Welcome to our website credit and debt managementr.

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

Tuesday, July 31, 2012

Telecheck Alternatives

Telecheck Alternatives

TeleCheck helps deter check fraud by providing debt verification and risk-based decision information. It keeps a database consisting of bank account and check debt records reported by merchants. Additionally, TeleCheck reviews check information and distinguishes patterns consisting with valid checks or fraudulent checks. You may encounter TeleCheck if a store declines your personal check or you are unable to open a bank account. Besides TeleCheck, your information may appear on a variety of alternative specialty consumer reporting agencies.


    ChexSystems (consumerdebit.com) has numerous financial institutions that submit information in regards to mishandled banking accounts such as checking and savings accounts. The data helps financial institutions evaluate a risk of opening a new bank account for a costumer. ChexSystems does not make the decision of opening new accounts. The final decision comes directly from the particular bank.


    Fidelity National Information Services (fisglobal.com) offers DebitBureau, a service that helps merchants assess consumers prior to opening a account. This services is powered by the ChexSystems. DebitBureau also helps merchants determine the risk factor of opening a new account with a potential costumers. Additionally, it keeps a record of fraud alerts and account-holder data from various financial institutions.


    The gaming industry may opt for Certegy (certegy.com) to help prevent fraud and assess risk of people gambling at casinos. It reviews information to verify personal checks and for check cashing. Additionally, Certegy also has numerous reports and information systems to assist in monitoring and evaluating player activities and makes sure transaction are in compliance.


    CrossCheck (cross-check.com) provides retailers and the auto industry with check services to reduce risks such as fraud. It keeps records of the habits of consumers. When you submit a check for payment, CrossCheck verifies the your history of writing good or bad checks through a database.

The Process of Debt Management

Effective debt management is critical for financial success, as you save money on current interest expenses, while also positioning yourself to negotiate low interest rates on future debt. For motivation, the process of debt management begins with an outline of your financial goals. From there, you can analyze your current assets and cash flow to begin making strategic debt payments according to interest rates.

Identify Financial Goals

    Define and prioritize your financial goals before initiating the process of debt management. Common financial goals include saving up money for a first-time home purchase, tuition costs and ultimately, retirement. Your goals should be broken down further according to a time frame and total costs. For example, you may need $2 million to retire to a South Florida condominium in 30 years.

    Recognize that your financial goals may never materialize, if you cannot get your debt and interest expenses under control. As part of your financial plan, you may set a goal to eliminate all credit card debt within the next two years.

Good vs. Bad Debt

    As part of your debt management plan, you must learn to differentiate between good and bad debt. Good debt is leveraged to buy assets that create wealth, and often features low, tax-deductible interest payments. Mortgages and student loans are examples of good debt. Alternatively, bad debt is used to purchase consumer goods, which do not add value to your bottom line. Bad debt typically includes credit card balances that feature high interest rates. Effective credit management calls for you to keep bad debt to a minimum.

Personal Debt Inventory

    Order a copy of your credit report---to take inventory of your current debt and credit history. TransUnion, Experian and Equifax are the three major credit-reporting agencies that help the Fair Isaac Corp. to calculate your FICO score. As part of the Fair Credit Reporting Act, you may order one free credit report per year through AnnualCreditReport.com. The credit report organizes debt according to lender, type, balance and your ability to make timely payments.

    With the credit report information in hand, you should further list each debt according to interest rates. From here, you should make the effort to contact each lender in an attempt to negotiate lower interest rates on current debt. Credit card companies are often open to lowering interest rates for good customers.

Analyze Current Assets

    Review banking and investment statements in order to locate cash flow that can be spent to pay off debt. Bank deposits and investments that pay out minimal returns should be viewed as a source of lump sum cash that can reduce debt.

    To calculate monthly cash flow, you will subtract your monthly expenses away from your monthly income. To improve your available cash flow, you may consider lowering your current living standards and putting in more time at work.

Debt Payments

    Prioritize debt payments according to interest rates. To save money, you will make minimal payments on low-interest rate debt, so you can preserve cash flow to first pay off the most expensive debt.

Monday, July 30, 2012

How to Transfer a Home Equity Line of Credit Balance to a Credit Card

How to Transfer a Home Equity Line of Credit Balance to a Credit Card

Many times you find credit cards that are offering a 0% or a very low interest rate for transferring balances. They are sometimes offered for the length of the paying off the balance, too. This makes transferring a large balance on another card or home equity loan very appealing. Not only does it save money on the interest charge, but it releases the property from that lien since credit cards are unsecured loans. If your balance is large however, you will need to have very good credit to accomplish this.


Tranfer a Home Equity Line of Credit to a Credit Card


    Go to CreditCards.com and click on the transfer balance section. You will find various credit cards that offer 0% interest on balance transfers. Some have the introductory offer for 12 billing periods and some are 15 before the interest rate goes up.


    Fill out the application for the credit card you choose and put the balance transfer right in the application. They may or may not approve you for the entire amount. If they don't, you can use more than one credit card to pay off the balance.


    Pay off the line of equity with a courtesy check provided by your credit card. Most credit card companies now provide these type of checks. You can put the balance on as many credit cards as you need to to pay it off this way.

What Is a Zombie Debt?

What Is a Zombie Debt?

Zombie debt is old debt that in many cases has been paid, written off, settled or discharged in bankruptcy that is nevertheless being pursued by collectors. Companies sell these old debts to third-party collectors who can then hound you for debt you thought had been discharged long ago.

Where Does it Come From?

    Third-party collection agencies can purchase delinquent debt from companies such as credit card companies, gyms and hospitals for pennies on the dollar, depending on the type of debt it is. The older the debt is, the cheaper it is to acquire, and the easier it is for collection companies to turn a profit. So-called zombie debt is so old that in many cases the statute of limitations has passed for you to be required to pay it, and in many cases collectors have lost track of the original debtor. Instead, they end up going after someone who never borrowed the money in the first place.

Legal Issues

    The Federal Trade Commission has sued several companies over illegally pursuing old debts. In 2005, for example, the FTC won a $2.5 million judgment against National Check Control for threatening consumers with jail and lawsuits for debts that in many cases they never owed, according to MSN Money. Even if you did borrow the money in the first place, in many cases your biggest weapon against zombie debt will be the statute of limitations in your state, basically the time limit set by the courts for how long someone can sue you for unpaid debt.

How to React to Zombie Collectors

    Paying a zombie debt may make your situation worse: in fact, it could make you a target for future collections or other companies. Instead, check the statute of limitations in your state and, if applicable, in the state where the alleged debt was incurred. If the statute of limitations has expired, or if you have proof that you have legally resolved the debt, you are within your rights to simply hang up on pesky collection agencies. If ignoring them doesn't work, however, you might have to send a cease-and-desist letter. This letter should use the words "cease and desist" and refer to the Fair Debt Collection Practices Act, or FDCPA, the federal legislation that prohibits collectors from using unfair, abusive or deceptive actions to get your money.

What Next

    If a collection agency sends you a legal notice that it is suing you over debt that isn't yours or if it continues contacting you after you have sent it a cease and desist order, you may have to consult an attorney. Make sure to document any attempt the company makes to contact you and file an official complaint with the FTC. If the debt collector sends you written notice of the debt you owe, such as a copy of your bill, and it falls within the statute of limitations, it can legally begin to contact you again.

Sunday, July 29, 2012

Tips for Fixing Bad Credit

Tips for Fixing Bad Credit

You cannot wave a magic wand and fix bad credit, but you can clean up your report and establish a better credit score. Good credit is important to acquire goods and services in our society, and it can help you save a lot of money on finance charges.

Dispute Negative Accounts

    Perhaps you've seen advertisements promising to fix your bad credit and remove negative items from your report---in reality, these services are performing a task you are entitled to do by law: disputing items on your credit report.

    Never pay someone to do something you can easily do on your own. Notify the credit bureau of the item you wish to dispute. The bureau has 30 days to open an investigation. They will contact the original creditor to furnish proof of the negative account---the creditor has 30 days to prove the negative item is inaccurate. Sometimes you will win this battle, other times you will lose. Take advantage of the opportunity and dispute every negative item on your credit report. Sometimes the creditor will neglect to respond or cannot furnish proof, which will require the item to be removed from your credit report.

Settle Past Mistakes

    Charged-off accounts or collections can haunt you for up to seven years. Settling the account with the creditor will not remove the item from your report, but it will mark the account paid. Most creditors will settle old accounts for a small percentage of the original balance---sometimes as low as 25 percent.

    Settling past mistakes will improve your credit score and show other lenders you are making an effort to improve your situation.

