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Saturday, December 31, 2011

How to Deal with Multiple Debt Collectors

Consumers are protected from being harassed by debt collectors by the Fair Debt Collection Practices Act, or FDCPA. This includes not being contacted before 8 a.m. or after 9 p.m., not being repeatedly contacted at your workplace if you're not allowed to receive calls, and not having your debt discussed with anyone other than yourself. This doesn't mean that you won't be contacted, though, and if you have multiple debt collectors contacting you, it can be overwhelming and stressful. The FDCPA provides methods for getting debt collector contact to cease.



    Speak to each debt collection agency once to find out what creditor it represents --- if it's a third-party debt collection agency --- how much the agency says you owe and what address you should use to send a "cease contact" letter. Write down this information, along with the name of the person you spoke to and the date and time you spoke with the debt collector.


    Compare the information you've written down to the mail you've received from each debt collector. Debt collection agencies are required to mail a letter to you within five days of their initial phone contacts. This letter should include the name of your creditor, the amount you owe and who to contact if the debt isn't yours. Review the letter for any discrepancies and to confirm whether the debt is actually yours.


    Write each debt collection agency. If the debt owed is yours, write a letter asking the debt collector to stop contacting you. If the debt owed isn't yours, write a letter asking for the debt to be validated, which means that the debt collection agency has to obtain proof that the debt is yours --- a signed contract, for example. Make a copy of each letter, then mail each letter by certified mail with a return receipt so you have proof the letter was received. After receiving your cease contact letter, debt collectors can only contact you for two reasons: to let you know there will be no further contact and to let you know the creditor is taking action, like filing a lawsuit.


    Review your current income and expenses and determine how much you can afford to pay toward any debts that are yours. Write each debt collector with an offer of how much you can pay, and whether it's a lump some or monthly payments. Make copies of all correspondence and send it certified mail with a return receipt. You may want to initially offer less than you can afford so there is room for negotiation, according to the financial information website Bankrate.


    Keep all correspondence you receive from the debt collection agencies. If you pay off a debt, make sure you have a letter that states the debt is paid.

Friday, December 30, 2011

How to Stop a Texas Credit Card Judgment

How to Stop a Texas Credit Card Judgment

A judgment is something that should be avoided if possible. Judgments entered against you will appear on your credit report and create a devastating blow to your credit score. By the time a creditor is pursuing legal action, your time is limited and you must act quickly to prevent the case from moving forward. Attempting to settle the debt or filing bankruptcy are two methods to stop the forward progression of the court action.


Attempt to Settle the Credit Card Debt in Texas


    Review your financial situation to see how much money you can put towards the credit card debt. Your creditor does not like to proceed to a lawsuit but will require some payment from you to halt the proceedings. If you have a lump sum, decide on the amount you can pay at one time. If this is not possible, decide on the amount of money you can put towards the debt each month. Do not agree to pay more than you know you can afford.


    Contact the person threatening the lawsuit. If possible record the phone call. Texas law allows recording if you are one party on the call. You do not need to disclose the fact that you are recording to the other party. Tell the person you wish to attempt to come to a settlement agreement to avoid the judgment. Explain your situation and why you cannot pay the debt in full, and express that you have a desire to take care of the debt to the extent you are able to.


    Explain the amount you are able to pay. Be clear that this is the most you can possibly afford. Do not argue with the representative. If he gets threatening or abusive, remain calm. If your representative says something that is against the Texas Debt Collection Practices, you may be entitled to sue him.


    Make him understand that your offer is the best you can do. If you are borrowing the funds, tell him this. You need to convince him that you simply do not have the resources to pay more than you can afford.


    Expect the representative to deny your offer and push for a higher payment amount to settle. The creditor does not want to go to court but he is trained to get the most money he can negotiate. He may tell you he is going to move forward with the judgment and garnish your wages. If he does get a judgment, he can do this, but this is usually used as a tactic to scare you and push you into paying more.


    Never agree to give the representative your bank information. If you agree to a settlement, require he send you a letter stating the terms of the agreement. Make your payment via cashiers check or money order. If you cannot come to an agreement, wait a few days and make contact again. Settlement agreements often take several attempts.

Contact a Texas Bankruptcy Attorney


    Contact a local Texas bankruptcy attorney. Most will offer a free consultation. Set an appointment for the soonest possible date.


    Gather all of your financial information. List all of your debts and include household childcare auto, and any other expenses you have.


    Meet with the attorney and give him all of your financial information. He will let you know your options and tell you if filing for bankruptcy in Texas is an option. If bankruptcy is possible and you wish to proceed, retain the attorney. This will stop the judgment from moving forward.


    Contact the creditor and give him your attorney's contact information. Your attorney will handle all further communication with your creditors and ensure the judgment process is stopped and does not proceed in the Texas court of law.

Thursday, December 29, 2011

Suspicious Activity on Credit Reports

Suspicious Activity on Credit Reports

Your credit score influences the type of loans you are approved for, your interest rates and your financial reputation. Fraudulent charges on your credit report can damage your score. Being vigilant in monitoring your credit can protect you.


    Examples of suspicious activity on your credit report include incorrect or counterfeit names, jobs, Social Security numbers or accounts you did not personally open. Detecting this activity is imperative when protecting your identity.


    You are able to monitor your credit by receiving a copy of your credit report. The law states that you are entitled to a free copy once a year from each of the main United States consumer reporting agencies.


    In order to protect your identity, it's important to have counterfeit information taken off. You'll have to send a letter and police report (called an Identity Theft Report) to the major consumer reporting agencies. They will block counterfeit information from appearing on your credit report.

Do Credit Repair Companies Really Work?

Do Credit Repair Companies Really Work?

The Federal Trade Commission says you should stay away from credit repair firms and manage your own credit repair. However, the FTC acknowledges that ethical credit repair firms can help you improve your credit report.


    The FTC says none of the credit repair firms has a magic formula for improving your credit. According to the FTC, companies are lying when they say they can remove quickly remove bankruptcies, foreclosures, liens and other negative entries from your credit report.


    The credit repair bureaus can help by pointing out errors that can be removed from your credit report. A credit repair firm can write letters challenging any of the information on your report. However, the FTC says you can do all of this yourself and save the hundreds of dollars in fees charged by some credit repair firms.


    Paying your bills on time is the best way to start cleaning up your credit, according to the FTC. For specific help on credit repair, consider meeting with a non-profit credit counselor such as those affiliated with Consumer Credit Counseling Service. Or take a financial literacy class at a local community college or from a non-profit credit agency.

How to Settle Credit Card Balances

How to Settle Credit Card Balances

Job loss, health problems and other issues can contribute to out of control credit card balances. Consumers struggling to pay off these debts may be wondering about options. Credit card settlements allow consumers to make a single payment to settle the debt obligation. This payment is usually much lower than the original balance (pennies on the dollar). Creating a plan for negotiating credit card obligations can assist in getting debt settled.



    Figure out what you can afford. Before contacting the creditor, it's important to know how much you can pay. Take inventory of savings and other assets that could be allocated toward debt. If you don't have assets, determine how much you can save each month to settle. For example, cutting out a daily latte could add up to $100 or more each month.


    Contact the creditor. Based on what you can afford, make an offer. This is typically 25 percent of the original debt. For example, if you owe $10,000, you might offer $2,500 to settle the debt. When negotiating, start out with a low offer. It might get refused but the creditor will make a counter offer. Starting out low will provide more room to negotiate.


    Get it in writing. Request written confirmation of the agreement. Review the agreement to ensure the terms of payment are correct. The agreement should include the total payoff amount and say the payment satisfies the entire debt.


    Check your credit report. A credit report can be ordered through AnnualCreditReport.com. The debt obligation should be marked as settled (which will improve your credit score). File a dispute form with the credit bureau (with a copy of settlement papers) if the account shows as outstanding.

Federal Grants for Debt

The federal government spends billions of dollars every year on grants and loans for American citizens. You can't, however, use the grants to pay personal debts. Simply stated, the U.S. federal government does not provide free money to consumers who are looking for an easy way out of debt; nevertheless, the government can assist you with some debts, like your mortgage. Don't pay for information and applications that are free, however.

Federal Grant Information

    Health and Human Services, the federal agency that administers grants, states very clearly on its website that it will not provide money for personal financial assistance or debt. The federal government offers grant information and applications free of charge. Note that there is never a fee to apply for a federal grant. You will not need to give personal information, such as your bank account or credit card number. Any company that asks you to provide this information is charging you for something that can obtain for free, and may be operating illegally.

