CCMS

Debt Settlements: This option can sometimes be extremely harmful to your credit health although there are some instances where a settlement can be to the debtor’s advantage. Some of the negatives include: A notation on your credit report that the debt was “paid as settled” and not paid in full. Lenders have a tendency to view this as a situation where the debtor was unable or unwilling to pay the debt in full and sends a “red flag” on any application for credit. Second, for any amount of money you save on the debt totaling over $600, you may be sent a 1099 tax form the following year, as the savings are considered “earned income.” Third, even when you settle the debt, the remaining balance may be sold to another collection company and in the future, you may be contacted and/or harassed by them regarding the debt. Finally, there are a number of debt settlement companies that will take payments from you over a period of time, but not make regular payments toward your debt. Companies such as these are attempting to build up a fund so that they can contact creditors and offer a specific amount based on what is available in it. If your credit has been questionable, this method will make it even worse and it can then be extremely difficult to regain your creditworthiness. (Note: You need to research any company you do business with by contacting the Attorney General’s office in the state in which they do business)

Refinancing your home: If you are a homeowner with reasonably good credit, you probably have received offers for refinancing or have seen or heard the commercials for it. While refinancing can work for a number of people and assist in paying off credit card or unsecured debt, there is a danger involved. Some debtors pay off the debt, but then begin to use the credit cards again, sometimes to the point of maxing out the cards, thus having a much worse situation than when they refinanced. It is advisable to either cut up the cards at the time of the loan or at the least, put a freeze on the cards for a specific period of time. If you have a low credit score and have had offers of credit from lenders who promise loans no matter what your situation, you must research those lenders, as you may end up paying a much higher rate of interest. There has been severe problems in this regard over the past several months in the sub prime loan industry.

 

In the credit counseling industry, we hear many different reasons why people got into debt and more importantly, why they are having problems getting out of debt. Issues range from life events such as death or divorce making it difficult to pay bills on time to loss of a job or what seems to be the prevalent of all reasons, that is, simply overextending themselves.
One size does not fit all when attempting to get out of debt, but the reality is that there are several options consumers have to resolve the situation. Getting out of debt options are as follows:

Taking Care of it on your own: If you can afford it, it is best to always pay more than the minimum balance. When you pay the minimum balance, approximately 92% of the payment is applied to the interest, while 3-4% is applied to other charges. Only 3-5% is actually applied to the principal balance. Always pay the bill on time, as credit card companies are very quick to charge late and over-the-limit fees. If creditors are offering special deals for transferring balances, or lowering interest rates, make sure you read the small print before taking advantage of the offer. It may be only a short term solution and may not assist you over time. If you are late on your bill or you are simply trying to reduce interest rates on your own, please be advised that it is sometimes difficult to get a “live” person on the other end of the line and many times, the solution that you might achieve can be very short term in nature. Whatever deal you get, make sure that they put it in writing, preferably signed by a manager or supervisor.

Bankruptcy: There are two forms of personal bankruptcy. The first is Chapter 13, which is known as a partial bankruptcy and includes are payment plan, which generally accounts for approximately 33% of the total debt and is paid between 3-5 years. This option is preferable for debtors who do want to pay their bills, but cannot afford the total amounts. The disadvantage is that the bankruptcy will appear on your credit report for at least 7 years and you will have to reveal the bankruptcy on any application for
credit. The second option is Chapter 7, which liquidates your entire debt. This option is preferable for debtors who want to wipe out the debt and start over as soon as possible. This also stays on your credit report for 7-10 years, but is discharged more quickly than the Chapter 13. You must research bankruptcy attorneys and make sure that you understand the legal aspects of either form of bankruptcy.  Keep in mind that since October 2006, the new bankruptcy law has been in place and there are specific stipulations that you must adhere to in order to file.

Children and teenagers earn, save, spend and borrow billions of dollars each year in the marketplace. They have more money to spend than previous generations and develop spending patterns at a younger age. Children’s  attitudes about money are most influenced by their parents, the media, their peers and their own successes and failures in spending money. The buying habits of children and teenagers are learning experiences. Their money management skills will develop from the ideas, attitudes and spending habits they learn at home, school and in the marketplace. Those who learn good money management skills are more likely to become adults who can make sound financial decisions, avoid excessive debt and manage income and expenses to reach their financial goals.

