How to Eliminate Credit Card Debt

Posted by Rana & filed under Credit Card Debt Consolidation Information.

Spiraling credit debt is a casualty of modern times, and this is particularly evident in the U.S., where the typical household is burdened with a credit debt averaging $8,400. For the millions of Americans caught in this dangerous cycle spawning substantial fees and finance charges, credit debt reduction becomes imperative for financial survival. To regain control over their finances, debtors need to bite the bullet and exercise a good dose of discipline, budgeting and management skills, as well as common sense. By implementing the following tried-and-true credit repair methods, consumers are able to avoid the severe consequences of indebtedness and get themselves back on a solid financial track:

1. Credit Counseling
Consumers may seek out credit card debt help by consulting a reputable counseling organization, which can help them:

a.) improve their cash flow management through effective budgeting,

b.) set up a payment plan,

c.) negotiate with creditors to obtain a reduction in their minimum payments and interest rate, an extension of their loan term, and/or a waiver of late fees.

2. Feasible Budgeting
To reduce credit debt, consumers should draw up a budget, comprised of income and expenses, and adhere to it as much as practicable. This helps them identify where their cash is going and how much they are spending, which will in turn enable them to cut expenditures accordingly.

3. Loans
Credit debt relief is available through low-interest loans, such as home equity loans, which boast significantly-lower interest rates than credit cards and the interest of which is generally tax-deductible. Debtors may also borrow from their 401(k) or from family and friends.

4. Debt Consolidation
Consumers can also lock in a substantially lower interest rate and lower their monthly bills by consolidating their credit debt. Furthermore, by combining their outstanding debt into one payment, consolidation simplifies debt repayment and saves debtors money.

5. Timely Payment
To avoid late fees and jacked-up interest rates on future purchasers, consumers should pay their bills in full by the due date. By failing to pay on time, they also jeopardize their credit rating. Consumers can avoid late fees by:

a.) automating their payments online

b.) contacting their credit company in advance of an anticipated late payment to obtain a reprieve

6. Prioritizing and Snowballing Payments
Debtors with multiple accounts should jot down the requisite minimum monthly payment and total balance for each credit card. They should then proceed to clear those credit cards with the smallest balances first. Alternatively, they may choose to first pay off the cards with the highest interest rates. Consumers should also consider snowballing their payments, or transferring balances on cards carrying high interest rates to cards with low interest rates. They may also switch to a credit card that features a lower interest rate.

7. Paying the Maximum and More than the Minimum Balance
Credit debt reduction may also be effectuated by paying more than the mere minimum due. The longer consumers take in repaying their credit card bills, the more interest the banks charge. The average minimum monthly bill is comprised of 10 percent principal and 90 percent interest. Therefore, by paying the maximum amount they can afford, consumers will save a substantial sum of money over time.

8. Negotiation Of Terms With Creditors
Debtors should contact their lender and explain their situation. An extremely viable option for consumers seeking to reduce credit debt is negotiating with creditors and requesting the following: A lower repayment plan A reduced interest rate Longer loan terms Waiver of late fees

9. Debt Negotiation
Consumers may obtain credit debt relief by contacting their credit card company and negotiating a debt settlement. Debt negotiation enables consumers to settle their credit card debt for a lower amount.

10. Living Below One’s Means
A practice that is guaranteed to save individuals from credit debt is spending less than they earn. Consumers should avoid financing unaffordable purchases with a credit card. To reduce credit debt, they are well-advised to refrain from impulse buying and from purchasing luxury or unnecessary items. As a general rule, 10% of an individual’s total income should be set aside as savings.

Repair Your Credit with Credit Counseling Services

Posted by Rana & filed under Credit Card Debt Consolidation Information.