Applying for Federal Benefits

    If you think you may qualify for federal benefits, for example, if you are suffering under the weight of a mortgage you can no longer afford or require start-up capital to begin a small business, you may be eligible for a federally-backed mortgage refinance or modification, or a small business loan.

    The FHA backs a streamline mortgage refinance program that may lower your interest rate -- and your monthly payment -- significantly. You may also qualify for a mortgage modification. You do not have to be late on your payments to qualify, but you must apply through your lender, not the federal government.

    The government also provides loan assistance to those who are looking to start or expand a small business. Microloans are available for amounts up to $35,000. If you need more, consider a small business loan; these are available up to $2,000,000.

    Note that these are loans and require repayment and must support a business endeavor.

If You've Been Scammed

    If you've already provided personal information, such as your social security number, bank account number, or credit card number, to a company that claims it can help you obtain a federal grant, order your credit report. In addition to charging you for information that's already free, you may be a victim of identity theft. Review the reports carefully, and dispute information that's untrue right away; identity theft is a serious crime that can go on for years and could (temporarily) ruin your credit.

    If you suspect that you've been scammed, contact your state attorney general's office to file a complaint. You should also file a complaint with the Better Business Bureau.

Legitimate, Nonprofit Debt Help

    If you're desperate for help with your debts and don't know where to turn, call the National Foundation for Credit Counseling, a nonprofit debt and housing counseling agency founded in 1951. It's helped millions of Americans for little or no fee. It provides bankruptcy counseling, as well.

    The NFCC does not provide loans; it provides credit counseling and a way to pay your unsecured debts in full. It has a sterling reputation. The NFCC partners with local debt relief agencies; you may request a consultation in person or on the phone.

    The federal government won't provide you with a federal grant to repay your debts, but there are solutions. Remember, if something sounds too good to be true, it probably is.

How to Get APR From a Monthly Interest Rate

How to Get APR From a Monthly Interest Rate

Annual percentage rate (APR) is the cost of credit expressed as a yearly rate. It is calculated by annualizing shorter-period rates. There are two basic types: Nominal APR, which is a simple extrapolation of a shorter-period rate; and effective APR, where fees and interest are compounded each period. In the U.S., Federal Deposit Insurance Corporation Regulation Z governs the calculation and disclosure of APR. Open-ended credit calculations apply to credit cards and lines of credit and utilize nominal APR. Close-ended credit calculations are featured in home mortgages and auto loans and are figured using effective APR.


Nominal APR Calculation


    Identify the monthly finance charge on your credit statement. Credit cards, home equity loans and other revolving credit lines highlight key amounts like the monthly finance charge according to the standards set by FDIC Regulation Z.


    Identify the average account balance on which the monthly finance charge is based. The lender has calculated the average account balance by summing each day's account balance and dividing by the number of days in the monthly billing period.


    Calculate the monthly interest rate. It is equal to the monthly finance charge divided by the average account balance.


    Calculate the nominal APR. It is equal to the monthly interest rate multiplied by 12.

Effective APR Calculation


    Identify the nominal interest rate. This is usually the rate advertised by the lender. For instance, a bank that advertises a 5 percent annual rate for mortgages is typically quoting the nominal interest rate. The nominal interest rate doesn't account for the effect of compounding interest.


    Calculate the monthly compounding interest rate. It is figured by adding one to the nominal interest rate and dividing the sum by 12.


    Calculate the effective APR by raising the monthly compounding rate to the 12th power and then subtracting one. For example, a monthly car loan advertised at an 8.25 percent nominal interest rate will have an effective APR given by:

    Effective APR = ((1 + 0.0825 / 12)^ 12) -- 1 = 8.57%

Wednesday, December 28, 2011

Consumer Rights for Harassment From Collection Agencies

Consumer Rights for Harassment From Collection Agencies

Collection agencies are private organizations hired to collect money owed to a creditor. Many banks and lending institutions have their own collection departments to manage past-due accounts. Collection practices are highly governed. Creditors must adhere to federal regulations to legally collect debts. Government protection agencies support the rights of consumers who are harassed by collection agencies.

Types of Harassment

    Certain collection practices are off limits to debt collectors. They may not harass, oppress, or abuse you or any third party they contact. Collection agencies cannot use threat of harm nor can they use profane language. In addition, collection agencies cannot call debtors repeatedly during the day. Debt agencies that use false or misleading practices when attempting to collect a debt are in violation of the law.

Contact Rights

    Debt collection agencies may only contact consumers during certain hours of the day unless the consumer agrees otherwise. Agencies cannot contact debtors at inconvenient times such as before 8 in the morning or after 9 at night. Furthermore, debtors have the right to request either verbally or in writing that agencies not contact them at work. Consumers also have the right to stop a collection agency from any further contact. The request must be made in writing and should state that all contact from the agency cease immediately. After the collection agency receives the request, they may contact the debtor only to inform them that there will be no more contact.

Account Validation

    If a collection appears on a personal credit report, consumers have the right to request a validation of the debt owed. Collection agencies cannot give false information to a credit reporting agency about a consumer nor can they represent that they work on behalf of a credit reporting agency. The collection agency must provide the consumer with information about the debt, including the amount owed and the original creditor. The agency is prohibited from contacting the consumer during the account verification process. If the debt is invalid or erroneous, the collection agency must cease all contact with the debtor. It is important to note, however, that if the agency identifies that the debt is valid, contact may start up again.

Consumer Complaints

    Consumers have the right to file a formal complaint against a harassing collection agency with the Federal Trade Commission or a local consumer protection agency. Consumers also have the right to sue a collection agency that violated the law. If a consumer wins a lawsuit against the agency, the judge may require the agency pay damages resulting from the collection practices, such as lost wages or medical bills. Even if there is no proof of damages, the judge can still award payment of up to $1,000 as well as attorney and court costs.

New York's Laws on Credit Card Responsibility for Dual Persons

New York's Laws on Credit Card Responsibility for Dual Persons

In New York, as in all states, when two people sign jointly for a credit card, they are in effect telling the lender that if one of them doesn't pay, the other will. If one of those co-signers is removed from the equation for some reason, the remaining co-signer owes all the debt. Credit card companies are usually agreeable to issuing cards to dual persons for this reason.

Defaults by One Co-Debtor

    If you are a co-signer on a credit card, you and the other debtor might have a private arrangement between you as to how you're going to make the payments. If one of you doesn't uphold that bargain, the other is responsible for the whole payment. The company won't care about what the two of you decided. It will continue to pursue both of you for payment until one of you pays, and if it gets a judgment for the debt, it affects both of your credit reports. The company can place a lien against property owned by either one of you. Both of your individual salaries and bank accounts are vulnerable to garnishment.

Effect of Bankruptcy

    If your co-debtor files for Chapter 7 bankruptcy in New York and the debt associated with your joint credit card is discharged, this only releases him from any legal obligation to pay it. The company can still pursue you for collection. If your co-debtor files for Chapter 13 bankruptcy, this will protect you from collection efforts for a short time in New York. A Chapter 13 proceeding protects co-debtors from collection efforts during the life of the plan. However, if your co-debtor pays back only 30 percent of the joint debt through his Chapter 13 repayment plan, the discharge eliminates his liability for the remaining 70 percent. After discharge, the automatic stay against collection efforts lifts, so the creditor could then come after you to pay the remaining 70 percent of the balance.

Death of a Co-Debtor

    If you share a credit card with someone and she dies, her death leaves you responsible for paying the entire debt. Technically, the creditor can attempt to collect from her estate, but the estate will probably reject the claim if someone else is dually responsible for paying it. An exception might exist if you are the surviving spouse and a beneficiary of the estate. If you are not related to your co-debtor and not a beneficiary in her will, her death does not protect you from liability for the debt at all in New York.


    There's a big difference between being an authorized user on an account and being a co-debtor. If you're just an authorized user, you did not actually sign for the account and you're not on the hook for paying the balance, even if you have a credit card on the account bearing your own name. If your co-debtor defaults or passes away, the company can't collect payment from you, although some may try, especially in the event that the cardholder dies. Some unscrupulous lenders will try to collect from an authorized user, misleading him into believing that he is liable for the debt, rather than go through the probate process and try to secure payment that way. Credit card debt is low priority during the probate process, and such creditors are not always paid if the estate doesn't have enough money to pay all debts and expenses.

My Credit Check Shows the Wrong Information

Even credit reporting agencies make mistakes. Unfortunately, when you apply for credit, potential creditors verify information against what's in your credit report---even if it's wrong. A simple mistyped birthdate can mean you are denied credit, even if it's not your fault. When that's the case, you must take steps to correct the erroneous information. This is even more important if the erroneous information stems from something more troubling, such as identity theft.

