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Credit counseling - Recovering from Bad Credit
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Winning Your Disputes With Credit Bureaus
You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services.
They all make the same claims:
* "Credit problems? No problem!"
* "We can erase your bad credit - 100% guaranteed."
* "Create a new credit identity - legal... Read credit counseling article
What Is A Good Credit Score
It is a right that you have to know what different credit agencies know about you. So you might want to know beforehand, what is a good credit score? The number where a credit score can be considered good is 700.
When looking at your credit score you need to look into the factors which determine your credit score. Credit scores can be in the range of 300 to 900 and the higher the number... Read credit counseling article
Credit counseling - Recovering from Bad Credit
I have seen the advertisements and cringe - "Let us fix your damaged credit", "Don't file bankruptcy, let us help". I am sure you have not only seen them but if you have been in financial trouble you have probably thought about calling a credit counseling service for assistance.
You might as well wreck your car and collect the proceeds to repair your own credit while recuperating.
My husband's financial situation was bleak, to say the least, when we met. He had previously been married and followed the letter of the law as laid out in his divorce decree. Unfortunately, his legal representation failed to explain that in order for his name to be removed from an automobile loan his ex-wife was awarded, that she needed to either refinance the car or she had to file a "Release of Lien" and obtain approval from it with their lender. She did neither and she failed to pay for the car. Yup, it was repossessed and he was held responsible for the loan since they could not locate her.
The same thing happened with their income taxes. She was supposed to pay her portion and five years after the divorce they located him and not only delivered a bill to him but audited him (this was prior to the newer and nicer IRS).
He was in college, getting his Ph.D. and his income was very limited. He was able to pay his truck loan and his living expenses but there was little left over for anything else.
I had just graduated from college with my high and mighty B.S. in Consumer Economics and thought I had the answer for him. I had taken a class whereby various executives from our community came in and explained their jobs and what the career possibilities were for our new educated lives. One of the ladies who spoke was from the local non-profit credit counseling agency and I had retained all of the literature she had shared with us.
My husband really wanted the situation remedied and was willing to do what was necessary to fix what was broken - instead of walking away from it through bankruptcy. He made an appointment and after we spent a whole week filling out the paperwork, they agreed to work with him to get him on the right track.
They made agreements with credit card agencies to stop the accruing interest as long as he paid the principal balance and we sent them a check every month to cover all loans and credit card payments. They disbursed the money and sent us a receipt so that we knew how much was paid to whom and the remaining balance. Our goal was to get everything cleared up within seven years. Fortunately we were smart enough to know that if we had extra funds, we sent extra money and asked them to forward it to whichever account we thought was best. We were able to pay everything off in four years - quite an accomplishment!
Then the bomb hit. We were sent a final copy of all payoffs along with a whole packet of information from the businesses in the town that we lived in showing us who would lend money to one of their 'graduates'. What? We thought we were taking care of everything so that we would not have trouble in the future with credit.
Wrong, wreck the car.
The information from the credit counseling service was dutifully reported to the credit reporting agencies and reality hit. If we had filed for bankruptcy, his credit report would have been wiped clean after seven years. There are also a number of places that are more than happy to loan people money after they file for bankruptcy because they are devoid of bills. As it was, we spent four years being socially conscious citizens and paying back debts and another seven years waiting for everything to disappear from his credit report.
I do not recommend wrecking the car and having the insurance company finance the bad choices you made in your financial life and I do not recommend filing bankruptcy, for the same reasons. What I do recommend is if you have financial trouble, you get ALL information available to help you make an informed decision. This includes not only how to stop the harassing bill collectors from calling you but also where you will stand when you have paid your debts and have to live with the results.
About the Author:
?2000 Tammy Harrison. Tammy Harrison is a wife and mother of three children ages five and under and a home-based working mom. She has a degree from Mizzou in Consumer Economics.
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Credit counseling - Get out of debt
What Every Family Must Know Diana Blaisdale is very familiar with that sinking feeling that comes with having too much credit card debt. For many years, she and her husband followed a pattern that many Americans know all too well: They charged loads of expensive gifts in December and then faced a pile of debt in January and February, which they couldn't finish paying off until the summer. Blaisdale finally put a stop to the cycle a few years ago when she and her overspending husband divorced.
"Not having too much debt has greatly decreased the stress in our lives. And we have so much more time," says Blaisdale, a mother of two who says she has a deeply ingrained fear of financial ruin. Her ex-husband, however, continued to charge up his credit cards, finally owing more than $50,000. Eventually, he turned his affairs over to a non-profit credit counseling agency, which negotiated down his debts and consolidated the payments so that he was able to avoid declaring bankruptcy.
Sound Familiar?
More Americans than ever are in the same boat as Blaisdale's ex. Only about half of U.S. households don't carry a balance on their credit cards - 40 percent to 50 percent are credit-card debt free, according to Steve Brobeck, executive director of the Consumer Federation of America (CFA) in Washington, D.C. The other half of the 104 million U.S. households, however, owe $10,000 on average, according to Brobeck.