Are you in a great amount of debt as a result of over-using your credit cards? Are you having trouble managing your credit cards and overall financial situation? If you answered yes to one or both of these questions, it’s time for you to get some help. Credit and debt counseling services are offered through many different physical and online agencies for consumers who are stuck in somewhat of a financial rut due to credit card debt. So if you’re one of these people, you need to look into some of the credit and debt counseling options that are available to you. Credit Counseling Agencies

Credit counseling agencies can offer you financial education, tips and advice, individual counseling, and credit and budget management tools. There are also select agencies that offer additional services including reverse mortgage counseling, housing counseling, repayment plans and more. While there are some credit and debt counseling agencies that render their services free of charge, keep in mind that the majority do charge a certain fee. Most of the time, they either charge administrative fees, which are typically minimal for the purpose of covering their expenses, or they are paid by the creditors of their customers.Some of the popular credit and debt counseling agencies that you can consider to help you manage your debt include the following: The National Foundation for Credit Counseling (NFCC) Consumer Credit Counseling Services (CCCS) Debtors Anonymous

The National Foundation for Credit Counseling offers consumers credit card counseling services through both local and online agencies for affordable fees. In addition to these services, the NFCC also educates debtors on effective ways to manage their money and avoid the accumulation of further debt in the future. Similarly, Consumer Credit Counseling Services also helps customers with debt-related problems. The educational topics they go over with customers include proper use of credit, understanding credit reports and helpful budgeting techniques. On the other hand, Debtors Anonymous works rather differently from both the NFCC and CCCS. This organization provides credit and debt counseling services through self-help groups. It works by having consumers share their personal struggles and, hence, helps one another in the process.No one is excluded from financial vulnerability which is why, in some cases, there are entire families in need of credit counseling services. Fortunately, through family credit counseling, families can get the help they need to decrease their financial problems such as debt management, budgeting analysis, financial advice, and repayment options. Family credit counseling services are geared towards providing adequate assistance so that families who are in debt can regain control of their financial situations. How to Choose the Right Agency for You

While it’s a good thing to have options, it can also get a little confusing at the same time when you’re trying to choose the right credit counseling agency for help with your credit debt. So how do you pick? Prior to selecting an agency to work with, consider the following important factors: Determine whether the credit counseling agency is non-profit Ensure the counselors on staff are qualified – do they have certification? Find out if the agency in question is a member of the National Foundation for Credit Counseling Get a list of the different types of programs, services, and plans they offer Ask whether the services being offered are confidential

All of these factors are extremely important to take into account when searching for reputable credit and debt counseling agencies to assist you. Remember that your main objective is to get help with credit card debt and eventually eliminate it all together; therefore you need to consult with experts who know exactly what they are doing so that you can reach your goals successfully!

Compare Credit Card Offers – Student, Secured & Bad Credit

Posted by Rana & filed under Credit Card Debt Consolidation Information.

Credit cards are an alternative method of payment to cash that gives you flexibility and convenience in managing your personal finances. These cards are issued by various private companies and financial institutions such as Visa, MasterCard, American Express and Discover. Essentially, the credit card issuers provide you a line of credit and lend you money each time you use your card. This allows you to carry over a monthly balance, at the cost of having interest charged but yield the risk of building credit debt.

In contrast, charge cards require the balance to be paid in full each month. Credit cards are also known as revolving credit and have become an integral component of the American landscape. Americans use credit cards for many conveniences, from purchases to emergencies. It is important to remember that credit card usage involves eventual repayment of incurred charges.

If you use credit cards wisely, you can build a good credit history. However, you must be judicious in your credit card use; otherwise you might find yourself in a quicksand of credit card debt. Therefore, it is of critical importance to become educated about credit card features, terms and conditions, as well as your consumer credit rights and responsibilities.

Credit Card Companies
Credit cards are offered by credit card companies that are integrated with mainly financial institutions such as banks. Cards are also accessible from retail companies, colleges and universities, hotels and resorts, airlines, movie theaters, major gas stations, and more. The original concept of paying merchants using a card was the brainchild of Frank X. McNamara and Ralph Schneider in 1950.

The credit card was to offer convenience to consumers and increase revenues of merchants. The original credit cards provided by credit card companies weren’t actually credit cards but charge cards. Today, only a few credit companies offer charge cards, as only few consumers have the financial ability or the desire to pay off their complete balances at the end of the month. Also, charge cards almost always are accompanied by high annual fees.