Acquire New Credit---and Pay it Back

    The best way to fix bad credit is to acquire new credit and pay it back as agreed. If your credit history is badly damaged, you may have difficulty finding someone to loan you money. If this is the case, consider taking out a secured loan or applying for a secured credit card. These accounts offer little risk to lenders because you are borrowing against your own money.

Can I Rent an Apartment With a Pending Bankruptcy?

A pending bankruptcy can have an impact on your credit history. And if applying for an apartment lease, getting an approval can become challenging as some landlords may reject your application for credit issues. But if you need a place to live, several methods can help get your application approved.

Ask About Credit Requirements

    Avoid a lease application rejection by prescreening different apartments and asking about credit requirements. Some landlords aren't concerned with credit history as long as you don't have an eviction on your credit report. Speak with landlords first and mention your pending bankruptcy and credit issues to see if this will impact your approval odds.

Rental References

    Because credit history helps landlords determine if you'll be a reliable tenant, some may reject your application due to a pending bankruptcy. If a landlord appears hesitant or reluctant, start negotiating and offer to supply rental references from past landlords as proof that you've never missed a rental payment, breached a contract or experienced an eviction. A good rental record can help you qualify for future rentals with credit issues.

Cosigner for Lease

    Getting an apartment with a pending bankruptcy may necessitate the help of another person. Cosigners are acceptable on rental leases, and these individuals agree to pay the rent if you can't. Cosigners submit to the same application process as you, which requires supplying their Social Security number, personal contact information and salary information. This person signs the rental lease agreement with you, and they are equally liable for monthly rent payments. If you default, the landlord can sue your cosigner or demand payment.

Employment and Income History

    Having the income and employment record to support rent payments can compensate for a pending bankruptcy. But again, this depends on individual landlords or apartment complexes. Provide the landlord with the name and number of present and past employers, and provide them with copies of your banking statements, W-2 statements, tax returns or paycheck stubs. If you earn enough money to afford the monthly rent payment, the landlord may look past your credit problems and approve your application.

Saturday, July 28, 2012

FICO Score Help

Your FICO score is one of the most important numbers related to your personal finances. Lenders use FICO scores (also called credit scores) to determine whether borrowers should receive loans as well as the interest rate individuals receive on loans. The higher the score, the better. If your credit score is lower than you would like, there are several ways to potentially increase your score over time.

Servicing Debts

    FICO scores range from 300 to 850 and are based on a variety of credit and financial information. According to the Fair Isaac Corporation, the company that created FICO scores, your payment history on debts like credit cards, personal loans and mortgages makes up 35 percent of your total FICO score. Paying all of your debts on time will help build a higher FICO score. The longer debts go unpaid, the larger the negative impact on your FICO score. Credit events such as bankruptcy or a foreclosure can have a long-lasting detrimental effect on your score.

Debt Balance

    The total amount of debt you carry and your total amount of credit affect your FICO score. The Fair Isaac Corporation states that the amount you owe on loans and credit cards makes up 30 percent of your FICO score. Avoiding new debt and credit card use can reduce your total debt load and improve your score. Having a small ratio of debt to total credit on a credit card is also important. For example, if you have a credit limit of $10,000 and a balance of $1,000, it is better than having a limit of $2,000 and a balance of $1,000.

New Debts

    Taking on new debt or opening new credit card accounts tends to have a negative effect on FICO scores. When you take out a new debt, it increases the likelihood that you will miss a debt payment or be stretched thin financially. After several years of servicing a new debt, the negative credit score impact will fade. If you plan on taking out a large loan like a mortgage or auto loan, avoid getting new credit before taking out the loan.

Credit History

    Credit history is another factor that influences your FICO score. The longer your credit history and the more credit events you have in your credit history, the better. Even if you don't need to use a credit card, getting a credit card and using it for small purchases you would otherwise pay for in cash allows you to build credit history, which can help establish your FICO score. Closing old credit card accounts may hurt your credit score because it can shorten your credit history.

How Is Identity Theft Reported on a Federal Report?

Identity theft can be difficult to report if unproven. While there is no formal federal record keeping system for identity theft, the Federal Trade Commission, in tandem with local law enforcement agencies, keep records of identity theft complaints.

Federal Trade Commission Complaints

    When a consumer feels they have been the victim of identity theft, they are asked to file a report with the Federal Trade Commission (FTC). This report should include documentation of the offenses and information proving the consumer's innocence in all financial obligations. This is accomplished by way of affidavit for each account of identity theft that is cited.


    The FTC reviews the complaint. If they find that the consumer is not at fault, and that identity thieves have victimized her, they will send notices to the three major credit-reporting bureaus: Experian, Equifax, and Transunion. At this point, a security alert and measure is placed on the individual credit reports, freezing the credit history and forcing merchants to verify that the consumer is the party attempting to open or use any accounts.


    Identity theft can be a very tricky blemish to undo on credit reports over time. The FTC receives numerous complaints of identity theft each year and is not always able to respond in a timely manner. Clearing the identity theft from a credit report is often an undertaking best done by the consumer.

Friday, July 27, 2012

What if You Can't Pay Your Credit Cards Because of a Work Reduction?

When times are tough, businesses often scale back. Scaling back does not always mean layoffs; instead, it can mean reduced hours at work. For employees, this can be a big blow to the household budget. If this has happened to you and you now cannot pay your credit card bills, taking action can prevent constant debt collection calls and a poor credit score.

Revise Your Budget

    The first thing to do to set your finances in order is to revise your budget. Write down your new monthly income as a result of the work reduction and list all of your expenses. Divide your expenses into two categories: necessities and wants. Necessities are items essential to living such as food, housing, transportation of some sort and insurance. Eliminate wants until your budget is balanced --- i.e., your income is the same or more than your expenses.


    Next, prioritize your debts. Write down who you owe, how much you owe and the total amount you can afford to pay each month, even if that's nothing. Then you need to decide who you can't pay. List the name and phone number of the creditor along with your account number next to the debt.

Contact Your Creditors

    Call your creditors to explain the situation and ask if they can provide assistance. Some credit card companies will offer you a few months of no payments so you can straighten out your finances, while others will pressure you for a payment today. Be willing to negotiate, but be clear on your limited ability to pay. Offer a small payment, even if it's only $10 a month. If you cannot pay anything, clearly state the solution you are seeking, such as two months of waived payments so you can find a second job to pay your debt. Creditors are more likely to work with you if they know you are trying to find a way to pay them.

Improve Your Situation

    While a reduction in hours at work can throw off any budget, it doesn't have to be permanent. Continue to trim your expenses as much as possible while also seeking more employment like freelance work or a second job to earn more money. Repaying your debt, even if it's on negotiated terms, will keep your credit score from tanking completely.

How to Negotiate a Deal So That Your Checking Account Is Not Garnished

Although wage garnishment is typically a last resort for a creditor to which you owe a delinquent debt, your creditor can pursue debt recovery through wage garnishment in most states if your account becomes severely delinquent -- usually at least six months past due. Wage garnishment can reduce your take-home pay by as much as 25 percent, and if two or more creditors execute wage garnishments in a single year, you can lose your job in some cases. However, you may avoid wage garnishment by negotiating with your creditor before it files a lawsuit against you to gain the right to garnish your earnings.



    Call your creditor as soon as you determine that you will not be able to make your debt payments on time. Staying in contact with your creditor shows that you are willing to repay your debt, even if you are currently experiencing a financial hardship. This may make the creditor less interested in pursuing garnishment, which is costly and time consuming.


    Provide your creditor with information about your current financial situation, including your income and other debts. Also, tell your employer if you recently lost a job or experienced a reduction in pay, and let the creditor know how you plan to resolve your financial hardship. The creditor may ask you to provide documentation to support your statements.


    Ask your creditor about an extended repayment plan or forbearance. If you are behind on your payments, the creditor may allow you to catch up your past-due balance over time. It may also allow you to suspend payments for a specified period of time if it believes your financial hardship is temporary.


    Propose a reduction in interest charged on your outstanding balance. Although the creditor will realize less profit by reducing your interest rate, this may make your payments more affordable and keep you from defaulting on your debt.


    Ask the creditor to waive some or all of your late fees and over-limit charges if you are behind on your payments or your balance exceeds your credit limit. The creditor may agree to waive these charges to help you catch up your past-due payments or bring your account balance below your credit limit.


    Propose a partial settlement of the debt if you have a lump sum available. The creditor may accept a partial payment and consider the debt paid in full, particularly if it believes that you will not be able to catch up your past due balance.