Debt: A Fact of American Life
The facts are sobering:
U.S. consumers currently owe more than $600 billion in credit card bills, according to the CFA.
Last year, American consumers paid $15 billion in credit card fees alone and more than $60 billion in interest.
Families that charge purchases during the holidays take an average of four months to repay that debt.
In the past five years, there has been an increase in the number of people who have paid off their credit cards and are committed to remaining credit-card debt free, says Brobeck. But those who maintain a balance are spending more and often paying more - in interest rates, penalties and other fees - for the privilege.
Credit card debt isn't the only form of household debt, of course. Consumers are saddled with car loans, mortgages, school loans, home equity loans and a host of other types of debt. Many homeowners have taken advantage of the lowest mortgage interest rates in decades to refinance their mortgages, often freeing up cash in the process.
There are other tried-and-true techniques for reducing school loan payments, such as consolidating loans over a longer repayment period. Indeed, today's low interest rates are opening up new worlds for families who want to improve their overall debt picture.
But when it comes to credit card debt there's not much good news. For one thing - unbeknownst to most consumers - credit card issuers recently raised the penalty interest rate to between 20 percent and 30 percent (the basic interest rate is commonly from 13 percent to 20 percent). This is the rate that automatically goes into effect (along with a flat late fee of about $20 to $30) if you are late with payments. It can all add up pretty quickly.
Getting a Handle on Debt
So, how do you begin getting your balances down and your life back in order? That depends on where you started. Many people carry credit card balances out of fiscal laziness more than dire circumstances. If that's you, make yourself a budget and resolve to pay down those balances. It's a good idea to hold off on investing - even in your 401(k) - until you pay off your credit cards since you're paying more interest on the cards than you're likely to make (especially now) in the stock market.
Brobeck recommends paying off your smallest total credit card bill first (even if it carries a lower interest rate than your other cards) to spark a sense of what's possible as well as a feeling of success. Once you have all your credit cards paid off, put the monthly payment amount into savings.
"People should focus on building their wealth. Through the miracle of compound interest, people of normal incomes can have the resources to pay for a home, weather an emergency, educate their children and retire comfortably,- Brobeck says. -The most important strategy is to pay off the debt as quickly as you can.
Digging Out of a Deeper Hole
If you're among those facing a more serious situation (if you have more than $10,000 in balances, have reached the end of your credit line, are able to make only the minimum payments or pay the bills on one card with another, for example), you need help. The first place to start is a nonprofit credit counseling agency. It's important to consult a nonprofit group, since the for-profit variety often charge higher fees and offer less advantageous debt payment plans. You will likely have to pay at least a small amount for the credit counseling services, though some are free.
The National Foundation for Credit Counseling (NFCC) is the oldest agency of its kind. NFCC offers confidential money management, homeowner counseling and educational services through 1,418 NFCC-affiliated offices in the United States and Puerto Rico. Most of these offices operate under the name Consumer Credit Counseling Service (see Resources).
At the first meeting, the credit counselor will ask you to list your debts and your assets. The counselor may ask you to get additional information or complete an assignment prior to the next visit. Fewer than 10 percent of all consumers who seek counseling through NFCC agencies are referred to a bankruptcy lawyer after the first meeting. (Many states have recently moved to make it more difficult to file for personal bankruptcy.)
Most of the rest agree to begin a debt management plan (DMP). Under the DMP, the agency develops a repayment plan in conjunction with your creditors, often negotiating some debt reduction in the process. Creditors are often willing to work with the credit counseling agency in order to obtain some payment from individuals who might otherwise have filed for bankruptcy. The consumer generally makes one payment to the agency during the life of the loan.
Less Spending, More Fulfillment
What if we could avoid the annual credit-card crunch altogether? In fact, in the shadow of the Sept. 11 terrorist attack, many parents craved a simpler holiday with cherished family members close by. Sixty-three percent of Americans surveyed were planning to make the holidays more meaningful this past season, according to the Center for a New American Dream, a nonprofit organization dedicated to helping Americans change the way they consume to improve quality of life, protect the environment and promote social justice. More than 25 percent planned to give more personal or meaningful gifts and nearly 20 percent planned to purchase fewer or less-expensive gifts.
Many people are waking up and saying, ''I'm deep in debt and I can't get out.' It will cause them to overwork and spend less time with their families, says Eric Brown, communications director for the Center for a New American Dream.
That's not the only alternative. Portia Weiskel, a mother of three and member of the center, has long enjoyed a simpler Christmas with her family. Weiskel's family celebrates the 12 days of Christmas with a small gift each day and emphasizes personal visits, cooking and music.
There's a lot of room for the discovery that simpler can be more fun, she says. The fact that she is not encumbered by revolving credit card debt gives Weiskel more freedom and flexibility.
"We have richness without price," she says, "our land, a little garden and each other."
Fom United Parenting Publications, March 2002.
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