Parents can help children become effective money managers and responsible buyers by teaching them money management skills from an early age. Financial education should be based on the needs, interests and abilities of each child. The following guidelines may be helpful:

Under 5. Around age 3 you can start talking to your children about money. Use a piggy bank to teach how to identify and count coins and cash. Between 4 and 5, you can explain the importance of good savings habits. Help them learn that saving for a specific item and then buying it gives great satisfaction. Take your child to the store to actually see a toy he or she saw advertised. Together, examine the toy and decide if it can really live up to the promises made in the commercial.

Children at this age are quite aware of commercials and sing the jingles they hear on the television and radio. Begin talking with them about the financial realities of the family and how choices are made.

The primary purpose of a budget is to design a realistic plan for spending limited financial resources. A student budget requires flexibility to adapt to the changing circumstances of college life. Essential steps in designing a budget are:

• Identify your income sources. Income can include your allowance from home, take-home pay from students employment, saving allocated to college expenses, interest, dividends, gifts, grants, scholarships.
• List fixed and flexible expenses. Fixed expenses are exact amount due on a specific date. Flexible expenses include money spent on wants and needs that are irregular in nature.
• Review and modify the plan. If expenses exceed income identity ways to increase income or reduce expenses. This is not rocket science, but doing it right is terrible important to your economic well- being at college.

Peer pressure and conveniences such as automatic teller machines can play havoc with student budgets, because ready cash makes it easy to buy think on a whim. A budget can help you sidestep impulse spending. It puts you in control of the decision to buy or not to buy, based on your needs and available cash.

College student’s Budget Format

The time period of a student budget can be a month, a semester, or the school year. After listing all income, estimate how much money you will spend on the fixed and flexible items in your budget. Fixed items are constant and easily defined. Flexible expenses are more difficult to identify because of their changing nature. Keep a daily record of your expenditures for a few weeks to better estimate the kind and amounts of your flexible expenses.

 

Credit Cards and College Students
You will have access to credit cards as a college student. While credit cards are useful when used appropriately, the temptation to overspend can lead to expenses that could destroy your budget as well as your financial independence. Students sometimes wisely use credit cards to pay for unexpected expenses such as medical emergencies, with the full understanding that it costs money to borrow money if the credit card balance is not paid in full each month.
Your credit record begins when you establish credit in your name, and a history of repayment is recorded by credit reporting agencies. Your credit rating follows you wherever you go, and a bad credit rating can affect your ability to get a job or buy a car or house.

Credit Card Tips for College Students

Set a credit card limit and stick to it. When possible, pay off credit card balances each month.If you pay only the minimum balance on credit cards each month, you will pay interest on the use of the money, and it will take time to pay off the total debt.
Comparison shop for credit cards. On credit applications, compare the annual percentage rate (APR) including finance charges, methods used to compute charges, the grace period, annual fees, penalties for late payments and other charges.
Your credit limit may increase when you pay your bills on time. To avoid overspending, make buying decisions based on a careful analysis of your financial condition rather than on the credit limit on your credit cards.

Tips for Raising Your Score #1

It’s important to note that raising your score is a bit like losing weight. It takes time and there is no quick fix. In fact, quick-fix efforts can backfire. The best advice is to manage credit responsibly over time. Pay your bills on time.
Delinquent payments and collections can have a major negative impact on your score. If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your score. Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years. If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. This won’t improve your score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.

Tips for Raising Your Score #2

Keep balances low on credit cards and other “revolving credit”. High outstanding debt can affect a score. Pay off debt rather than moving it around. The most effective way to improve your score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.
Don’t close unused credit cards as a short-term strategy to raise your score. Don’t open a number of new credit cards that you don’t need, just to increase your available credit. This approach could backfire and actually lower your score.

Tips for Raising Your Score #3

If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your score if you don’t have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

Tips for Raising Your Score #4

Do your rate shopping for a given loan within a focused period of time. Scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.
Re-establish your credit history if you have had problems.Opening new accounts responsibly and paying them off on time will raise your score in the long term.
Note that it’s OK to request and check your own credit report. This won’t affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.

Tips for Raising Your Score #5

Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix — it probably won’t raise your score.
Have credit cards — but manage them responsibly. In general, having credit cards and installment loans (and paying timely payments) will raise your score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.Note that closing an account doesn’t make it go away. A closed account will still show up on your credit report, and may be considered by the score.