Thursday, July 26, 2012

How Much Credit Card Debt Is Too Much?

Determining whether you have too much credit card debt varies depending on your individual circumstances. High debt load for one person may be manageable for another. However, there are signs that your debt load is out of control and too much debt often results in stress, financial hardship and lower credit scores. Evaluate your budget and calculate your debt-to-income ratio to determine potential problems.

Debt-to-Income Ratio

    Excluding house payments, consumer debt beyond 20 percent of your net income may indicate financial problems, Bill Hampel, chief economist for the Credit Union National Association tells Bankrate.com. Hampel advises consumers to include second mortgages and equity loans in the mix when calculating debt load as the first mortgage is an investment that generally increases in value while subsequent secured loans are often used to repay other debts.

Credit Scores

    Credit bureaus use credit-scoring models that factor your available credit to total debt ratio --- utilization ratio --- to determine your creditworthiness and credit score. Generally, the less you owe on a particular credit card and across all cards, the better your score. The Fair Isaac Corporation FICO, recommends keeping your credit card utilization ratio below 50 percent to minimize negative credit scoring. FICO also cautions against altering your utilization ratio by closing paid credit cards unless managing credit card debt is difficult and open cards increase the risk of overspending.

Warning Signs

    If you're using credit cards to pay for day-to-day expenses due to lack of cash, making only the minimum monthly payments, have late payments, continue to charge on high interest rate cards regardless of fees or are at or near the limit on one or more cards, you may have too much credit card debt. Additionally, living paycheck to paycheck and lacking savings may indicate too much debt. If you have too much debt and find yourself struggling with payments, the Federal Trade Commission recommends realistic self-budgeting or credit counseling from reputable agencies.


    Consumers often use balance transfers to shift high balance or high-interest rate balances to low-interest rate cards. While this practice is beneficial when the goal is to pay off debt quickly and reduce fees, applying for numerous cards in a short period or amassing a lot of cards may deter lenders from approving loans or offering less favorable rates. Additionally, opening new credit cards without a budget or repayment plan may lead to increased debt and financial hardship.

Credit Problems & Tips

Modern consumers have access to a variety of credit and debt instruments which can be beneficial when used responsibly. For many people, however, credit card use leads to financial hardships such as loan default, foreclosure and bankruptcy. If you are facing credit problems it is important to work diligently to resolve them to avoid more serious financial hardships.

Excessive Debt

    One of the most common credit problems is the accumulation of large debt balances. When you use a credit card, the money you spend becomes a debt balance on the card. Credit card companies do not require that you pay all the money you spend immediately; you only have to make minimum payments that include interest on your balance. Interest can cause balances to accumulate over time, to the point where they are so large, they are difficult to pay off. If you are facing excessive debt, stop using your credit cards and halt unnecessary spending. Use the money you save each month to pay off your highest-interest credit card.

Poor Credit Score

    Lenders use calculations known as credit scores to help determine whether to lend to borrowers. Credit scores are calculated from a variety of credit information such as your debt payment history and how much debt you currently carry. If you have a poor credit score, lenders may deny you loans and new credit or charge you higher interest rates. To improve a poor credit score, make all debt payments on time, keep credit accounts open to establish your credit history, use extra cash to pay down your debts and avoid opening new credit accounts.

Credit Score Errors

    Since credit scores take account of a wide variety of credit data, it is possible for errors to arise in the information that creditors send to credit reporting companies. If you order a credit report and notice an error in the record of credit events, contact the creditor to dispute the error. Clearing up credit errors can result in a quick increase in your credit score.

Credit Card Fees

    Credit card companies often tack additional fees onto credit cards to raise extra money. Even if you pay off your credit card balance in full each month, you may incur fees. Always read the terms of a credit card agreement before signing so that you are aware of fees and read any mailings your credit card company sends to you so that you are aware of changes in fees. Check your credit balance regularly to make sure you don't spend more than your limit and avoid taking cash advances as they often result in costly fees.

Wednesday, July 25, 2012

How Do I Update My Address on My Credit Report?

When you move there are some important things you need to consider. From scheduling the moving truck and protecting your personal possessions to making sure your mail reaches you at your new location, it is important to make sure that everything gets done. One thing that often is overlooked when people move to a new location is updating the address the credit reporting agencies have on file. When you move it is important to make sure everyone--including those credit reporting agencies--have your new address on file.

New Address

    Before you move it is important to contact all of your creditors, including the company holding your mortgage, the banks that hold your credit cards and of course your bank. It is a good idea to contact your creditors as soon as you have your new address. This will help to ensure that you do not miss any mail. Ideally the information you report to the credit card companies and your other creditors will in turn be reported to the credit reporting agencies.

Contact Credit Reporting Agencies

    While you could simply wait for your creditors to update your address with the credit reporting agencies, it is better to take matters into your own hands and contact those agencies directly. Updating your address with the credit reporting agencies is easy--all you need to do is make a simple phone call to each agency, answer a few security questions and provide the updated address. The credit reporting agencies even provide toll free numbers to call, so updating your address will not cost you a dime.

    The toll free numbers for the three major credit reporting agencies are:

    Equifax: (800) 685-1111
    TransUnion: (800) 916-8800
    Experian: (888) 397-3742

Following Up

    After you have contacted the credit reporting agencies and all of your creditors, it is important to follow up by checking your credit reports to make sure the proper address is shown. You can order a free copy of your credit report from each agency once each year by going to AnnualCreditReport.com, so it is a good idea to check your own credit reports for accuracy after you have settled into your new home. Not only will you have the peace of mind of knowing that your address is correct, but you will also have the opportunity to check your credit reports for errors.

Should I Cash in a 401K to Pay Off Credit Cards?

Should I Cash in a 401K to Pay Off Credit Cards?

    You will suffer in the long run by cashing out your 401K.
    You will suffer in the long run by cashing out your 401K.

You Are Paying Down Debt

    Cashing out a 401K seems like a reasonable option for a consumer carrying a lot of credit card debt. The interest on credit card debt can make it very difficult to pay down. The debt continues to balloon, and the consumer struggles to make minimum payments. Taking the money out of a 401K and erasing some or all of the debt would free a consumer from the day-to-day struggle to keep his bills current.

The Cost Is Steep

    Cashing out a 401K has hidden consequences. You will pay a 10 percent tax penalty for early withdrawal if you are not of retirement age. This is on top of the normal income tax you will pay on the withdrawal, which varies depending on your tax bracket. Additionally, once money is taken out of your 401K, it is no longer growing because it is no longer invested and you are no longer receiving an employer matching contribution. This can cost you thousands of dollars in lost income over the long run.

Bottom Line

    Cashing out a 401K is not a wise choice for paying off credit card debt. Getting rid of $20,000 in debt now could end up costing you many times that amount in the long run. You are better off leaving your 401K alone and finding alternative sources of income or looking for other expenses to cut. Use this money toward your credit card bills and let your retirement savings continue to grow.

Monday, July 23, 2012

Method of Verification Credit Reporting

A collection agency is required to verify the information on a collection account upon request by the debtor. A debtor can request verification to confirm that he does owe the debt, to find out who the debt is owed to and to find out when the debt was incurred. Verification is often used in credit repair, in order to weed out collection accounts based on false information or inaccurate collection accounts. Junk debt collectors may attempt to collect on debts that aren't yours, or that have been paid off some time ago.



    Check the letter that the collection agency sent you regarding your alleged debt. If possible, look through your financial records to confirm whether or not the collection matches up with a previous account or debt.


    Write a letter to the collection agency, specifically requesting verification of your debt. You do not need a specific template for your letter as long as you ask for verification. The collection agency is legally required to put the collection account in dispute until it has provided verification that the debt is yours and that it is the legal agent allowed to collect on the debt.


    Send the letter certified mail so that you have a way to track the amount of time that it takes for the collection agency to respond. The collection agency has to respond and provide proof of your debt within 30 days of receiving your verification dispute letter or it must drop the collection.


    Arrange payments or a payment plan with the collection agency if the debt is legitimately yours. If it is not, check your credit report to see if the collection agency removes the collection from your credit report. If it fails to do so, send another letter informing the company that the debt needs to be removed from your report, as it did not send sufficient proof of its validity.

Information on Financial Hardship

Information on Financial Hardship

Banks, mortgage companies, student loan lenders and other creditors are sometimes willing to give consumers facing financial hardship a break until they can get on their feet. Such breaks could include loan deferral or forbearance or a modification of the terms of your debt to make monthly payments more affordable. Before you can get any kind of break, however, you'll have to prove that you're facing a financial hardship.