Annual fees are not the exclusive domain of charge cards; many credit cards have them as well. But annual fees are certainly not popular among the general public. Herein, most consumers carry credit cards with no annual fees. However, there are things that credit card companies provide that are immensely popular with consumers, called credit card offers.

Credit Card Offers
All major credit card companies, retail companies, airlines, and more offer special credit card promotions and programs to entice cardholders into using their cards. Over the years credit card companies have started offering various types of cards for various types of consumers. For example, there are credit cards for businesses, college students, cards that offer reward points, and such. Here are some of the major, more common credit card offers:

  • Rewards Credit Card
    rewards for your various purchases
  • Cash Back Credit Card
    you can earn cash back on your purchases
  • Airline Credit Card
    you can earn frequent flyer miles with several airlines
  • Low Interest Credit Card
    0% intro Annual Percentage Rates (APR) or low fixed rate
  • Balance Transfer Card
    high interest balance can be transferred to a low APR credit card
  • Business Credit Card
    businesses and corporations earn rewards when credit cards are used by employees
  • Instant Approval Card
    instant approval from certain credit card companies
  • Prepaid and Debit Card
    allows you to control your spending with prepaid debit cards, debit cards and prepaid credit cards
  • Student Credit Card
    credit cards for high school and college students
  • Credit Card for Bad Credit
    extended to consumers with less than perfect credit.

These are the most popular forms of credit card offers provided by credit card companies. As credit cards become more popular, credit companies will extend newer, more innovative offers to consumers.

Welcome to our Auto Loan Section

Posted by Rana & filed under Auto Refinance Information.

Welcome to the Auto Loans section. Over the next few weeks we will be adding articles pertaining to all the aspects of auto loans, so hang tight! If you have any suggestions of what you’d like to see, just let me know!

– Margie

The Consequences and Cures for Bad Credit

Posted by Rana & filed under General Debt & Loan Consolidation Information.

In a culture such as ours that is dominated by consumerism, the shopping temptation stares at us from every corner. Day in and day out, the average American is bombarded with advertisements and commercials luring him or her to spend now and pay later. With the use of plastic money and consumer credit catapulting to unprecedented levels in the past decade, it comes as no surprise that foreclosures, delinquent payments, late payments, and bankruptcies have reached an all-time high. Complicating the financial equation is the general stagnation of household incomes which have struggled to accommodate the increase in consumer debt. Collectively, these factors have converged to produce bad credit, a financial termite jeopardizing the entire foundation of an individual’s life. The ramifications of bad credit are significant and widespread, impacting everything from housing and employment opportunities to mortgages and insurance rates. Borrowers who are delinquent, default on their payments, or suffer from bad credit expose themselves to the following consequences:

1. Higher fees and charges

Bad credit borrowers face increased fees and charges, such as late fees.

2. Higher interest rates

Credit is more costly when a consumer’s credit score is low. Delinquent credit card borrowers are often subject to a penalty interest rate ranging from 25 to 30%. Because credit card or loan applicants with tarnished credit pose a higher risk to lenders, the latter generally impose a higher rate of interest on them. For bad credit borrowers, this means hundreds if not thousands of dollars more in charges resulting from high loan or credit card rates. Furthermore, borrowers who are delinquent on one credit card are often hit with a higher interest rate on all their other cards pursuant to a policy known as ‘universal default’.

3. Housing complications

Credit-impaired debtors face an uphill battle when attempting to rent an apartment, house, or condo. Their choices are limited, as landlords typically perform a credit check prior to renting. Bad credit often results in the denial of a rental application. Landlords may request applicants with bad credit to make a deposit (a requirement that is usually waived for those with a good credit rating), obtain a co-signer, and/or pay a higher rent.