Contact Credit Reporting Agencies

    When your credit report shows the wrong information, contact the credit reporting agency from which you got the report. Equifax, Experian and TransUnion are the three national credit reporting agencies in the U.S. It's important to check with all three, because not every creditor that reports to a credit reporting agency necessarily reports to all three. Therefore, it's entirely possible that you might have different information on each report---including errors. While the three agencies are required by law to communicate with one another if you report suspected identity theft, they do not usually share information otherwise, so you must contact them separately. Their websites have forms online for disputing errors, and you can also contact them via phone or postal mail as well.

Contact Creditors

    If the erroneous information your credit report was something reported by a creditor, you should contact that creditor in addition to contacting credit reporting agencies. While credit reporting agencies must follow up on your error report within 30 days of receipt, contacting the creditor that filed the report may speed up the process. Notify them of the problem, and provide any supporting evidence you may have, if they require it. For example, if a creditor is reporting that you failed to pay off a balance, yet you have bank statements and canceled checks to prove it, you may need to submit copies to clear your record. Creditor contact information can be found on your creditor's statements. If identity theft is involved, search for the creditor's website to find contact information and resolve the situation.

Follow Up

    Credit reporting agencies must investigate error claims within 30 days, but it is your job to make sure that your credit report is accurate and stays accurate. All residents of the U.S. can request a free copy of their credit reports once every 12 months via AnnualCreditReport.com. As of January 2011, it is the only service that provides a truly free copy of your credit report, without requiring you to sign up for other services in order to obtain it. Monitor your credit report after the 30 days have passed, so you know that the erroneous information was changed. It is a good idea to monitor your credit report on a regular basis, whether or not you spot errors.

Identity Theft

    In some instances, significant errors may appear on your credit report. Misspelled names and wrong birthdates are simple errors that anyone can make while typing. However, entire accounts with creditors that you do not recognize may be signs that your identity has been stolen, and new accounts opened in your name, without your knowledge. If you suspect that this is the case, you should still contact both credit reporting agencies and creditors immediately to let them know that you suspect fraud. Credit reporting agencies will place a fraud alert on your file. Contact your local authorities as well. If the possibility exists that the thieves have your Social Security number, the Social Security Administration has a list of steps you should take. The Federal Trade Commission also has a helpful guide available for all types of identity theft.

Credit Card Hardship Strategies

Nearly all the major U.S. credit card issuers maintain credit card hardship programs. They are meant to assist card holders in paying their debts. The basic idea is to avoid default and bankruptcy at any cost. A hardship program allows the bank to help you get back on track financially so you can continue paying them.


    The main features of a credit card hardship program are the lowering of interest rates and minimum payments for a specific period of time, usually from six to 12 months in response to a personal tragedy. A loss of a job, divorce, family death and other "life changing events" are the normal causes for financial hardship strategies. Hardship will not eliminate any of the debt (though there are exceptions) and it will close your credit card account for a time.


    The purpose of these programs is to keep the debtor from declaring bankruptcy. Because credit card debt is unsecured by any collateral, bankruptcy will wipe this debt out completely. Banks would like at least some of their money back, and therefore, they are willing to negotiate with those facing legitimate hardship.


    When applying for credit hardship, use the word "bankruptcy" a lot. These programs exist primarily to avoid bankruptcy. If you threaten to declare it, the banks are out the money. Using this word often in your interview will help your case. Second, show that your use of the credit card has been moderate. Excessive spending will get you a quick rejection from a hardship program. Third, the hardship you report must have a clear connection to your financial situation.


    Have all your data when you go for your interview. When you apply for a hardship program, the bank will want to speak to you in person. Have your financial papers with you, as well as proof of the hardship cause and its effect on your finances. Remember: You cannot max out your credit card and then claim hardship. Banks are wary about this. You must have hard proof of a "life changing event" and its effect on your finances to quality for these programs.


    If you are lucky enough to get your principal reduced by the bank, be aware that the Internal Revenue Service considers this forgiven debt as income, and you will have to pay taxes on it. Furthermore, the hardship program will affect your relationship with the bank and your credit score. Of course, it is not nearly as bad as having a bankruptcy on your credit report, but it will still negatively affect your credit. Once you get back on your financial feet, you can apply to get your credit card reactivated.

Tuesday, December 27, 2011

How to Stop Charge Card Judgments

If you don't pay a charge card, your account will eventually be turned over to a collection agency. When a collection agency has your account, they may file a judgment against you, which can lead to further collection activity. Your bank account can be levied, meaning all of the money or a portion of the money in the account, is frozen and turned over to the agency as payment for your debt. They may also garnish your wages up to 25 percent per week or pay period. Sometimes a lien can be filed against certain property. There are some things you can do to stop a charge card judgment.



    Find out all of your options. Research the various methods that can be utilized to stop judgments. You may have to seek legal counsel. Once you have all of your information determine, decide which method is going to help you stop a judgment effectively and efficiently. Seek the method that helps you achieve your financial goals.


    File a petition for bankruptcy. Call a bankruptcy attorney and provide all of your information. An automatic stay will be issued to all of your creditors once the bankruptcy has been filed. This means they must stop all collection activity including the execution of judgments. You may need a list of all debts plus all assets in addition to pay stubs and tax returns. Your attorney will provide the proper instruction to work you through the process. There is a chance you will need to rebuild your credit after filing a petition for bankruptcy. Your credit file will be damaged and your credit score will be lowered significantly.


    Direct your creditors to your attorney. When a bankruptcy has been filed, some creditors may forget to update their computer system, which means you could still receive phone calls. If they ask you for a payment, tell them you have filed a petition for bankruptcy and give them your attorney's name and phone number.


    Contact creditors which have filed judgments. You can expedite the process to make sure judgments are stopped, by contacting those creditors who have filed judgments. Provide them with your attorney's name, phone number, address, type of bankruptcy filed, bankruptcy case number and the filing date. Creditors will not freeze your bank account, garnish your wages or attach liens to any of your property or assets.


    Wait for the discharge of debtors notice. You will receive a discharge of debtors notice in approximately four months after you file a petition for bankruptcy protection. When debts are discharged, you are no longer responsible for paying them.

How to Cancel Debt Legally

How to Cancel Debt Legally

Many Americans struggle with crushing debt, especially credit card debt. When debt reduction strategies and repayment plans fail to work, sometimes the only option that consumers face is debt cancellation. Canceling your debt in most cases will negatively affect your credit.



    Pull a current copy of your credit report. See Resources for a free copy. You should also pay for a copy of your FICO score. A FICO is a three-digit number between 300 and 850 that represents your total creditworthiness. Look at your payment history on all accounts. Most creditors will not consider any debt cancellation if you're currently paying well on your accounts.


    Calculate your debt-to-income ratio. This is a ratio lenders use to determine how much of your monthly income is used for debt payments. To calculate your DIR, divide the sum of all monthly credit-reportable bills by your gross monthly income. Lenders like to see a DIR of at least 55 percent before considering debt cancellation.


    Negotiate a debt settlement with your lender. You can either do this on your own or with a debt settlement company. Debt settlement is the process by which lenders either eliminate debts or reduce the total amount owed. You'll need to provide your income documents to either your debt settlement agent or your creditors.


    Cancel your debts on your own through debt settlement. You must be seriously delinquent on your accounts for your creditors to review settlement. Make an offer to cancel part or all of your debts owed. Many companies will counter this offer--you will need to make a good faith effort to repay a part of your debt before any part is cancelled. Make sure to get a contract in writing from the lender prior to agreeing to a settlement offer.


    File for Chapter 7 bankruptcy protection. This will halt all collection activities (including foreclosure). Chapter 7 bankruptcy will eliminate your debts. The courts will review and liquidate your assets, though. In addition, your credit report will reflect a bankruptcy for at least seven years.

Monday, December 26, 2011

Three Types of Information for Borrower's Creditworthiness

When you apply for a loan or a credit card, your lender will obtain information about your finances and credit to determine if you qualify to borrow money. Each lender uses this information differently to assess you as a potential borrower depending on the lender's guidelines. However, lenders typically obtain and use three primary types of information to determine your creditworthiness.

Payment History

    Lenders typically use payment history, which they obtain from your consumer credit reports, as a means to evaluate your creditworthiness. Your credit reports show delinquent payments on installment loans, mortgages, credit cards and lines of credit. Late payments on existing accounts show inability to handle debt, and may cause a prospective lender to deny a loan or credit card.

Length of Credit History

    Length of credit history refers to the period of time during which you have maintained active credit accounts with lenders. A long credit history, coupled with an absence of delinquent payments, can help establish creditworthiness to qualify you for credit cards and loans. Conversely, if you have no established credit history, a potential lender has little information to evaluate your creditworthiness. Some lenders may decline your credit application if you do not have an established credit history.