First Step

    As soon as you know that you will be falling behind on your payments, you should contact your lender and explain the situation. This may include job loss, a reduction in your number or work hours or unexpected medical bills or disability. Each lender has a different process for helping consumers faced with financial hardship, so you'll have to ask what is required of you, but the first step is always alerting the lender as soon as possible.

Why it Works

    Lenders don't want to see you stop paying back the debt altogether, because they then will not be able to collect a penny more from you. They'd prefer to come to some sort of agreement that will allow you to pay back at least a portion of the debt. The point is, you have leverage. On the other hand, you as the consumer must make the first step, or the lender will move to foreclose, repossess or charge off your account.

Required Documents

    Sometimes a lender can take a statement of financial hardship over the phone. However, more likely than not, you'll have to complete paperwork specific to the lender. Complete any documents your lender sends you. Be as specific as possible about the cause of the financial hardship and the severity. If the lender does not have a specific form for this, it may ask you to send a letter with a narrative explaining the financial hardship. Often, you're required to complete an itemized budget of your monthly expenditures and income as well.

Proof of Hardship

    A lender may take your statement of hardship at face value and require no further documentation, but the more likely scenario is that you'll be asked to prove that what you stated in any hardship documents is true. Be prepared to provide copies of monthly bills, as well as anything documenting a loss of work hours or loss of employment.

How to Write a Letter When Paying Off a Debt Owed

How to Write a Letter When Paying Off a Debt Owed

Whether you've been paying off a debt for a month or thirty years, that final payment can bring about relief. In this instance, you might choose to write a letter to a creditor for several reasons, including to request that you be removed from any listings, to validate that you've met all requirements, or to ask that the account be removed from your credit report. Regardless of the specific reason for writing, there are a few guidelines that can help ensure that your final requests are met.



    Insert the date that the letter is written at the top of each page of the letter. This will serve as proof of the time frame during which you made your request.


    Include your account number or case number at the top of the letter, immediately following the greeting. This will help the reader better process the request since they will be able to access your records right away.


    Write the letter in a formal, professional manner regardless of your request. Use the first paragraph to briefly identify why you are writing. Follow that up with information supporting your request. For example, you might include specific details on how you would like your case to be handled, such as legislation that applies to your case or instructions on contacting your bank or employer


    Cite any laws or legal mandates properly in the body of the letter. Refer to them by their full name since abbreviations could cause confusion. If you are unsure about which legislation might be helpful in your situation, try contacting a legal aid in your area.


    Close the letter with a concise statement regarding the action that you would like for the reader to take. Also, refer them to your most recent contact information.

How to Pay the Interest on Child Support in California

How to Pay the Interest on Child Support in California

Child support payments ensure children receive the financial framework necessary for a successful start. In California, a non-custodial parent's payments are processed using an income withholding order, which deducts equal payments each pay period. When a parent falls behind, an arrearage is assessed which accrues interest. California applies payments to the current support, followed by the arrears and then the interest. As a result, to pay the interest on child support in California, you must bring the account current and then complete the interest payments.



    Contact the California Department of Child Support Services (see Resources) to request an accounting of your case which confirms the amount of interest, any past due support and the current accrued balance that you owe. The agency will use the accounting to compare past payments to the current amount due and calculate the interest.


    Pay down the current amount due, if necessary, by sending a check or money order to complete the balance. For example, if you owe $1,000, of which $300 is interest, send a money order or check for $700 to pay off the current amount. Once the account is credited and current, send the remaining balance of $300 to complete the interest payment.


    Request an income withholding order from the California Department of Child Support Services. The order goes through your employer who can then withhold a specified amount from each paycheck. Initial payments are made against the current amount followed by the arrears and then interest.

Sunday, July 22, 2012

Can They Levy My Wife's Bank Account for My Judgment?

A bank levy is a collection strategy a creditor can use after obtaining a legal judgment against you for an unpaid debt. This strategy involves directing your bank to freeze your account and send all nonexempt funds to the court that issued the judgment. The court then pays the funds to the creditor. In some cases, a creditor can levy your wife's bank account, as well as any bank accounts you own, to collect on a judgment debt.

Community Property States

    In some states, any property you obtain after marriage is considered community property. This includes funds deposited in a bank account, regardless of who owns the account. In community property states, a creditor with a valid judgment against you may levy both your bank account and your wife's bank account to collect funds to apply toward a judgment debt.

Individual Property States

    Although some states consider assets obtained after marriage to be community property, other states consider a husband and wife's property to be separate. This means that funds in your wife's bank account belong solely to her. In individual property states, a creditor typically cannot levy your bank account to collect on a judgment issued against you by a court.

Joint Debt

    Whether a judgment creditor can levy your wife's bank account for collection of a debt also depends on whether the debt is in only in your name or both your and your spouse's name. If you and your spouse both hold a debt, a judgment creditor will obtain a judgment against you and your wife jointly. This means that the creditor may levy bank accounts held jointly by you and your wife, as well as individual accounts in your name or your wife's name.


    Some states allow debtors to claim exemptions on certain funds held in bank accounts -- these exemptions prevent creditors from taking all of the funds in an account to pay toward a judgment debt. For example, Ohio law exempts $400 in a bank account, regardless of where the funds came from. Bank account funds derived from Social Security and disability income are also typically exempt.

Can You Get an FHA Loan Two Years After a Foreclosure?

Mortgage loans backed by the Federal Home Administration offer flexible credit approval guidelines and, in certain situations, are available two years after the completion of a foreclosure. The standard wait for a home loan after a foreclosure is three years, but borrowers who can document an isolated hardship may be eligible for FHA loan approval two years after the foreclosure.

Extenuating Circumstances

    FHA.com reports that the FHA makes exceptions for "extenuating circumstances." The circumstances could include long-time unemployment through no fault of your own, divorce or a serious illness. Applicants making a case for a waiting time less than three years must document their hardship and present it to the lender during the application process. Examples of documentation include divorce papers, job termination notices, hospital and doctor bills, copies of federal tax returns and more.

Strategic Defaults

    People who walked away from their homes in so-called "strategic defaults" are unlikely to be considered for approval after two years, even if they were suffering from hardships at the time of their foreclosure. Strategic defaults happen when a homeowner voluntarily allows the lender to foreclose on the home. These voluntary foreclosures have been used by some people to get rid of homes that have significantly declined in value because of a housing slump or recession. Other people have used the defaults to escape a neighborhood that has deteriorated.

Credit History

    Lenders review a potential borrower's credit history before and after the foreclosure. People who had an excellent credit history before suffering a hardship stand the best chance of being granted an exception to the thee-year waiting period. A credit history marked by collection accounts, judgments, delinquent accounts and frequent missed payments will make approval more difficult.

Credit Score

    Overall, FHA is willing to approve loans for credit scores as low as 500, according to "The Washington Post." However, underwriters will require that judgments and collection accounts be paid off and all other accounts brought current before approval. Borrowers with credit scores less than 580 must pay at least 10 percent down. Those with scores above 580 can pay 3.5 percent down. Credit scores range from 350 to 850, with scores of 720 or higher offering the lowest interest rates and best chances for approval. Standard, non-FHA loans typically require a credit score of at least 620 with 20 percent down.

Recommended Debt Reduction

Debt is common among consumers, and debt reduction should be as well. If high-interest debt is tackled first, money can be saved along the road to becoming debt-free. Certain types of debt should be paid off more quickly than others, and with the right plan of attack, debt can be eliminated faster than you ever thought possible.

Credit Cards

    Pay more than the minimum payment when paying your monthly credit card bills. These types of debt are unsecured, meaning there is no collateral for the lender to take in case of default, and depending on your credit score, the interest can be over 20 percent. Even if the interest is low, it is wise to pay more than the minimum required monthly amount to slowly eliminate the principal.

    Many credit card companies will not charge interest on balances less than thirty days, so if you do use your credit card, you should try to pay the entire balance within that period. This way, no interest will accrue and you will have paid off the entire balance. If you cannot, it is recommended that you pay at least 20% over the minimum payment to more rapidly pay off any balance that you may have accrued.

Mortgage Debt

    Pay off your mortgage quicker than its life. If you can pay extra on your mortgage, not only will you own your house sooner than expected, but you will save thousands of dollars on interest. Because mortgages are secured loans, their interest amounts are relatively lower than unsecured debt. If you can pay down your mortgage quickly, you will actually make money compared with paying the stated amortized payments for the entire term.

    If you are considering a mortgage, stay within your budget, which should be no more than 33% of your monthly gross salary as a payment. If you can, finance for fifteen years. Although the payments will be higher and you may end up with a less expensive home, the savings are substantial.