4. Loan or credit denial

Borrowers with a poor credit rating are less likely to be approved for loans or credit cards. Creditors place a premium on an applicant’s ability to repay a loan and his or her payment history. Too many student loans, unpaid taxes, repossession, foreclosure, or bankruptcy can keep consumers from qualifying for a line of credit, personal loan, car loan, or mortgage. Bad credit prevents debtors from purchasing electronic equipment, furniture, or anything on credit.

5. Denial of services

Borrowers who are delinquent on their rent payments or utility bills risk eviction or discontinuation of their service, respectively. To have their services reconnected, they will be required to pay expensive charges and deposits as well as any outstanding balances.

6. Obstacle to car loan eligibility

Bad credit makes it harder to qualify for an auto loan. Borrowers with a negative credit rating who do get approved for a car loan are slapped with costly dealer fees and charged double the interest rate, thus making vehicles unaffordable. The rate of interest may be as high as 20-25%.

7. Calls from collectors

Accounts of debtors with high unpaid balances are usually sold to professional debt purchasers or transferred to attorneys or collectors. Individuals with bad credit are also the subject of incessant calls from debt collection agencies. Consumers with bad credit are charged fees and accruing interest.

8. Inability to open a checking account

9. Disadvantage in relation to mortgages and other loans

As a general rule, mortgage lenders require applicants to have a good credit score. Since a bad credit rating indicates to creditors that an applicant is more likely not to make payments in a timely manner, it can shut the door to financing and result in the denial of a mortgage. Consumers with credit problems, such as FICO scores in the 600 range or below, bankruptcy filings, foreclosures, charge-offs, or recent unpaid balances pay higher down payments, interest rates, and origination fees. Individuals who have defaulted on their house payments for several months may be required to pay substantial fees in full to stop or avoid foreclosure.

10. Adverse impact on eligibility for car rental

Consumers with bad credit may experience difficulty in renting a car.

11. Insurance denial or hike in insurance rates

Many insurance providers – usually home and auto – take credit history into consideration when evaluating whether to renew or issue an insurance policy and how much coverage they will offer. Insurers rely on the data in prospective clients’ credit reports to create an insurance score, which forecasts the frequency of claim filing by the applicant and the expense associated with it. Insurance scores are based on the length of credit history, unpaid debts, collections, bankruptcies, and payment history. Applicants with bad credit pay more for insurance because insurance companies consider that a client’s credit history determines the odds that he or she will file a claim. Individuals with a poor credit rating may not be covered by an insured’s underwriting guidelines and may be denied a renewal.

12. Legal action

To recover funds owed, lenders have numerous remedies: (1) filing of a lawsuit, (2) foreclosure or lien on the borrower’s property, (3) repossession or seizure of the debtor’s assets (i.e. home, car), and 4) garnishment of the borrower’s wages.

13. Employment difficulties

Bad credit risks are viewed by prospective employers as irresponsible and therefore have a diminished chance of being hired. An increasing number of employers are utilizing credit reports for purposes of screening and hiring job applicants and evaluating employees for retention or promotion.

While wiping out a bad credit history is not a simple and rapid task, a good dose of discipline and patience produces positive results. What follows are some credit-building strategies for consumers with a blemished credit score:

Consulting a credit counseling agency which assists consumers with debt reduction and repayment; Obtaining a free copy of one’s credit report from each of the three leading consumer reporting agencies (Experian, TransUnion, and Equifax) and reviewing it for errors, inaccuracies, and incompleteness; Paying balances in full and on time; Keeping balances low (preferably lower than 20% of one’s credit limit); Ensuring that the credit bureau removes information concerning debts discharged in bankruptcy; Opening a line of credit at a gas station or department store and paying balances on time; Applying for a secured credit card that reports to the three main credit reporting agencies and using it to purchase items that are paid in full each month; Taking out bad credit personal loans and paying them off in a diligent manner, which would lead to lower interest rates and an improved credit score; Refinancing one’s mortgage via bad credit home loans; Asking a friend or relative to co-sign on a credit card or loan; Paying more than the minimum balance on one’s credit cards; Not applying for new credit card accounts; Closing old credit accounts that are unused; Enrolling in debt consolidation programs, whereby the borrower’s account is re-aged and marked as current as long as he or she is making payments consistently; and Entering into debt negotiation or settlement, which effectuates a 40-60% debt reduction and involves a lump sum payment of outstanding balances.