Debt-to-Income Ratio

    Even if you have a solid credit history with no missed payments, your debt-to-income ratio can affect your creditworthiness. A potential lender will look at your existing credit balances and monthly payments, and will compare this information to income information you or your employer supply. The larger the portion of your income you must pay toward existing debts each month, the less likely a lender will be to approve a loan. The lender may reason that an additional credit obligation may strain your finances and make you unable to afford your loan payments.

Other Information

    A lender may use other types of information when evaluating your creditworthiness for a loan or credit card. This information may include vehicle repossessions, rental payments and public records such as bankruptcies, judgments, property liens and foreclosures. With the exception of rental payments, these factors can decrease your credit score, potentially affecting your ability to obtain credit. Lenders may also look at expenses such as utilities, groceries, entertainment and child care when determining your creditworthiness.

Information on CareOne Credit Counseling

Careone Credit Counseling Services is a debt-relief company with five different companies operating under its umbrella. The company provides services designed to get you out of debt as efficiently and effectively as possible.


    Some of the companies that operate under Careone Credit include American Financial Solutions, Clarion Credit Management, and Debt Management Group.


    If you are considering the services of Careone Credit, you can go online and fill out an application that includes your personal information as well as the amount of debt you have outstanding. A representative will contact you to discuss your situation.


    Careone Credit targets prospective clients who have debt in the amount of $2,500 to $10,000 and are struggling to make monthly payments.


    The services provided by Careone include debt negotiation, debt repayment, and debt consolidation. These methods help you make new payment arrangements with your creditors, lower interest rates, waive fees, and consolidate your outstanding debt. Careone may use a combination of these services depending on your situation.


    There are set-up and activation fees which you will be responsible for. These fees will be determined by the number of creditors you want Careone Credit to handle.

Sunday, December 25, 2011

Meaning of Debit and Credit in Accounts

Meaning of Debit and Credit in Accounts

Debits and credits are the backbone of modern accounting principles and economies. Without them, there would be no financial statement available, no possibility of financial analysis and no investment valuation. Bookkeepers record business activities by debiting and crediting specific accounts based on generally accepted accounting policies (GAAP), company rules and regulatory standards.


    A bookkeeper records a business transaction by crediting one account and debiting another. This is called making an entry (or making a "journal" entry). A "journal" is an accounting record. The idea behind a journal entry is that an economic transaction always has a double purpose---that is, double-entry accounting principle. For example, when a customer pays for goods, the seller receives cash but "loses" the goods, and vice-versa.


    The double-entry accounting principle is important because accounting rules and regulatory standards require it for companies listed on securities exchanges. Even entities that use cash accounting to record transactions, such as small businesses, follow the double-entry accounting principle. (Cash accounting does not comply with GAAP and requires debits and credits only when cash is received or paid.)


    A revenue is income from a sale or an investment. A revenue also may be a reduction of an expense. (For example, if a landlord decreases the monthly rent, the extra cash represents a revenue for the tenant.) A revenue account could be sales, interest income or commissions. Debits decrease a revenue account, and credits increase it.


    An expense is any amount paid for goods or services. An expense also may be a reduction in revenues. (For example, if a vendor sells goods at a discount, the discount amount represents an expense or a loss for the vendor.) An expense account could be cost of goods sold, salaries or interest expense. Debits increase an expense account, and credits decrease it.


    An asset represents a company's resources, or what it owns. An asset that a company can sell in a year or less is a current asset (e.g., inventories); it is a long-term or fixed asset if the company intends to use it for more than a year (e.g., machines or land). Debits increase an asset account, and credits decrease it.


    A liability represents a corporation's debt. Debt that a company must reimburse in a year or less is a current liability (e.g., salaries payable); it is a long-term liability if it is due in more than 12 months (e.g., bonds payable). Debits decrease a liability account, and credits increase it.

Owner's Capital

    Owner's capital represents cash that owners (or shareholders) invest in a corporation. Examples of owners' capital accounts are dividends, retained earnings, profits and reserves. Debits decrease a capital account, and credits increase it.

Utah Debt Help

Being overburdened with debts like credit card and medical bills can feel scary, but Utah residents can take advantage of several types of legal help when in financial trouble. No matter how serious the financial situation, most people can qualify for some type of bankruptcy relief or partially repay debts through credit counseling, according to the Utah State Bar.

Statute of Limitations

    Under Utah statute 78-12-25, you cannot be sued for credit card or bank loan debts that happened more than four years ago. A debt collector can still pursue payment but not through the court system. If a creditor sues you for an old debt, then attend court and inform the judge that the company has violated state law 78-12-25.

Debt Collection Basics

    Collection agencies representing a credit card company or similar lending institution can legally contact you to pursue payment of overdue debts, according to the Utah Division of Consumer Protection. All collection agencies contacting state residents must be registered and bonded with the Utah Division of Corporations and Commercial Code. Because most debt collection laws are federal, the Federal Trade Commission is the best agency to contact if you feel a bill collector has threatened you or otherwise violated your legal rights. In extreme cases, you may opt to hire a qualified attorney to assist you.

Chapter 7 Bankruptcy

    Some Utah residents need to file Chapter 7 bankruptcy to receive debt help, according to the book "How to File for Chapter 7 Bankruptcy." This legal option allows permanent forgiveness of approved, pre-existing obligations like credit card and medical bills. Utah residents must earn less than the annual median income level for their household size in order to automatically qualify to file Chapter 7. As of 2011, the figure for a single resident was $50,568, while the level for a family of four was $69,990, according to the U.S. Trustee Program. People who earn more must prove through a federally derived means testing formula that they cannot even partially repay debts while supporting their dependents or file for Chapter 13.

Chapter 13 Bankruptcy

    Working people may opt to partially repay their debts under court supervision in Chapter 13 bankruptcy, notes the Utah State Bar. These repayment plans last three to five years and enable state residents to retain more of their personal assets. But one drawback is that someone under a Chapter 13 payment plan cannot legally get new credit without court permission while repaying debts, warns the book "How to File for Chapter 7 Bankruptcy."

Saturday, December 24, 2011

What Is Considered Top Tier Credit?

What Is Considered Top Tier Credit?

When you apply for a loan at a car dealership, jewelry store or mortgage company, the banks or creditors look at your credit score, among other pieces of information. Having a credit score that the creditor considers top tier may help you save money in the long run, as you qualify for better interest rates on your loans.

Top Tier

    A credit score falls in the range between 300 and 850. The higher your credit score, the better your credit rating. A higher credit score helps an individual qualify for credit more easily or receive credit at a lower interest rate. The credit rating helps lenders assess the amount of risk they take by lending money to a certain person. People who have top tier credit, or who fall into the group of creditors with the highest credit scores, can qualify for the best credit offerings.

Different Lenders

    According to the Fair Isaac Corporation, which formulated the FICO credit score used by many lenders, there is no universal credit score that all lenders use as the cutoff for top tier credit. Instead, each creditor uses its own set of criteria to determine what it considers at the time to be a prime credit score. What a lender considers to be a score high enough to qualify for its top tier rates changes over time as the credit market and economy change.

Market Changes

    Different lenders have their own standards for what they consider to be top tier credit, based on criteria that changes over time. In other words, a score that was considered top tier credit by a particular creditor may no longer be considered top tier credit by that same creditor just a few years or even months later. Shifts in the credit markets, affected by the economy, also may shift a lender's cutoff for top tier credit. The scores of other credit applicants relative to your own score may also affect whether a lender considers your credit score to be top tier.

Improving Your Score

    If your credit score is not helping you qualify for the top credit deals around, engaging in certain activities may nudge your score up high enough to be considered top tier credit. Always make arrangements to pay your current creditors on time, since your creditors may report you as being on time consistently. Keep the balances on your credit cards low and avoid opening more credit accounts than you truly need. Order copies of your credit reports from Experian, Equifax and Transunion, and then look over the reports for any inaccuracies. File disputes with the credit bureaus if you find inaccuracies on your reports.

Definition of Consolidate

Debt consolidation is the process of combining multiple loans into one. A consolidation loan does not reduce the amount you owe but can help you have a more manageable repayment schedule.


    By combining all of your loans into one, you will only have one larger payment to worry about each month rather than several or more smaller payments. This can reduce the chance that you will accidentally miss one of them and be hit with late fees and finance charges.


    Consolidation loans can be used to combine any type of debt into one loan with several common loans being student loans, credit card debt and auto loans.