Education Debt

    Student loans should be paid within 10 years. There are many programs to help students with the loans they have acquired during college or graduate school. Although they are helpful in a bind, if you do not pay the minimum, you will add to your balance rather than subtract. It is essential when reducing your debt to pay above the minimum to lower your balances. If you consolidate loans, you may see some savings as they may be able to lower your interest percentage during the consolidation process.

Solutions for Educational Debt

Solutions for Educational Debt

Senate legislation passed in 2010 makes it easier for graduates to repay student loans by reducing the percentage income earmarked for loan payments. Acceleration of loan forgiveness, for those who keep up payments as agreed, occurs at 20 years in the new program or five years sooner than before. That is good news for financially strapped new graduates and their families.

Repaying student loans challenges many graduates in a recession. Consolidate your student loans to lower monthly payments and evaluate other ideas to ease repayment of your obligations.

Credit Bureau Reports

    Obtain a copy of your credit report from one or all three major credit bureaus. You may obtain a free copy of your credit report each year directly from each credit bureau---Experian, TransUnion and Equifax---or use a free online credit report site. Check the reports for accuracy and promptly report any errors. Each student loan reports separately to the credit bureau. Educational loans are usually structured for each semester's expense, so many graduates have several loans.

Defer Student Loans

    Defer your loans. Deferment allows you to cease repayment of student loans for an agreed period. Lenders may agree to deferment in cases of economic distress, enrollment in school, military service or internships. Stafford, ParentPlus, GraduatePlus and Federal Consolidation Loans may provide deferment. Subsidized Stafford Loans defer all interest and principal repayments during deferment.

Loan Forbearance

    Request forbearance. If deferment is not an option, collection and potential loan defaults cease with approved 12-month to 3-year forbearance intervals. Interest continues to accrue. Lenders may request documentation of proof of financial hardship, such as unemployment or disability. Continue to make payments until forbearance approval is received. Forbearance requests should be made through the loan servicer. Forbearance does not affect interest rates. Consolidate loans to lock in interest rates.

Consolidate Loans

    Restructure or consolidate your loans. Consolidation offers a fixed interest rate. Some student loans may have variable interest rates and, as of 2010, historically low interest rates may offer large savings over the life of the loan.

Income-Based Repayment and Forgiveness Program

    Income-Based Repayment (IBR) is one of many different options designed to assist borrowers of student loans. In 2010, the "current contractor for Direct Loan Servicing has incorrectly based IBR payments on the borrower's gross income...instead of the lower Adjusted Gross Income (AGI, or taxable income). As a result, these borrowers' monthly IBR payments are higher than they should be." Learn more about IBR in general, or whether your payment has been incorrectly calculated, at IBRInfo.org. Other particulars, such as debt-to-income ratio, determine if you qualify for lower loan payments.

    Teachers, government employees and non-profit workers may qualify for federal student loan forgiveness after just 10 years of maintaining loans as agreed while working for the public good.

H.R. 2492 and Loan Forgiveness

    President Obama's 2010-2011 budget proposes improvement to IBR to assist more financially stressed graduates with student loan repayments. To that end, H.R. 2492 proposes to end taxation of student loans forgiven through the IBR program.

How to Consolidate Monthly Bills Into One Payment

Have you found yourself under a mountain of bills? Are you concerned for your future and your mental health? Debt is an American epidemic, but there are ways to reduce and eliminate that pile of paper that seems to be smothering so many. The best method? Consolidate your bills and begin to pay them down.



    Calculate your outstanding balances and required minimum monthly payments. You're presumably paying minimums on all of your cards and bills (effectively stretching the repayment of each card to 20 years), so figure your monthly outgo based on all of your minimum payments. Make sure to figure in all of your ancillary bills (like electrical and cable) to get a full picture. What you're doing is establishing an idea of where you stand and where you'd like to be.


    If your credit is below 500, you may have waited too long to consolidate and maintain a reputable score as you pay down debts. Bankruptcy or credit counseling may be your best bet, regardless of the effect on your credit. However, with a score above 500, you have a few options to consider before taking these drastic steps. Research cards, loans, lenders, and banks on the Internet and locally to find out what rates, payments and programs are available.


    If it's available, and if you're willing, take out a secured line of credit against your home or property. This will be the cheapest (albeit long-term) solution. Some people may not want to secure unsecured debt, but this is the method for the lowest possible outgo. Apply at several institutions about which you've complied research, and speak to a loan representative to discuss your options. Contact a financial adviser and get advice regarding your personal situation. Make sure your adviser is close to you--your finances are not something to leave in the hands of someone you don't know--or, even more so, trust.


    Review all approved applications for fees, payment plans, rates and terms. Make sure to review these documents with your adviser and, if possible, an attorney. There are many ways in which financial documents can be confusing, complicated and difficult to interpret. Never sign a loan without fully understanding the terms and structure to which you are obligating yourself. Pay special attention to the rate, and ensure you do not end up with a variable or adjustable rate unless you trust that you can manage a changing loan.


    Sign the correct loan for you. Before signing, review all of your loans to be included in the new loan and ensure that your total monthly outgo will be reduced. You'll be putting yourself in a better long-term financial situation. Shoot for a short term (5 to 7 years) depending on your debt load, and make sure your ultimate goal is to become debt-free.

Saturday, July 21, 2012

How to Deal With Collection Agencies for Internet Payday Loans

How to Deal With Collection Agencies for Internet Payday Loans

An Internet payday loan is a loan against your future earnings that comes with a very high fee. According to Bills.com, the charge can run from $15 to $30 per $100 borrowed as of December 2009. You get the loan by applying over the Internet. Online payday loan providers may turn your account over to a collection agency if you do not repay it as agreed. You may even get collection calls for a loan you did not take out because collection agencies sometimes target the wrong person. In either case, you are protected by a federal law, the Fair Debt Collection Practices Act, that helps you deal with these agencies.



    Record every phone conversation with the collection agency when it calls about your Internet payday loan. Some states let you do this without telling the other party, while others require you to disclose what you are doing. You may wish to alert the collector, even if your state does not require it, because he may be more likely to treat your respectfully and follow the law when your have a verbatim record of the conversation.


    Ask for the name and address of the collection agency and request written validation of the Internet payday loan debt. You are entitled to this under the FDCPA, and the agency is in violation of the law if it refuses to provide this information. The agency cannot collect on a payday loan for which it does not have proper validation.


    Send a certified letter to the collection agency demanding that it cease and desist all communication with you regarding the debt. You can do this whether the debt is valid or whether you are the wrong person. If it is not your debt, let the collection agency know this. It must abide by your request once it receives the letter or face penalties for violating the FDCPA. This does not mean it cannot take further action like suing you for the payday loan if it is allowed to do so in your state, but it will stop the harassing phone calls. It must let you know if it intends to sue even if you have sent a letter.


    Contact the original Internet payday loan provider and make payment arrangements directly with that company. Bills.com says several states have laws requiring these companies to accept payment installments. You can still send payments even if you live in a state without this requirement, or you can put the money aside until you can pay the company in one lump sum.

Did My Husband Assume My Debt When I Got Married?

Did My Husband Assume My Debt When I Got Married?

For many people, getting married also means marrying their finances. While the debt you bring into a relationship is your responsibility, it may impact your spouse's finances in other ways -- in particular, any credit you apply for jointly in the future. It's vital to discuss your finances openly so that neither party is surprised when it comes time to open a joint account or apply for a loan together.

Prior Debt

    Any debt accumulated prior to the date you got married is not the responsibility of your spouse. According to Catherine Williams, president of the Consumer Credit Counseling service of greater Chicago, spouses are not responsible for each other's debt accumulated before getting married. However, she encourages spouses to work together to pay down debt to qualify for good rates on future loans.

Obtaining New Credit

    If you intend to apply for loans in the future, both your credit scores will count toward the loan decision and the interest rates. Therefore, even if your husband doesn't assume your debt, he may still be impacted by your debt if it's weighing heavily on your credit score. Smart Money points out that couples generally apply for mortgages together, so working together to pay down your debt is in the best interest of your larger goals.

Community Property States

    In most states, spouses are not responsible for each other's debt even after they get married if their accounts are separate. If an account is joined, both parties are considered owners of the account and are equally liable for the debt incurred on it. Only in community property states are spouses responsible for one another's debts regardless of whether the accounts are joined or separate. The states that observe community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington. Wisconsin also uses community property statutes, under the Uniform Marital Property Act.