Types Of Tax Deductions And Creating A Tax Deduction Checklist

Posted by Rana & filed under Tax & Bankruptcy Law Information.

Tax deductions, or deductions which can affect a taxpayer’s income tax, represent expenses acquired. These expenses are deducted from the gross income when computing income taxes. This results in a lower taxable income and lowers the amount of taxes to be paid. There are numerous factors which can affect standard tax deductions, including federal, income, mileage, medical and home improvement tax deductions.

Federal Tax Deductions

Federal tax deductions come in two types: standard deductions and itemized deductions. In standard federal tax deductions, you can deduct based on your marital status, age, and disability. The deductions change based on if you are filing single, married but separately, married by jointly, or household. You can also receive an additional deduction if you are over the age of 65 or are blind.

If your income tax deductions are greater than standard deductions, you can file an itemized deduction. Itemized deductions can include mortgage or home equity loans, state taxes, local taxes, medical expenses, or charitable donations. If you make a charitable donation, be sure to have a receipt with the total amount of your donation in order to back up the donation.

Mileage Tax Deductions

If you use your car for business, medical, moving, or charitable reasons, you can use a mileage tax deduction. This is often used to reimburse employees for their mileage or volunteers for their driving time to and from community service locations. Typically the rate is changed annually, but can be changed midway through the year in the event or rising gas prices.

Computing your mileage tax deductions can be tricky as it is based on the months of the year, but there are free websites on the Internet which will assist you in computing the total cost. Since you deduct the rate per mile, it is important to keep track of the miles you cover each time you use your vehicle for a business, medical, moving, or charitable reason.

Medical Tax Deductions

If your healthcare related costs are above a certain amount, you can claim medical expenses as itemized tax deductions. You can only deduct medical expenses which exceed 7.5% of your adjusted gross income. For example, if you and your spouse have a combined adjusted gross income of $80,000, you would need at least $6,000 in medical costs in order to reach the 7.5% limit. If you have dependents, be sure to include all of their medical expenses in addition to yours.

Medical tax deductions include expenses for laser eye surgery, eyeglasses, medical procedures, medicines, and dental treatment. You can even use the mileage to and from medical treatments and drug abuse and alcohol treatment as deductions. Although laser eye surgery is included as an approved medical tax deduction, cosmetic surgery purely for appearance is not an approved deduction. In order to itemize your medical tax deductions, you need to keep track of and save all of your medical bills and payment statements.

Home Improvement Tax Deductions

Home improvement tax deductions cover costs you pay which add value to the home. Whereas a repair keeps the value of the home from dropping, it does not increase the value of the home. Home repairs, including painting, repairing leaks, or replacing a broken window, do not serve any purpose to increase the home’s value. All you are doing when you conduct a home repair project is bringing the home’s value back up to its original value before the damage occurred. A home improvement project is done in order to raise the value of the property from the original value.

In addition to home improvements such as the addition of a swimming pool, fencing in your backyard, or adding a room, you can also deduct for improvements made to conserve energy. When considering your home improvement project, it is important to know that the projects that count for a home improvement tax deduction changes based on geographic location, size and age of your home, and the exact project you will be completing.

At the start of each tax cycle, you should research the various types of tax deductions on the Internet and create a list of tax deductions. With that list, you can create a tax deduction checklist and keep track of all tax deductions for that year. Keep any receipts and payment statements in the same folder so that organizing and paying your taxes will become a simpler process. Remember that you need proof of each deduction in the event you are audited. By keeping organized and informed of the types of tax deductions, paying your taxes should become worry-free.

Measuring Your Financial Standing with the Debt to Income Ratio

Posted by Rana & filed under General Debt & Loan Consolidation Information.