Interest Rates

    The interest rate on your consolidation loan will depend on your credit score and whether you are taking out a secured or unsecured loans. Secured loans will use your property---usually a home---as collateral that can be seized by the bank if you do not pay your loans on time. Since this makes the loan less risky you will pay a lower interest rate.


    Most people who consolidate their debt end up paying a lower interest rate than they did on the separate accounts. This is particularly true of credit card debt because of the very high interest rates charged by credit card companies.


    Be sure to compare the interest rates and monthly payments before signing because if your credit score has gone down, you may have to pay a higher interest rate if you consolidate. In addition, if you use your home as collateral, be aware that if you fail to make your payments, you can lose your home.

If You Open a Checking Account With Someone Else's Name on It, Can It Still Be Garnished for You?

Bank garnishment is a process a creditor may use to recover unpaid debts you owe. This process involves freezing the bank account, which means that you can deposit money, but you cannot make withdrawals. The frozen funds may then be sent to the court to reduce the debt you owe. In certain cases, a debtor may garnish your bank account, even if someone else's name is on the account.


    Before a debtor can garnish a bank account, it must obtain a judgment against you. A judgment stems from a civil suit that is typically filed with a court in the county in which you reside. You will receive notice that a debtor has filed a suit against you, and you will typically have an opportunity to challenge the judgment. If you do not answer or cannot successfully challenge the lawsuit, the court will typically grant a judgment against you.

Joint Accounts

    If you open a joint account with another person, and your name appears as an account holder, a judgment debtor can typically apply to the court to freeze the account and garnish the available funds. The other holder of the account typically does not have to provide permission for the debtor to freeze the account. However, laws regarding the ability of a judgment debtor to garnish joint funds varies by state.


    Although a judgment debtor can freeze a joint bank account you own with another person, it typically cannot garnish funds that solely belong to the other account holder. The other account holder must provide proof to the court that he owns part of the funds in the account, and that you do not have permission to use the funds. If the other party can provide proof, the funds are typically considered exempt, and they may not be used to pay your judgment.


    Some states, such as Ohio, impose an exemption on a certain amount of funds in the account, regardless of which account owner controls the funds. In Ohio, the first $400 in your account is exempt from garnishment.


    You may be tempted to open a bank account in someone else's name in order to keep funds from a judgment debtor. Some banks allow customers to open accounts online without ever visiting a bank branch. However, this is considered fraud unless you have legal guardianship of the person whose name appears on the account. Using someone else's identity to open a bank account may result in fines and up to 15 years of imprisonment.

7 Secrets to Debt Freedom

7 Secrets to Debt Freedom

A debt-free life is within reach if you can change your habits. Even if you have been carrying a balance on your credit cards, or even increasing the amount you owe every month, planning and discipline can help you reach your goal. Paying off your debts requires sacrifice, but you have more to spend when interest no longer consumes a chunk of your income.

Assess Your Situation

    Calculate the flow of money each month. First, total up all your income. Then add up your unavoidable or fixed expenses, such as rent and minimum debt payments. Finally, add up all your optional or varying expenses, such as clothing.

Make a Realistic Budget

    Create a budget that covers all the essentials, including food, insurance, rent or mortgage, minimum payments, utilities and gas. Then include a reasonable amount for flexible expenses such as entertainment or clothing.

Create a Surplus

    Eliminate or reduce unnecessary expenses until you achieve not only a balance, but a monthly surplus. For example, look for more affordable car insurance, cut out restaurant meals and reduce spending for entertainment. If cutting extras isn't enough, consider moving to a cheaper place or selling a car. Find ways to increase your income, such as working overtime or getting a part-time job.

Get Lower Interest Rates

    Reduce the interest rates on your loans. Refinance to a lower-rate mortgage, and move credit card balances to a lower-rate card. Call your lenders and ask them to reduce the rate on your existing card, or open a new credit card account with a low rate.

Stop Charging

    Stop adding to your debt. In her book "Making the Most of Your Money Now," finance author Jane Bryant Quinn calls this the most important step to breaking the debt cycle. If you keep on using credit cards, the balances will never fall to zero. Don't take on other debts, such as auto loans, either.

Retire Debts Early

    Use your budget surplus to pay off your debts early. After paying the minimum on each loan every month, put extra money on one debt at a time until you have paid them all off. In one popular method, you pay off the debt with the highest interest rate first, and then the next highest, and so on. This method saves the most money in interest. Another option is personal finance expert Dave Ramsey's "debt snowball," in which you pay off the debts in the order of the smallest balance to the largest. This method has the psychological advantage of retiring individual debts more quickly, creating the desire to build on the momentum.

Accumulate Savings

    To stay out of debt permanently and live debt free, you need an emergency fund for unexpected expenses. Your beginning goal should be to have $500 to $1,000 in an accessible place, such as a money market account. Ramsey recommends saving your first $1,000 even before beginning extra payments on your debt so that an unexpected expense doesn't add to your debt. Eventually accumulate enough in emergency savings to live three to six months so you can stay debt-free even if you lose your job.

What to Do About Credit Card Debt for Older People

What to Do About Credit Card Debt for Older People

A 2009 study by public policy group Demos found that the elderly --- those age 65 and older --- accumulated credit card debt faster than any other demographic between 2005 and 2008, according to "USA Today." The elderly sometimes have credit card problems because they tend to live off of a fixed income and don't work. The best option may be to legally discharge this debt.

Expert Insight

    Ultimately, the elderly need to pay debts that give them the essentials to live, such as a mortgage and utilities, according to Legal Counsel for the Elderly. Cathleen Moran of Moran Law Group suggests bankruptcy as a possible option when the elderly can't make credit card payments. Credit card debt is unsecured debt and can be eliminated during a bankruptcy.


    Bankruptcy reform in 2005 made it harder to file for bankruptcy. Consider helping seniors save money on their largest expenses. Drug companies, pharmacies and government programs such as Medicare can help reduce the cost of prescription drugs by 20 percent, according to CBS News. With rising home values comes larger property tax bills, so states often offer to reduce tax bills for the elderly.

Contacting the Creditor

    An elderly individual with credit card debt problems is also likely paying more in interest than the average holder: Credit card rates are higher for people with lower credit scores and missed payments. He should contact his creditor about freezing or lowering interest rates, according to Legal Counsel for the Elderly. If the individual can't even make the minimum payment, he should consider negotiating a lower debt. Usually, creditors would rather collect less than what a borrower owes to avoid legal fees.


    The elderly often have little cash but they may have paid-off mortgages. Reverse mortgages are available to people age 62 and older. In a reverse mortgage, the homeowner converts equity in the home into an interest-free loan that doesn't need to be repaid until the owner sells the home or dies.

    Once the elder person in your life gets control of credit card debt, advise them to avoid credit cards with high interest in the future. (ref 4)

Friday, December 23, 2011

When a Person Dies Is Their Estate Responsible for Their Credit Card Debt?

When a Person Dies Is Their Estate Responsible for Their Credit Card Debt?

Many families today have multiple credit cards with balances on them. When an account holder dies, her debt will have to be dealt with. The credit card debt would not necessarily be passed onto the beneficiaries of the deceased, but it may have to be addressed by the estate.

Account Holder

    If you are the only person on the account when you die, the debt will not become the responsibility of one of your beneficiaries. If you opened the credit card with your spouse, the surviving spouse would still be responsible for the debt on the credit card. This is part of the responsibility of signing up for a joint credit card, and the debt would then have to be repaid regardless of the surviving spouse's financial situation.


    When a person dies, her estate is responsible for paying off any of her debts. The executor of the estate is in charge of selling any property that is necessary in order to come up with the necessary cash to repay the debt. The executor has to file tax returns, pay taxes and pay off any other debts that the deceased had. If there is any money left over, it can then be distributed to the beneficiaries of the estate.

Insufficient Estate Value

    When a person dies without any substantial assets, and a large amount of credit card debt, the estate may not be able to pay off the debt. If this is the case, the debt will simply be retired and it will not pass on to the heirs of the deceased individual. Debt is not transferable unless someone agrees to repay it for the deceased. Otherwise, the debt will be forgiven by the credit card company.


    When a person dies, his beneficiaries will have to prove to the credit card company that the death is legitimate. To prove that your loved one did not fake death to get out of credit card debt, you will most likely have to provide a copy of a death certificate to the credit card company before it will consider forgiving the debt. At that point, the company should write off the debt as long as there are no other assets in the estate that can be used to repay it.

Collection Calls

    In some cases, the surviving spouse of a person with credit card debt will receive collection calls for a certain amount of time. The credit card company may try to collect the balance from the surviving spouse. If there is not enough money in the estate to pay for the credit card bills and the spouse was not a cosigner on the account, there is nothing that the credit card company can legally do to collect the balance.