    Even though your spouse did not assume the debt you incurred before getting married, it's important to communicate about your financial state throughout your relationship. Set up weekly or monthly meetings to discuss your finances so that you may work together on paying down your debt and meeting goals, such as saving for the down payment on a house. Certified Financial Planner Ginita Wall suggests rewarding yourself with a date after these meetings so that you actually look forward to them.

Friday, July 20, 2012

How to Consolidate Credit Card Bills Once They're in Collections

The U.S. census bureau reported in 2010 that U.S.citizens had more than $886 billion in credit card debt, but it also found that credit card delinquencies had fallen by 17 percent despite the economy in America at the time. More people are attempting to consolidate their credit card debt into one monthly payment, and they are employing the aid of credit counseling agencies to help them deal with past-due accounts, high-interest cards and accounts in collections.



    Find a reputable credit counseling agency in your area. Ask for referrals from family and friends, or contact the National Foundation for Credit Counseling, which has on its website a list of reputable credit counseling agencies in each state. Both for-profit and nonprofit agencies are available. Contact an agency, explain your situation and request a free consultation. Ask questions about the services each provides and any costs associated with their services.


    Gather your credit card statements and collection notices. The credit counseling agency will need copies to compile an accurate debt consolidation proposal for your review. Verify that the information in the proposal matches the information on your credit card statements. Make certain you read and agree with all aspects of the proposal before you sign an agreement to enroll with the agency's plan.


    Sign an agreement and allow the agency to contact your creditors on your behalf. Be prepared to have one lump sum deducted from your bank account each month to be distributed to your creditors on your behalf. Follow up with the agency within one to two months to verify that the accounts in collections have been accepting payments and that all your creditors have accepted the agency's proposal for your debts. After six months, contact the creditors whose accounts had fallen into collections. Verify that payments are being received, and request that they stop reporting the status of your account as "in collections."

Debt Utilization Ratio Definition

When calculating your credit score, the credit bureaus look at a number of factors in your credit history. One factor that they evaluate is your debt utilization ratio. This is a ratio that looks at the relationship between the amount of credit that you have available to the amount of debt that you have.


    Your debt utilization ratio is the amount of money you owe compared to the amount of open credit that you have on credit lines. For example, if you have $5,000 worth of credit card debt and you have $10,000 worth of credit lines, your debt utilization ratio is 50 percent. The lower your debt utilization ratio is, the better it looks to the credit bureaus. You can change your ratio by paying down your balances.

Closing Accounts

    This term often comes into play when people consider closing out credit card accounts. If you're concerned about your credit score, you may not want to close credit card accounts when you pay them off because it lowers the amount of available credit. If you have $5,000 in credit card debt and $20,000 in credit card lines, your debt utilization ratio is 25 percent. If you close a credit card with a $10,000 limit, you've now changed your debt utilization ratio to 50 percent.


    Your debt utilization ratio is one of the most important factors that lenders consider when evaluating you for financing. In fact, this one statistic comprises up to 30 percent of your credit score. The only factor that holds more weight than this is your payment history. This means that if you're interested in improving your credit score quickly, you can pay down your credit card balances to have an immediate impact.

Other Factors

    Even though it can hurt your debt utilization ratio, it may be to your advantage to close out a credit card after you pay it off. For people who have trouble with spending too much money, the temptation of an empty credit card sitting there might be too great to overcome. If this is the case for you, you may want to cancel your credit card regardless of the impact to your debt utilization ratio.

Can I Get a Car Loan After Buying a Home?

Can I Get a Car Loan After Buying a Home?

If you're in the market for a new car, having a new mortgage on your credit report may hinder your chances of getting a loan or obtaining competitive interest rates. While each person's situation depends on multiple factors, you can generally get a car loan if you have good credit, while those with poor credit face tougher odds.


    Whether a lender wants to give you a loan, be it for a car or any other purpose, is up to the lender. Lenders are under no legal obligation to provide you a car loan. While lenders cannot discriminate against you based on factors such as your race, marital status or religion, they are allowed to use your financial information as a basis for evaluating your loan application. If you've recently bought a home, the lender has the right to use this information when it determines your car loan eligibility.

Debt Ratio

    Whenever you apply for a new loan, creditors typically look at your debt-to-income ratio, or DTI. This percentage represents how much of your gross monthly income you spend on debts. For example, if you've just taken out a mortgage, have an income of $5,000 per month and a debt obligation of $2,000 per month, your DTI is 40 percent. According to Lending Tree, your debt-to-income ratio should be no higher than about 36 percent. If yours is higher than that, lenders are less likely to give you a loan.

Credit Score

    Your credit score is a number that represents your past history with credit. The higher the score, the better a borrower you are and the more likely you'll get a car loan. Part of your score is made up of both the number of new loans you have and the average length of your loan. Getting a new mortgage may lower your credit score, though not nearly as much as making a late payment or settling a debt.

Other Factors

    If you've recently bought a home, you may want to wait a few months before getting a new loan. Lenders may not be willing to offer you competitive rates if they see you taking on a lot of debt all at once. Proving that you can handle your current debt obligations will make it much easier to get a favorable car loan.

Thursday, July 19, 2012

The History of Consumer Debt

The History of Consumer Debt

Consumer debt has existed from the earliest of human societies, as evidenced by ancient legal codes attempting to resolve conflicts between debtor and creditor. Consumer debt and debt collection practices in early America were modeled after those of Britain, and debt laws have evolved over time. However, according to PBS Frontline, starting about 1980, a large increase in consumer debt in America has occurred, partly as a result of aggressive and questionable practices by the credit card industry.

Consumer Debt B.C.

    According to the Code of Hammurabi, written by a Babylonian king in 1700 B.C., debtors were expected to repay creditors and the Code addresses the legal process. For example, farmers who borrowed to plant a crop and subsequently encountered bad weather were excused from the debt that year. If a family became unable to repay debts, family members could sell themselves to their creditor until they either worked off the amount owed or until three years had passed, after which they were free. The Bible forbade charging any interest to poor borrowers or exploiting neighbors financially. It also warned against borrowing at all, on the grounds that, "The rich rules over the poor, and the borrower is slave to the lender" (Proverbs 22:7).

Debt in America

    According to "The History of Debt in America" report on the I Hate Debt website, British law allowed for the imprisonment of bankrupt individuals and families. This law was considered progressive, because Greek and Roman debtors had simply been enslaved. By the end of a Depression in 1760, bankruptcy began to be seen not as a moral failure, but as something that could happen to anyone. In the Colonies, defaulting debtors had to give part of their property to creditors in payment and become an indentured servant to each creditor until the debts were repaid. Debtor's prisons operated in America until almost 1850. Written and unwritten debt agreements existed in early America and laws followed the British model. A famous American debtor was Thomas Jefferson, whose property and slaves were auctioned off after his death for repayment.

Rise of Revolving Debt

    According to the PBS documentary, "The Card Game," revolving charge accounts operated in America for many years, with credit extended only to those who could reasonably be expected to repay. In the 1980s, however, Providian Financial initiated a plan to extend credit to the 30 to 40 million households who were not as creditworthy, on the theory that they would not pay off their balance and would pay continuous high interest. When other credit card companies noticed Providian's $1 billion annual profit, they began to follow its example.

Growth of Consumer Debt

    According to Credit Card Nation, revolving consumer debt in the U.S. rose from $55 billion in 1980 to $603 billion by 2000. According to the Federal Reserve, consumer debt reached a peak just before the economic crash of 2008, with revolving consumer debt at $957.5 billion. The increase in consumer debt from $55 billion in 1980 to $957.5 billion in 2008, or just under 30 years, is unprecedented in U.S. history.

Serious Debt Problems

Serious Debt Problems

Being the not-so-proud owner of a serious debt problem can make you feel like you'll never be happy or relaxed again. However, it's simply not the case: for every debt problem, there's a solution. It may not be easy, and you'll have to work hard. The good news is that acknowledging the problem is the first step toward a solution that will make your future better.

Option 1: Do-It-Yourself Debt Repair

    Empower yourself by making a list of your debts, including everything from tax liens and past due utility bills to credit card and mortgage statements. Make a note of each interest rate, minimum payment and total balance. Rank each debt in order of importance: credit cards, for example, should be near the bottom since they're unsecured loans. Housing and utility payments are at the top. Call each creditor and explain your situation. Tell them you want to satisfy your obligations, but need help doing so. Creditors may lower your rate or minimum payment immediately. Don't wait until they get in touch with you.