Every year millions of Americans receive short term payday loans to cover emergency expenses or provide extra cash during hard times. While payday loans can provide borrowers quick access to cash, without a credit check, these loans come at a high price and if used unwisely can lead to further financial troubles.

Payday loans are incredibly expensive by traditional standards. The interest rate on payday loans is often over 500% and requires borrowers to repay the loans in full within two weeks or risk further fees and charges. While these loans do not help borrowers build a positive credit history, failing to pay a payday loan can have a dramatic negative effect on your credit. Borrowers often find themselves trapped after taking out their first high-interest payday loan. When they are unable to repay the first loan, they take out additional payday loans, and before long are thousands of dollars in debts to these companies. Many payday loan lenders will attempt to take the funds from a borrower’s bank account, every week, whether the money to pay the loan is there or not. This results in overdraft fees from their bank, as well as additional fees from the payday lender. Unfortunately, many consumers are forced to close their bank accounts to stop this process and negotiate a payment plan with the payday loan company. By the end of this process a $500 payday loan could cost a consumer $700, $800, $900 or more. 

 
At the end of the day the key word in getting a payday loan is caution. Use caution when deciding whether or not to take out a payday loan.  Consider all of your other options for getting the money necessary, never take out a payday loan unless you are 100% sure you can repay it on the day it is due and never use payday loans to pay for frivolous or unnecessary purchases. In the event you do find yourself in trouble with payday loans immediately contact a non-profit credit counseling agency for assistance.

As I promised last week today I am going to give you more tips on how to prevent ID theft.

• Carry a photocopy of your passport when you travel here or abroad.

• We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know where to call. Keep those where you can find them.

• File a police report immediately in the jurisdiction where your credit cards, etc, were stolen.This proves to credit providers you were diligent, and this is the first step toward an investigation, if there is going to be one.

• VERY IMPORTANT!  Call the three national credit report organizations immediately to place a fraud alert on your name. Also, call the Social Security Fraud line number. The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.

• These are the numbers you should contact right away about your wallet or purse, etc., having been stolen. Make all four calls!

1. Equifax: 800-525-6285
2. Experian (formerly TRW): 888-397-3742
3. Trans Union: 800-680-7289
4. Social Security Administration( fraud line) : 800-269-0271

Today I was thinking to give you some advice on how to prevent ID theft. Here are some tips which I thought are the most important. Ready? Let’s get started:

1. Do not sign the back of the cards. Instead, write “PHOTO ID REQUIRED”.
2.  When you are writing checks to make a payment on your credit cards accounts DO NOT write the entire account number on the “For” line. Instead, just write the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your checks as it passes through all the checks processing channels won’t have access to it.
3. Put your work phone # on your checks instead of your home phone.
4. If you have a PO Box, use that instead of your home address. If you don’t have a PO Box, use your work address.
5. Never have your social security # printed on your check. You can add it if it is necessary. Why? If you have it printed, anyone can get it and use it.
6. Duplicate the content of your wallet on a photocopy machine. Do both sides of each license, credit card, etc. You will know what you had in your wallet and all the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place.

Did you understand what to do ? Good! Stay in tune for more tips on ID Theft, which I am going to publish next week. Promise.

Two important federal laws protect women’s credit history and make it possible for them to obtain credit in their names. The Equal Credit Opportunity Act gives women the opportunity to establish their own credit history and identity, even if they are not employed. Under this Act, reports to credit bureaus must be made in the names of both husband and wife if both use the account and are equally responsible for repayment.

The Fair Credit Reporting Act establishes the procedure for correcting mistakes on a credit report. You have the right to see what is in your credit file and have any errors corrected. The law also gives you the right to add a statement in your credit report explaining your side of the story for any negative item. If you have negative information in your credit report, the Fair Credit Reporting Act gives you the right to add a statement explaining your side of the situation.

If you have applied for credit and were denied, find out why you were denied. It may be unrelated to your credit usage. It may be that you have not been with your current employer long enough or that your history has been combined with another persons’, or erroneous information was given by a business, or that there were too many inquiries on your credit report. An inquiry is noted on your credit report when anyone or business requests your credit report. Some businesses look at the number of inquires and may judge that you are trying to obtain more credit than you can afford.