The Truth About Debt Cures

When you're drowning in debt, anything that can help you get rid of debt and get your life back can seem like a lifesaver. The truth is, most quick debt cures come at steep price, whether it's fees charged by debt negotiators or the damage done to your credit score.

No Quick Cure

    You probably didn't get head over heels in debt overnight, there's no way to get rid of debt overnight with no repercussions. Unfortunately, it's often much easier to rack up debt than it is to it is to pay it off. Therefore, any legitimate road out of debt will not be an easy one. Any quick cure for debt will almost certainly destroy your credit score, making credit difficult to come by in the future.

Debt Settlement/Negotiation

    Companies that claim to be able to settle your debt for pennies on the dollar, or to erase your debts make tantalizing claims, but the truth is much less attractive.

    "Despite the claims, settlement is not an easy way to slash debt, doesn't always work and could wreak havoc on your credit score," writes Bankrate's Leslie McFadden.

    Debt settlement or negotiation firms often claim that they can settle your debt for half or even less of what you owe, but they often charge exorbitant fees and ask you to stop making payments on your debt. Both stopping payment on your debt and settling your debts for less than you owe is destructive to your credit.


    Filing bankruptcy is a quick cure for debt, but only if you qualify for Chapter 7 bankruptcy, which eliminates most debt. However, if you do not meet the guidelines for Chapter 7 bankruptcy, you must file Chapter 13, which means repaying some or all of your debts over a period of several years. Although Chapter 7 bankruptcy can erase much or all of your unsecured debt, it's the most destructive thing you can do to your credit, often knocking hundreds of points off your credit score, and staying on your credit report for up to 10 years.

Debt Management Plans

    While a debt management plan will not eliminate your debt overnight, it can eventually cure you of overwhelming debt over a period of years. A reputable credit counselor can assist you in working with your creditors to create a repayment plan that will lower your payments and/or fees and interest, allowing you to repay your debt over a period of years.

How to Collect on a Verbal Loan Agreement

How to Collect on a Verbal Loan Agreement

When you have a signed contract, you have a better chance of collecting an outstanding loan. A verbal loan agreement is more difficult to collect, but if you have enough facts, figures, data, and evidence, you can eventually collect the money thats owed you. There are certain steps you will need to take. First contact the debtor and try to work out a repayment arrangement. If this does not work, you may have to seek legal action.



    Gather your facts and evidence. If you dont have a contract, you will need as much evidence as you can gather. Determine if there is a paper trail for the money you loaned. When you go to the bank and get a cash advance on a credit card, the date of the transaction will show up on your credit card statement and the bank will give you a receipt. If you withdrew money from your bank account to extend a loan, this transaction will show up on your bank statement. Recall if there were any witnesses to the transaction. The debtor may have told someone he was borrowing the money from you. Make a note of what the money was borrowed for as well as the date, time, and repayment arrangements.


    Go to the district court in the county where the defendant lives or where the business transaction was conducted and complete a small claims application. The application will include your name and the defendant's name as well as your version of what happened and why you are suing. Once its complete, there will be a flat filing in the amount of $35, but the amount can vary from state to state and court to court. Verify you claim is within the amount handled by small claims. Some courts have a maximum of $3,000 for small claims and some have $5,000.


    Wait for the writ of summons. You and the defendant will receive a writ of summons that states you both should attend the trial. The date, time, and location of the trial will also be listed on the summons. The trial is usually at the courthouse. These type of cases are handled by magistrates, which are court-appointed attorneys. Notification will go to the defendant in the form of certified mail with a return receipt. Also note some courts will let you choose from three different methods to have the defendant notified. The first method is having the sheriff department handle it. They will attempt to give the defendant notification, in person, three times. You can also decide to have a private processor deliver the summons. This person must be over 18 years of age. The last method already mentioned is certified mail.


    Attend the trial and present your case. On the day of the trial you will be able to stand before the magistrate with your evidence and witnesses, if applicable, and present your case. The defendant will also be allowed to present their defense. When everyone has been heard, the magistrate will make a ruling. If she decides in your favor, you will be awarded a judgment. To collect on a judgment you may need to do a bank levy or garnish the wages of the defendant. The court can work you through the steps. They should have the forms you need to fill out. The court cannot collect your money judgment for you.

Thursday, December 22, 2011

Debt Charge Off Definition

A debt charge off is a technique that is used by a creditor when they eliminate a portion of debt that they believe they cannot collect. This procedure is used when a debtor will not pay their bill. It can eliminate part of your debt, but it can also harm your credit.


    When a consumer has an outstanding balance on a credit account that they cannot afford to pay, the company will try to collect it from them. The creditor will employ a collections agency to try to collect the debt. The debt collector may offer to take less than what you owe and charge off the rest. This means that they write off the remainder of the balance as bad debt.


    Many people mistakenly believe that when a company charges off your debt, you no longer owe it. While you could potentially avoid paying it, you still owe the debt. The company charges it off so that they can get a tax deduction on the amount that they did not collect. You could still pay the debt that is charged off and attempt to salvage your credit history.

Paying Old Debt

    Even though a debt is charged off, you can still choose to pay it. If you make payments towards eliminating the debt, this cannot hurt your credit score. If you try to settle your old debt by paying a lump sum that is less than what you owe, this could hurt your credit score. If you are concerned with your credit history, choosing to make regular payments towards the debt would be better for your score.


    When a debt is settled, you may have to consider the tax consequences. Even though you do not have to pay the debt, you would still be liable for the taxes on this charge off. The Internal Revenue Service looks at a charge off as if you earned income. Since you did not have to pay the debt, your financial situation was improved. This adds money to your annual income and affects your taxes.

Credit Impact

    If you choose to engage in debt settlement, it could have a large negative impact on your credit score. In fact, settling a debt could lower your score by as much as 125 points for a single occurrence. If it is possible, you may want to consider setting up a payment plan so that your account does not show any debt settlements. By saving your credit score, you can have a better chance at being approved for financing in the future and pay less in interest on future loans.

How to Pay a Bit More Than the Minimum Amount on Credit Cards

Credit cards are flexible, allowing you to make large purchases and pay them off immediately or stretch repayment over months or even years. Card issuers require a minimum monthly payment, but sending more money is optional. More than half of American credit card users carry a monthly balance and 29 percent only pay the minimum amount required at least some of the time, according to the 2009 "Financial Capability in the United States" study, conducted by the FINRA Investor Education Foundation. Your balance goes down faster and you save on interest if you add money to that minimum.



    Change your income tax withholding amount if you usually get a refund from the federal government, Melody Warnick, an MSN Money website writer, advises. A refund means you are paying too much and the government simply holds on to the money until you file your tax returns. Put it to use immediately by adding it to your credit card payments once you adjust your withholding to an accurate level.


    Cut unnecessary expenses out of your budget and add the money to your credit card payments. Warnick recommends monitoring your spending for a week by writing down every expense. Note the optional items, like buying vending machine snacks, going to the movies or going out to lunch. Eliminate as many as possible to free up extra funds.


    Find the interest rate on each of your credit cards and channel a bit more money to the ones with the highest rates. The Credit CARD Act, a federal law, makes card issuers tell you how long it will take to pay off your accounts if you only send the minimum, according to the Bank of America website. Statements must also show how much you would pay in interest charges over that period. Use this information to decide how to allocate your funds for extra payments.


    Hide all but one credit card and use that remaining account sparingly, Warnick recommends in her MSN article. Your minimum payments go up if you keep spending more money on your cards, making it harder to send extra funds.

Canadian Debt Recovery

Debt recovery refers to collecting debts from individuals or businesses. In Canada debt recovery regulation is established by provinces or territories. Collection agencies have legal status and are hired by service-provider companies to collect on their behalf.

Canadian Regulations

    Canadian regulations regarding debt recovery apply to collection agencies and they establish rules about calling debtors, the times, the number of calls per week and the situations when mailing correspondence is necessary. Collection agencies must notify the debtor in writing about the account in collections, the creditor and the amount owed. Recovery agents are allowed to call the debtor once a day every day except on Sundays and on statutory holidays.

Collections and Creditors

    Some collection agencies act on behalf of the creditor for a fee (usually around 25 percent of the debts owed). Other agencies buy the debt from the creditor for a small percentage of the debt and then collect the full amount from the debtor. The creditors are banks, credit card issuers, retailers, telephone companies or other service providers.

Bad Collection Practices

    Collectors must not make frequent calls that can be considered harassment. They are not allowed to make charges or threats and they must not continue to contact a debtor except in writing or through the debtor's lawyer if the debtor has notified the collector about that.