Option 2: Credit Counseling and Management Plans

    Reach out to the National Foundation for Credit Counseling, the nation's gold standard for budget and debt education. It's also a nonprofit. The NFCC partners with local agencies to help you get the assistance you need, including housing counseling if you're behind on your mortgage. Counselors are budget and credit certified and offer free one-hour sessions.

    Depending on the severity of your situation, a counselor may suggest a debt management plan. In a DMP, the NFCC reaches out to your creditors to negotiate lower rates and payments. The accounts are closed, but are repaid in full by you in less than five years. Even if you're already late, you may still qualify. Fees vary, but are minimal, depending on your state.

Option 3: Settle Your Debt

    Settling your debts is your next choice. Settlements are legal, but be careful whom you do business with, because debt negotiation businesses are frequently scams. Be sure to check with the Better Business Bureau before you reveal any personal information. Nevertheless, you can anticipate paying about 40 cents on the dollar. You must be late on your payments---three to six months---to be offered a settlement. You'll get a better deal if you pay in one lump sum, although you may be offered the option of a five- or six-month staggered-payment settlement. You must also be prepared to get a lot of phone calls from your lender.

    Settlement companies most frequently settle credit card debt, but can be used to negotiate mortgage settlements, as well. Be advised that these services aren't cheap, and consumers should be prepared to pay several thousand dollars in fees. However, your debts will be eliminated.

Option 4: Collection or Bankruptcy

    If possible, you should avoid having accounts go to collection, also known as being "charged off." Be wary of paying a charged-off account, especially if you haven't made a payment in years. Check with your state Attorney General to find out what the debt collection statute of limitation is for your area. You may be able to walk away without paying anything it it's been long enough, but making a payment suddenly may restart the statute's clock.

    The last resort is bankruptcy. There are 2 kinds: Chapter 7 and Chapter 13. In a Chapter 7, or "straight" bankruptcy, the court decides what assets are sold to cover your debts. Recent federal legislation has made it more difficult to declare Chapter 7 bankruptcy. Chapter 13 bankruptcy allows you to keep your home and car. You'll be assigned a repayment plan that is agreed on by your lenders. You'll also be required to undergo credit counseling. Bankruptcy does not eliminate certain kinds of debt, like tax liens, student loans, alimony or child support, but it does eliminate most of it (credit cards are typically wiped out). You will need to hire (and pay for) an attorney, but you will have a completely fresh start.

Budget and Credits Tips

    Establishing a budget and sticking to it during your debt repayment period is critical. In general, try to pay your highest-interest loan first (unless you are late on your home payment; in that case, do that first). After the first debt is paid, apply that payment to the next debt on your list, continuing until you're debt free. Don't give up: this may take several years. Chances are, your credit is in poor shape. But you can improve it by always paying your bills on time and in full, if possible. Don't use more than 50 percent of your available credit. Try to have a mix of loan types (a credit card, an auto loan, and a home loan are ideal). Don't close an account because you're not using it; keep it open instead so your credit to debt ratio is lower. Most of all, remember: This too shall pass.

Wednesday, July 18, 2012

What a Consumer Should Do When a Credit Card Company Turns Over Debt to a Collection Agency

If a United States consumer owes a debt to a credit card company, the company will usually sell the debt off within 120 days to a collections agency if it cannot collect the debt itself. After this point, the debtor can no longer pay back the original creditor and must deal exclusively with the debt collection agency. Consumers can resolve the debt with the collection agency through a number of remedies.


    To prevent a debt from further damaging his credit score, a consumer can choose to pay off all debts owed to the collection agency. The agency will send the debtor a letter detailing the amount of the debt and the means by which the debtor can pay. Most agencies will accept a payment program that allows debtors to pay off their debt in monthly installment payments.


    Consumers can choose to ignore the notices that collection agencies send them but the collectors may try to collect the owed debt through a court of law. In addition, all states except North Carolina, Pennsylvania, South Carolina and Texas allow a creditor to legally garnish a debtor's paycheck to collect owed monies and creditors can have a court place a lien upon a debtor's house or car in most states. Under the Fair Debt Collection Practices Act, consumers can send a letter to the collections agency stating that they want no further written or verbal contact with the agency.


    Since credit card companies sell debt to collection agencies for a fraction of the value of the debt, consumers can try to work out an arrangement with the agency for a reduced settlement. With a reduced settlement, a debtor pays a fraction of the debt owed. According to Credit Restoration of Washington, collection agencies routinely settle debts for 50 percent of the owed balance. Agencies most commonly accept reduced settlements if they believe that the debtor does not have the financial means to pay monies owed. Settling your debt for less than its value, however, will be a negative item on your credit report.

Know Your Rights

    Under the Fair Debt Collection Practices Act (FDCPA), a U.S. debt collector must abide by certain rules when contacting a debtor. If the consumer believes he does not owe the debt, he can request a validation notice which verifies the owner of the debt and lists remedies the consumer can take. Collection agencies cannot harass consumers or make false statements, such as threatening the debtor with arrest or using obscenities over the phone. Consumers can receive up to $1,000 per violation of the FDCPA through the ruling of a local or state judge if the collection agency violates their rights under federal law.

Tuesday, July 17, 2012

Pros and Cons of Credit Counseling

Pros and Cons of Credit Counseling

If you've had difficulty managing your credit, you may have considered seeking help from credit counseling or debt management agencies. These companies serve as intermediaries between you and your creditors. Credit counseling can help alleviate your debt sooner. But there's also a negative side to this type of service.

Renegotiated Interest Rate and Payment

    Credit counseling agencies have relationships with creditors, and they know how to convince them to alter your existing credit card and loan terms. Acquiring a lower interest rate on these debts can significantly reduce the monthly payments. Often, credit counseling agencies are able to negotiate the elimination of interest, which benefits borrowers with rates around 20 or 30 percent.

Debt Management

    Along with re-working your current terms and payments, credit counseling agencies take control of your finances so you don't have to concern yourself with making numerous monthly payments. As long as you're signed up for the service, you send one monthly payment to the counseling agency, which in turn disburses payments to each of your creditors. This services benefits consumers unable to manage their debts.

Negative Credit Remark

    On a negative note, working with a credit counseling agency can look bad on your credit report. Once your original creditors begin negotiating with a credit counseling agency, they may include a notation on your credit report that reads, "third-party assistance," which indicates the help of a credit counseling agency. Seeking assistance to manage your debt and credit can makes future creditors nervous, and they might deny your request for credit.

Frozen Credit Accounts

    Credit counseling agencies strive to help you alleviate your outstanding debts. To accomplish this, they place a hold or freeze on your credit cards while you're signed up. This stops you from accumulating new charges, which can impede your debt-elimination efforts. Freezing accounts can help you get out of debt sooner. However, this feature doesn't benefit you during a real emergency, when you may need to access a credit card.

The Standard Operating Procedure for the Collection of Debt From Nonpaying Customers

An unpleasant part of having a business is having to collect on unpaid debts. Debt collection can be easy if the customer simply forgot to pay or is having temporary financial problems. However, you may have to resort to legal tactics to collect some debts. The debt collection process is straightforward and basically the same in most cases. Before attempting to collect any debt, make sure you understand the laws within the Fair Debt Collection Practices Act to avoid inadvertently breaking the law.

Payment Reminder

    Contact the customer by phone, mail or email to request payment of the past due amount. Tell the customer the total balance they owe and how much they must pay to keep the account current. Do not call the customer between 9 p.m. and 8 a.m because the FDCPA considers those hours inconvenient for most people.

Final Notice

    Wait 30 days for the customer to respond with payment or a plan to pay the overdue amount over time. If the customer does not respond of refuses to pay, send a notice by mail stating the debt amount, the consequences of continued nonpayment, such as filing a lawsuit or charging the debt off and giving it to a collection agency. Give the date that the customer must pay by to avoid further collection activity. This is usually 15 to 30 business days after the notice date.


    Contact a lawyer if the customer still hasn't paid by the final notice date. If the customer owes a substantial amount of money, often more than $1,000, the lawyer will let you know your options for filing a lawsuit and the likelihood of winning the suit. Do not attempt to file a debt collection suit by yourself because you could fail to include important information in the petition that may cause the judge to rule against you. If the court finds in your favor, it will make a legal order for the customer to pay and may garnish the customer's wages or bank account.

Debt Collection Agency

    Contact a debt collection company if you do not want to file a lawsuit. The debt collector must be licensed in the customer's state. A debt collection agency agrees to pursue the debt for a percentage of the debt. Depending on the amount, type and age of the debt, this percentage can be from 10 to 50 percent. This is often better than pursuing the customer yourself because debt collection can be time-consuming.

