcy Considerations

Friday, July 20, 2007