Wednesday, December 21, 2011

How Soon Do Credit Card Companies Sue After Payments Stop?

Making regular payments to your credit card company benefits your credit rating and prevents the company from closing your account and initiating collection activity. Defaulting on your credit card debt carries severe consequences and places you at risk of a debt collection lawsuit. If sued, you may face wage garnishment, a bank account freeze or even a property lien.


    Many consumers who are struggling financially believe that credit card companies are quick to sue. In reality, this isn't the case. Credit card companies don't often sue consumers. A lawsuit requires time and money that few credit card companies are willing to risk. Your credit card company is much more likely to sell your delinquent account to a third-party collection agency. The majority of lawsuit threats that consumers believe come from credit card companies actually come from collection agencies.


    Credit card companies don't dispose of debts after a few missed payments. The majority of credit card providers wait a full six months before charging off and selling unpaid accounts. Because lawsuits require the same time and effort from a collection agency as they would from a credit card company, the collection agency will attempt to convince you to pay the debt voluntarily before initiating legal proceedings. Thus, you are unlikely to face a lawsuit over your unpaid credit card debt until months -- sometimes years -- after you stop making payments.

Time Frame

    Fail to submit a payment on any unsecured debt, such as a credit card, for 180 days and your state's statute of limitations for debt collection will begin to count down. The statute of limitations varies, depending on your state, and regulates the amount of time any creditor has to sue you for a given debt. Once the statute of limitations expires, your creditor still has the right to collect but can't legally use a lawsuit to facilitate debt recovery.


    Not everyone gets sued for unpaid debts. According to New York's Neighborhood Economic Development Advocacy Project, a lawsuit is more likely if the debt you owe exceeds $1,000, you haven't attempted to make payment arrangements, or the creditor that owns the debt has a history of suing debtors.


    Although the statute of limitations restricts creditors from filing lawsuits after a specific period, this doesn't stop out-of-statute lawsuits from occurring. If your creditor files a lawsuit against you and you don't acknowledge the suit or present a defense, the creditor wins the suit by default -- even if the debt it is suing for is beyond the statute of limitations in your state. You must respond to the summons, show up in court and use the expired statute of limitations as your defense to avoid losing the lawsuit.

Tuesday, December 20, 2011

How to Compute Credit Card Balances & Interest

If you want to get serious about paying off your credit card debts, it's important to learn about the balance and interest associated with your account. When you understand computations involved with determining your new balance as well as interest expense you pay each month, you can make better decisions about how to pay off the account more quickly. Gather basic information about your credit card account, including your current open balance and the annual interest rate, referred to as APR, to get started.


Computing Interest Charge


    Divide your annual APR by 365, which is the number of days in the year, to get the daily interest rate. For instance, if your annual APR is 12 percent, the daily interest rate is .0329 percent. Convert the percentage rate to a decimal point number, which is .000329 in this case.


    Multiply the daily interest rate by the average daily balance listed on your credit card account. This is the balance on each day of the month added up and then divided by the number of days in the billing period. If the average daily balance is $5,000 and you multiply it by the daily interest rate of .0329, you're paying about $1.65 per day, which is .000329 times 5,000.


    Multiply the daily interest expense by the number of days in the billing period to estimate the monthly interest charge. For a 30-day billing period, the interest cost is $49.35 in this example.

Computing New Balance


    Start with your opening (previous month's) credit card account balance. Assume a balance of $5,000 for this example.


    Calculate your interest expense as described in the first section and add it to the balance. Use the example of $49.35.


    Add any new charges added to your account--skip this step if you did not add new charges to the card. Assume new charges of $100.


    Subtract any payment amount you've made for the month in question. Assume a payment of $200. The result is your new balance, which is $4,949.35 in this case.

Getting Out of Debt: How Credit Counseling Can Help Identify Your Options

Debt load consists of credit card accounts, loans and other bills. Your debt might become overwhelming if you run up big balances or suffer an unexpected problem like unemployment or illness. Credit counseling offers a way to review your options and create a plan. The Federal Trade Commission explains that a good counselor shows you every alternative, from budgeting on your own to letting the counseling agency administer a debt management plan.


    Credit counseling is a service provided by professional organizations. The FTC explains that many counseling firms are nonprofit, although they do charge fees for certain services. Counselors discuss your financial situation with you in person, in a phone call, through email or online chat. Together you determine your best course of action, whether it is development of a personal budget, a formal repayment plan or bankruptcy. For example, if the counselor discovers that you have sufficient income but are spending too much unnecessarily, you might be taught to make and follow a strict budget. Many counseling organizations also offer free information online for self-study. If you have trouble disciplining yourself to pay bills, you might need a formally administered plan. Bankruptcy might be the recommendation if your obligations far outweigh your income.


    The FTC advises that you can find credit counselors through banks, credit unions, universities, housing authorities and military bases. Consumer protection agencies sometimes offer referrals. Professional credit counseling organizations like the Association of Independent Consumer Credit Counseling Agencies and the National Foundation for Credit Counseling maintain databases that list firms in certain areas. Limit your search to nonprofit firms.

Choosing a Firm

    The FTC website advises caution when choosing a credit counselor because some firms charge excessive fees or push you into debt management plans that might not be your best option. Ask any counseling firm you are considering whether it is licensed in your state and if its counselors have outside training and certification. Ask about the services offered. A good firm offers everything from budgeting advice to classes to payment plans. Request a list of fees and ensure that the firm offers written contracts.


    Do not confuse credit counseling firms that offer debt management plans with companies that offer debt negotiation services, the FTC website warns. A debt management plan sets up a specific repayment schedule. You give your money to the counseling firm each month, and the firm redistributes it to your creditors. The plan should be aimed at paying off your bills in a minimum of 48 months. Debt negotiation means that the firm tries to get your creditors to accept lower balances. Some companies claim they can slash your bills by up to 50 percent, but the FTC explains that those companies often exaggerate. Debt negotiation can seriously hurt your credit rating, and unscrupulous companies charge a large fee or collect monthly payments and give nothing in return.

How to Clean Up Bad Credit Reports

How to Clean Up Bad Credit Reports

There are any number of reasons to avoid a bad credit rating. Bad credit marks you as a risk to lenders, and sometimes landlords or potential employers. Even if you can get a loan, you'll likely be stuck with a higher-than-average interest rate. Although it is much easier to hurt your credit than fix it, there is hope for reviving it as long as you are consistent and determined.



    Keep an eye on your credit report at least yearly. You will be able to spot and dispute false negative or fraudulent action on your account. Make sure your creditors report your transactions correctly. If not, dispute it with the credit agency immediately. You can get your credit report online, typically for a small fee.


    Make regular payments on all of your debts. Even if you are only able to make the minimum payment, be sure to pay it on time. Late payments usually result in late fees as well as further negative marks against your credit rating.


    Pay down your balances as quickly as you can. Lenders see consumers as less of a risk if they are using 30% or less of their available credit, according to financial expert Liz Pulliam Weston. If you have extra money at the end of the month, use it to pay down balances. You should also stop using your credit cards whenever possible.


    If you absolutely must use a credit card, use the oldest one. Older credit history is better than new since it establishes what kind of consumer you are.

Monday, December 19, 2011

Charities That Help Pay Rent

Charities That Help Pay Rent

Don't wait until it is too late. There is help available if you have fallen behind on your rent. There are charities nationwide that will help in your time of need. Be prepared and identify which ones you will approach. If you wait until you have an eviction notice, chances are it will be too late for their intervention to succeed.

Community Action Agencies

    Many communities have agencies that can assist if you need help paying your rent. Part of the mission of the Community Action Partnership is to help people help themselves. They almost always have at least some funds available to help needy community members pay rent. Thus, check for a community action agency office near you. The amount you will receive depends on various factors such as income, family makeup, funds available to the agency and more.

Salvation Army

    The Salvation Army is another helpful source when paying the rent becomes problematic because part of their mission is to meet human need without discrimination. They are an evangelical arm of the universal Christian Church that bases its actions on the Bible, acting in the love of God to reach out and meet human need in the name of Jesus Christ.

    The measure of help they provide differs from one community to another depending upon available funding. Thus, to apply for rent help, contact your local branch of the Salvation Army. Simply enter your zip code on their home page. After determining your level of need, they will offer whatever help they can. They may offer helpful suggestions on ways you can also help yourself.

Society of St. Vincent de Paul

    This charity runs on donations and thrift store sales to keep local programs going. Like the Salvation Army, the Society of St. Vincent de Paul works through local offices and the amount of assistance offered depends on the funding available to that office. To apply for rent help, go to their website to find the closest St. Vincent de Paul. You will have to apply there, but be sure to call first, since some locations may have limited hours to receive applications.