Before settling on a residence and signing along the dotted line, prospective homeowners must ask themselves the critical question- how much home they can afford. This, of course, is a function of their financial stability and creditworthiness, two leading factors gauged by a widely-used formula known as the debt-to-income ratio (DTI). Lenders assess a consumer’s financial health by determining the amount of income available once all debts have been aggregated. The debt to income measure involves comparing a borrower’s income to the total amount of debt owed to creditors. By monitoring their debt-to-income ratio, individuals can 1)avoid escalating consumer debtand significant credit problems, 2) view the positive impact on their personal finances of paying more than the minimum on their credit card bills, and 3) make judicious decisions about taking out loans and purchasing on credit. The DTI concept is employed in the context of mortgage affordability, thus assuming added importance when consumers are trying to obtain home financing. Lending institutions evaluate a prospective borrower’s credit status by examining his or her debt to income ratio. Some of the consequences of a high DTI include: 1) inability to benefit from favorable credit terms and the lowest rates of interest due to the fact that such borrowers are at a higher risk of defaulting or being delinquent on their loans, 2) difficulty to acquire additional credit in the event of an emergency, and 3) threatened ability to purchase big-ticket items when desired. By maintaining a low DTI, consumers will increase their chance of eligibility for optimal loan terms and interest rates when applying for consumer credit.

The debt-to-income ratio may be calculated via one of two methods depending on which debts are included in the computation:

Front ratio

This represents the portion of gross income that is applied towards housing costs. The front ratio for renters is calculated by dividing the rent by the income. Homeowners obtain this figure by dividing PITI- the principal, interest, taxes, and insurance- by income. By figuring out the DTI, borrowers will know how much money is available to pay off the mortgage each month. Under this method, the debt-to-income ratio is calculated by dividing the total monthly debt payments by the borrower’s gross monthly income. The first step consists in adding up the income from all sources. For credit purposes, DTI is always calculated using gross income, which means income before deductions and taxes. Gross income includes the following:

regular salary government benefits income from child support and alimony Income from interest and dividends overtime and bonuses commissions tips, and other yearly income

After adding up the above-mentioned figures, consumers should divide the number by 12 in order to arrive at the monthly gross income. To determine the amount they can afford to pay monthly on their mortgage, borrowers should multiply their monthly gross income by 0.28.

Back ratio

This represents the portion of gross income that is allocated to payment of recurring debt each month. Rotating or revolving charges include the following:

Minimum monthly payment on all loans and credit purchases (This includes payments on credit cards, student loan payments, credit union/bank loans, installment payments on appliances and furniture, car payments, home equity line of credit, or other loans) Payments for medical care Child support payments Alimony payments Rent or monthly mortgage payment

Borrowers should add up all of these debt payments and exclude monthly expenses such as utilities, entertainment and groceries.

In general, a lower DTI translates into greater financial security, and the closer to 0% the borrower is, the more likely he or she will achieve a debt-free existence. Conventional lenders usually prefer that payments on mortgages not exceed 28% of borrowers’ monthly gross income and that the total debt expenses- including student loan payments, credit card bills, mortgage payment, and other debts- be equal or less than 36% of their income. This is referred to as the 28/36 eligibility ratio. Therefore, a debt-to-income ratio of 36% or less is deemed good and survives the eligibility test. While some creditors approve loans for individuals with a DTI in the range of 37-40% or higher, these borrowers may face difficulty in paying their bills. Consumers in the 40% or higher bracket should consider seeking out debt help since their credit situation is in the red. On the other hand, flexibility in relation to the debt-to-income ratio is prevalent among subprime lenders, who typically issue bad credit mortgage loans to applicants with a DTI in the 45-55% range. In exchange for liberal eligibility, bad credit borrowers generally pay a higher interest rate. While debt-to-income ratios are guidelines, they are not bright line rules. When it comes to loan approval, creditors have a lot of leeway and tend to conduct a global evaluation of their candidates by taking into account their personal situations and reviewing their entire application. After all, circumstances such as spending habits, emergency expenses, and number of dependents influence the amount of debt that borrowers can expect to handle.