Credit Card Payoff Help

Unfortunately, credit card debt can creep up to scary levels where it becomes difficult to pay the minimum balances and keep up with day-to-day bills. It can become overwhelming quickly. You may have become accustomed to using your credit card for day-to-day morning coffee purchases as well as your grab-and-go convenience store purchases. How do you make the transition between this lifestyle and a bare-bones budget? You take the bull by the horns.

Face Your Fear

    Many people don't actually know exactly what they owe to whom and at what rate. Your first step in setting up a plan to pay off your credit cards is to face reality. Get out all of your bills--every one of them--and make a list of the balances owed at the interest rates. You may notice that some of your bills, like medical bills, don't charge interest--they just took second place in your bill-paying plan.


    Once you have your list, place the creditors with the highest interest rates at the top of your list, then list the next highest interest rate-bearing card and so on. If you have access to a spreadsheet program, set up a spreadsheet, either on your computer or on paper. Let's say you owe XXX credit card $4,000 at 22 percent interest; YYY credit card company $2,500 at 9 percent interest; and TTT credit card company $1,300 at 6 percent interest. Your priority is to pay the creditor with the highest interest rate off first. If you have to just pay the minimum payments on YYY and TTT for a year, so be it. Pay all that you can, while budgeting to pay all of your other debts (like medical bills), to XXX to pay it off as soon as possible. As soon as it is paid, go for YYY company and pay it off as soon as you can; then go for TTT Company. This, of course, assumes that you have cut up your credit cards and are not accruing any more debt. Your budget shouldn't be so tight as to not allow for some fun money or you will quickly fall off the debt-payment wagon. Once you have it on paper, you will be able to see that there is an end to the debt. Think about how it will feel to have no debt and to be able to purchase things with cash, not with credit. Make a vow to never own more than one major credit card (for emergencies!) and to remain debt free.


    If you find that your debts are completely out of hand and overwhelming, there are organizations that will help you negotiate your debt down. Beware of organizations that charge you for their services--there are those that don't--like Consumer Credit Counseling Services. Don't pay for services that you don't have to pay for.

    Many credit card companies will work with you. Call them and see if you can negotiate a lower interest rate on your own. Most of the time, they will work with you.

What FICO Score Is Top Tier?

Many consumers spend time managing their credit scores, and with good reason if they plan to borrow money. People with the best credit scores usually receive the best interest rates on many different types of loans. Consumers, as well as lenders, artificially break down ranges of credit scores into different levels, or tiers, to make it simpler to grade a person's credit and determine his qualifications for a loan.


    A top tier credit score is a range of scores considered prime or that represent the least risk of default or late payments. According to Craig Watts, consumer affairs manager with the Fair Isaac Corporation, a top tier credit score is anything better than the mid-700s. The highest FICO score possible is 850, so anything from 750 to 850 is considered top tier.

Variations by Lender

    Banks determine individually if a person has top tier credit. Different types of loans have different cutoff points considered top tier. Unsecured loans and credit cards usually require a higher score to be top tier, with auto and home mortgage loans requiring a lower score due to the reduced risk of these loans. Other criteria figure into a person's credit worthiness, such as her income or how long she has been at her job, but have no impact on a person's FICO score.

Interest Rates

    Banks and other lenders reserve their best interest rates for their top tier credit customers. Loans with higher interest rates may still be available for customers who fall into lower tiers. The lower the tier, the higher the interest rate.

Improving Credit Scores

    A consumer can save significantly on mortgage and auto loan rates and even credit card interest rates by taking action to improve his credit scores. Making all payments on time over a long period of time is a leading factor in higher credit scores. In addition, keeping revolving account balances relatively low in relationship to the available credit has a large influence. Having a good mix of accounts and maintaining a low number of inquiries into your credit report help improve credit scores, but are less of a factor.

Monday, July 16, 2012

How to Get Rid of Old Debt

How to Get Rid of Old Debt

When you allow old debt to sit on your credit report, it makes you look bad in the eyes of potential lenders. Some employers will also check your credit history before making a decision to hire you. It is best to be proactive with old debt. Instead of sitting back hoping it will go away, do something to make it go away. By doing so, you improve your credit score and your chances of obtaining future credit and future employment.



    Order a copy of your credit report from all three credit reporting bureaus, Experian, Equifax and TransUnion. Your credit report will tell you exactly what debt needs to be paid and the amount of the debt. A free report can be obtained, once a year, from the Annual Credit Report website.


    Create a list of all of the old debt that needs to be paid off. Organize the debt from the lowest amount to the highest amount. Add the names and contact information relevant to each company you owe.


    Determine the amount of money you are able to pay each month towards the debt. Contact all of the companies you owe. Advise the company representative that you would like to setup payment arrangements.


    Start paying small monthly installments on all of the debts. When paying the debt, the goal is to pay off the lowest debt amount first. For that reason, make higher payments towards the lowest debt.


    Take the money that you set aside to pay off the lowest bill, and add it to the monthly payment for other bills. This is referred to as the "snowball" effect. Every time a debt is paid off, continue using the extra money towards the next debt. Do this until all of your debt is completely paid off.

Why Do College Students Fall Into Credit Card Debt?

Why Do College Students Fall Into Credit Card Debt?

According to Sallie Mae, about 84 percent of college students owned at least one credit card in 2008--up from 76 percent in 2004. By the time the average student graduates from college, he will accumulate more than $3,000 in credit card debt (including those without a credit card). College students fall into credit card debt due to the relative ease of getting a card, the convenience of it, and sometimes, out of necessity.


    Only about 26 percent of teenagers understand that credit card companies make money by charging interest and charging late fees, according to Charles Schwab. In a 2009 Sallie Mae survey, 84 percent of college students felt they needed formal financial education classes--with 64 percent wishing they had received this type of education in high school.


    Credit cards can lull students into going over budget, according to CNN. Gaining a line of credit lets students believe that have money to spend on items, such as clothes and electronics, that they do not have. Additionally, college students are already strained financially due to the costs of college, so putting something on credit just seems like the only option.


    College tuition probably contributes to student credit card debt. The average credit card debt load for students has climbed along with the cost of college, according to USA Today. Also, private educational loans are becoming harder to get--part of the reason for a 134 percent increase in educational expense related credit card debt in 2008. According to Sallie Mae, at least 30 percent of students have to put some of their tuition on credit.


    In 2010, a new credit card law--the Credit Card Accountability Responsibility and Disclosure Act (CARD Act)--put an end to credit card companies enticing students to apply for a credit card by giving away free pizzas and T-shirts, according to Smart Money. However, this just means credit card companies might start giving away promotional items to build brand loyalty or to get their parents to co-sign on a card.


    Despite the new law, credit card companies, such as Discover, plan to continue marketing toward college-age individuals. Although signing up for a credit card early helps establish a longer credit history, you probably should avoid a credit card until you have better financial management skills, according to College Board. Alternatively, you simply could use a debit card to help prevent going over budget, or keep a credit card in case of an emergency.

When Is a Credit Card Considered Defaulted?

When Is a Credit Card Considered Defaulted?

In June 2009, Bank of America claimed that it anticipated default rates of 12 percent on its credit card balances, according to National Public Radio. Default means you have missed a payment and the lender notifies a credit reporting agency. Technically, the lender can decide when an account goes into default, but most use roughly the same time frame.


    Credit reporting agencies rely on credit card companies to report delinquent accounts. As soon as you fail to make a timely payment, the credit card issuer can report it as in default. Most banks, however, will give you several days or possibly an entire month before they consider your payment "late." Credit union cards may wait as long as 60 days to consider your account in default.

Delinquent Accounts

    Most credit card lenders wait six months before they consider your account noncollectable, according to MarketWatch. At this point, the bank believes that it cannot reasonably expect repayment on your overdue balance. The bank writes it off on their taxes and sends it to a collections agency -- called a charge-off. You will still legally owe this debt to the creditor or the collection agency that bought it, according to Bills.com.


    If you are less than 180 days late on your credit card bill, the issuer will charge late fees to your account -- up to $39 each month -- and raise your interest rate to the "default" rate, which can be 32 percent or more, according to Market Watch. When your account goes to collections, your credit score takes a huge hit, because charge-offs are almost as bad as bankruptcy. The bank or collections agency may even try to sue you in court.


    At the very least, you should make the minimum credit card payment. You can avoid default rates by paying on time and limit credit card use -- good borrowers do not use more than 35 percent of their available credit. If you cannot make payments at all on your credit card, let the credit card company know, suggests OneMint.com. They make work out a payment plan, such as freezing your interest rate, with you to prevent it going to collections.