About Right to Cure Letters

About Right to Cure Letters

Right to cure letters, and the loan note language that triggers them, vary from state to state. Right to cure provisions exist in almost every loan note and explain the borrower's options to correct a delinquency or default, usually caused by missed payments. Borrowers should learn about their rights to remedy a delinquency if they want to continue their relationship with their current lender should there be a problem.


    Right to cure letters are sent from the lender to the borrower after a delinquency or default occurs. They explain the options available to the borrower -- per the terms of the loan note -- to fix their current deficiency. The letters explain what the borrower must do to remedy the situation and to be, once again, rated as "current and paying as agreed."


    Right to cure letters typically have at least four features. First, the lender explains the borrower's situation regarding non-performance on the loan terms. Next, the lender outlines the rights of the borrower to fix the problem by taking certain actions. For example, the borrower might have 20, 30, or 45 days to bring the account current. The lender normally states the amount of money necessary to cure the default. Finally, the right to cure letter typically explains the lender's options to take subsequent action if the borrower does not cure the problem.

Time Frame

    Two time frames are particularly important in exercising right to cure provisions. First, there is a time frame specified in loan notes that triggers the right to cure options. For example, a number of missed payments, delinquent days or other violation of note agreements will trigger a default and a right to cure letter. Second, the letter will state the time frame the borrower has to cure the default. Once again, this is not an arbitrary lender decision. The right to cure language in the loan note will specify the time frame per local state law.


    Never disregard a right to cure letter. It is often your best -- and last -- chance to rectify a loan problem. Disregarding the contents and time frames noted in the letter typically result in lawsuits, liens and foreclosure on or repossession of your assets.


    At first, borrowers are dismayed and upset upon receiving right to cure letters. However, there are borrower benefits to consider. Receiving a right to cure letter offers two positive things to borrowers. First, most borrowers have forgotten -- or never knew -- the options they have to fix a default problem. Second, it is a natural opportunity to reopen the lines of communication between borrower and lender. Often, the simple act of communicating with each other relieves the pressure on both parties and leads to a more peaceful resolution of loan problems.

What Makes a Property Qualify for Cash for Keys?

If you are about to lose your home to foreclosure, your lender may offer you cash to leave your home quickly and in good condition. This payment, commonly known as "cash for keys", can help you with the expense of finding and securing new housing after the foreclosure. Contact your lender and ask whether it offers cash incentives to move, and how you can qualify for its program.


    When a homeowner defaults on her mortgage, her lender must complete a legal process to seize the home so that it can be resold. This process, known as foreclosure, varies by state: Some states require that the lender go to court to obtain a foreclosure, while other states have an administrative foreclosure procedure that does not require a court order. Once a lender forecloses on a home, the lender can evict the former homeowner so that a new buyer can take possession of the property.

Cash for Keys

    Eviction is a separate legal process from foreclosure, and can take months to complete. If your lender forecloses on your home, it likely wants you out as soon as possible. If you agree to leave on your own, without formal eviction proceedings, the lender or buyer may offer you a cash payment, commonly known as "relocation assistance" or "cash for keys". The amount of money you can receive varies, but it may be enough to help you pay for your moving expenses and make a security deposit on a new place to live.


    There is no law that requires lenders to offer cash to foreclosed homeowners, and each lender has its own qualifications for a cash-for-keys offer. One typical requirement is that you remove all of your belongings from the home. Another is that the home is "broom clean" (swept out) when you leave and turn your keys over to the lender's representative. Minnesota Public Radio reporter Jessica Mador cites an example of a lender that encourages speedy relocation by offering larger payments for early move-outs. Ask your lender if it offers a similar incentive.


    Lenders and new property owners sometimes offer renters who live in foreclosed properties a cash-for-keys option. New owners or lenders often make these offers when they want to get previous tenants out of a home or building quickly. Renters who live in foreclosed homes should understand, however, that the federal Protecting Tenants at Foreclosure Act, and tenant protection laws in some states, give tenants a significant amount of time to remain in their homes after their landlord loses the property to foreclosure. The amount of time varies from 90 days to the end of the renter's lease term. Renters do not have to accept a cash-for-keys offer, and should make sure that they will be able to secure new housing quickly before agreeing to move.

Sunday, December 18, 2011

Problems With Quicken Loans

Quicken Loans was founded in 1985 as Rock Financial Corporation, an independent mortgage broker. Since 1999 the company has been part of Intuit, Inc., a software company that offers Quicken accounting solutions and Turbo Tax software. Quicken Loans offers home loans, mortgage refinancing home equity loans and reverse mortgages. Today, Quicken Loans claims to be the largest online lender.

Fair Credit Reporting Act

    In 2002, the Federal Trade Commission (FTC) charged that Quicken Loans violated the Fair Credit Reporting Act (FCRA) in the manner in how customers were notified of pre-approval denials. Specifically, the FTC charged Quicken Loans for failing to provide "adverse action" notices when pre-approvals were denied due to bad credit reports.

    According to J. Howard Beales, III, Director of the FTC's Bureau of Consumer Protection, "Consumers who are denied credit or other benefits based on their credit report have a right to know, and lenders have a legal responsibility to tell them. An adverse action notice is the key to maintaining the accuracy of sensitive personal information and the signal to check your credit report for accuracy." (see Reference 2)

    If you believe that you were not provided sufficient notice by Quicken Loans for a pre-approval denial, you can file a complaint by calling the FTC toll-free, 1-877-FTC-HELP (877) 382-4357, or use the complaint form at www.ftc.gov.

    Neither fines nor penalties were charged against Quicken Loans in the FTC's settlement.

Individual Problems

    Since settling with the FTC in 2002, no action from the Federal Trade Commission nor from state attorney general offices have been levied against Quicken Loans.

    Individual problems with Quicken Loans are outlined on various message boards, forums, social media sites and blogs and include customer dissatisfaction with loan rates, fees, customer service and more.


    If you have a dispute with Quicken Loans, call (800) 251-9080 to speak with a loan representative about your case. If you're still not satisfied, ask to speak with a supervisor. Try to resolve your problem directly with the company.

    If you still aren't satisfied with Quicken Loans, fill out a complaint form at the Better Business Bureau website at complaint.bbb.org. In addition, you can file a complaint with the FTC as well as your state's office of the attorney general.

Saturday, December 17, 2011

Will Deleting a Trade-Line Increase a Credit Score?

Whenever a creditor reports information about your debts and accounts to the credit bureaus, the bureaus create a trade line for the information on your credit report. Positive trade lines reflect on-time payments and responsible financial behavior while negative trade lines reflect defaulted debts and delinquent balances. Regardless of whether a trade line is positive or negative, it only impacts your credit score for the length of time it remains on your report.

Deleting Trade Lines

    The Fair Credit Reporting Act (FCRA), in an effort to ensure that consumer credit scores are based on the most recent and relevant financial information, requires that the credit bureaus delete most trade lines--both positive and negative--after seven years. The exceptions to this rule are bankruptcies, which can remain for ten years, and open accounts, such as credit cards, which can remain indefinitely provided the account is current.

    If a trade line on your credit report is incorrect, disputing it will result in an investigation by the credit bureaus. If the creditor that reported the information acknowledges that the data is incorrect or does not respond to the bureaus' inquiries, the credit bureaus must delete the information from your credit report early. Both deletion methods impact your credit rating.

Positive vs. Negative

    Whether your credit score will increase or decrease after the credit bureaus delete a trade line depends at least partially on whether the trade line in question was positive or negative. In general, deletion of a positive trade line hurts your credit rating while deletion of a negative trade line increases your credit score.

Scoring Groups

    The Fair Isaac Corporation's credit scoring system, FICO, places consumers into different scoring groups depending on what information is present on their credit reports. The credit score you can expect to carry depends on which group you are in.

    The grouping system occasionally causes consumers' credit scores to drop, rather than increase, after the credit bureaus remove a negative trade line. If the removal of a negative trade line bumps you into a higher scoring group, you move from the top rank of one group to the lower ranks of another -- lowering your credit rating.

Scoring Over Time

    Even if the credit bureaus have yet to remove a negative trade line from your credit report, your credit score will increase in time--provided you pay your debts on time. This is because the FICO scoring system considers your financial information for the past two years as the most relevant indicator of your credit risk. Thus, negative trade lines impact your credit score less after two years than they did when they were originally inserted.

    The same is not true of a positive trade line reflecting a current and open account. Each time you make a payment, the trade line updates--keeping it recent and ensuring that it has the greatest positive impact on your credit score as possible.