The Fair Debt Collection Practices Act: Shielding Consumers from Abuse

Posted by Rana & filed under General Debt & Loan Consolidation Information.

Along with the Fair Credit Reporting Act, the Fair Debt Collection Practices Act (FDCPA) forms the cornerstone for consumer credit protection in the United States. Its objectives are as follows: 1) to prohibit collection agencies from utilizing abusive debt collection methods, 2) to provide debtors with remedies as well as a mechanism for disputing the alleged debt in order to ensure the accuracy of debt information, and 3) to guarantee fair debt collection. While the Fair Debt Collection Practices Act does not relieve consumers of their duty to repay debts, it grants them rights vis-a-vis creditors and bill collectors. The federal law applies to consumer debt, which encompasses debts incurred through loans, first and second mortgages, or credit cards as well as household, family, and personal debts. Individuals who have defaulted on their payments or have errors on their credit report that cast them as delinquent are potential targets of debt collectors. The Act governs the conduct of debt collectors, or individuals who regularly conduct debt collection activities.

Pursuant to the FDCPA, debt collectors must act fairly and ethically as well as refrain from undue harassment and illegal collection tactics. They must make their identity known to the debtor and state the lender’s name and the amount of the debt. Debt collectors may not engage in the following practices:

1. Abuse or harassment

The Fair Debt Collection Practices Act allows collectors to contact consumers via mail, fax, or telephone. However, debt collection must be free of oppression, abuse, and harassment. For instance, debt collectors may not:

contact debtors at unreasonable times, that is before 8:00 a.m. or after 9 p.m. unless consented to by the latter make repeated phone calls threaten harm or violence; or mail correspondence which appears to have been sent from a court of law

2. False or misleading representations

It is unlawful for debt collectors to employ false or misleading statements in the course of collecting a debt. Some of the prohibited conduct in this category includes the following:

False representations by debt collectors that they work for credit reporting agencies or operate one False information about the debtor to third parties Misrepresentation concerning the amount of the debt False implication by the debt collector that he or she works for the government or is an attorney Threat to arrest the debtor if he or she fails to repay the sum owed Statement that the debtor’s wages or property will be seized or garnished unless the lender or debt collection agency plans to take such action and it is legally-justified Statement that the debtor will be sued when such an action would be illegal or when there is no intention to do so on the part of the collector; or Threat to bring criminal charges against the debtor

If a debt collection agency does in fact intend to report the consumer’s debt to a credit reporting agency or his or her case to a lawyer, a debt collector can make such a statement. What the law prohibits is a fabricated threat aimed at intimidating a debtor into making payments.

3. Unfair practices

The Fair Debt Collection Practices Act requires debt collectors to steer clear of unfair practices. Examples include:

Seizing or threatening to repossess debtor’s property unless the law permits it Collecting an amount exceeding the consumer’s debt, unless permitted under state law Menacing to publish or publishing debtor’s name in reference to non-payment of debt (except to a credit bureau); or Threatening to seize debtor’s property, unless the collection agency or lender can do so by legal means

If the debtor has legal counsel and asks the debt collector to address all inquiries to his or her attorney, the debt collector must cease all contact with the debtor. If the debtor is not represented by an attorney, thus barring an opportunity for the debt collector to enter into debt negotiation with the latter, the debt collector is allowed to contact third parties. However, he or she may only inquire about the debtor’s phone number, place of employment, or domicile. Under the Act, debt collectors may only communicate once with third parties (i.e. employers, relatives, neighbors). Within five days of their initial communication with the consumer, debt collectors must provide written notification of 1) the amount owed, 2) the creditor’s name, and 3) the debtor’s right to dispute the amount due partially or in its entirety if he or she claims the debt to be lacking in legitimacy. If within 30 days after being notified of the debt in writing, the debtor informs the collector in writing that he or she does not owe money; the latter must cease all contact with the debtor, except to inform him or her that it intends to take action. The debt collector may proceed with the collection if the consumer is furnished written evidence of the debt such as copies of bills for the sum owed.

Finally, the Fair Debt Collection Practices Act provides a legal remedy to wronged debtors, who can sue the collection agency in federal or state court within one year from the violation’s inception. Debt help is also available through the Federal Trade Commission and the state Attorney General’s Office, which may assist consumers with any issues involving debt collectors.

Tracking Debt with Free Credit Scores

Posted by Rana & filed under General Debt & Loan Consolidation Information.

A credit score is a numerical representation of a consumer’s credit rating and a summary of the information on his or her credit report. Lending institutions, landlords, mortgage brokers, and employers utilize this pivotal number to gauge a prospective applicant or borrower’s creditworthiness and financial reliability, determine his or her eligibility for credit, and set the applicable interest rates and terms. Credit scores provide an indication of how much debt a particular applicant can comfortably assume. Lenders and banks rely on the credit score furnished by credit bureaus for deciding how much interest to charge to outweigh the risk of credit extensions and for making decisions regarding mortgages, loans, lines of credit, and credit card rates. Free credit scores are extremely useful for individuals seeking approval for credit cards or home mortgage loans or shopping for the optimal insurance rates. Bad credit places an obstacle in prospective borrowers’ path by preventing them from capitalizing on the lowest insurance rates or attractive rates on other categories of loans. Individuals with poor credit must fork out hundreds, if not thousands of dollars more than those with healthy credit. Good credit scores offer borrowers leverage to negotiate for the most favorable loan terms and obtain lower rates of interest. By maintaining a high credit score (i.e. 700+), consumers maximize their chances of getting approved for special credit card benefits and rates.

Typically, the range of credit scores runs from 300 to 850, with 350-640 constituting bad credit and 720-850 indicating excellent credit. The lower the number, the greater the risk a prospective borrower poses to a lender. Consequently, consumers with low credit scores are slapped with higher interest rates as a buffer against the elevated risk of default. Credit reports play a significant role in credit scoring systems. It is therefore imperative that consumers ensure the accuracy of their credit reports prior to submitting a loan or credit application. Free credit scores allow consumers to obtain direct feedback on lenders’ evaluations of their credit history and provide immediate insight on whether they need to exercise better credit management. To control their credit, consumers should first request a free credit score and report. Generally, credit reporting agencies are not required to furnish those free of charge. While the Fair Credit Reporting Act (FCRA) grants consumers the right to obtain annually a copy of their credit report from each of the three credit bureaus- Experian, Equifax, and TransUnion- it does not guarantee the same with respect to their credit score.

Identity theft protection and credit management services are the ones that typically provide the assessment of borrowers’ creditworthiness, also referred to as the credit score, at no cost. Numerous offers of free credit scores abound on the internet; usually, these are offered as part of a package. It is both safe and simple for consumers to obtain a free credit score and report online. Both independent websites and the three major credit reporting agencies extend offers of 3-in1 credit reports with three free credit scores (one per credit bureau), often with unrestricted online access to credit ratings. Consumers are simply required to validate their identity, usually by entering their account number. Upon confirmation, borrowers’ free credit scores and reports are instantly and securely transmitted to them through online channels. The credit bureaus often offer a trial membership that includes a 3-in-1 report from TransUnion, Experian, and Equifax, along with a free FICO score and helpful tips on how to boost one’s credit rating. Credit reporting agencies provide easy and fast online access to the free credit score.

Another way to obtain a free credit score is by applying for a credit card offer or signing up for a credit service such as a credit monitoring program which alerts consumers about changes in their credit profile or fraudulent activity. Credit card applicants might be offered a trial period- typically 30 days-to make use of free services such as access to their credit rating. To view their FICO score, they are usually required by the credit card company to submit their account number. Consumers may avail themselves of bank credit cards that provide gratuitous, unlimited online access to their credit score. Credit monitoring applicants who take advantage of a free trial membership receive a free credit score and report. Usually, credit monitoring services offer their customers continual access to their FICO score and credit report.