Insurance and Credit

In my years of experience in the industry, I have found that most people are looking for a debt relief option that does not exist. Here are the criteria they are usually requesting: – Pay off all accounts quickly – Not harm their credit – Not cause creditors to hound them with phone calls

The straight fact: That program does not exist!

What I have found over years of assisting clients out from under the burden of debt, is that most are initially seeking a program that does not exist. Let’s be clear, there is no debt management program in existence that will provide the above benefits. That being said, let’s talk about what options are available and in short summary; provide a basic understanding of each one.

Debt Consolidation: Debt consolidation loans are typically home equity loans or second mortgages. This is where you take the equity out of your home to pay off unsecured debts, and then just repay the equity loan with one payment, hopefully lower than the total min payments on all your unsecured debts. The upside is that you can trade in your high-interest unsecured debts for a lower-interest, single payment that can sometimes have a tax benefit. The downside is that most people who have a lot of unsecured debt will not qualify for a loan, or have any equity in their home.

Credit Counseling: Credit counseling companies have been getting a lot of trouble lately with consumer protection agencies. Most of them are non-profit and claim to lower your interest rates and provide a low monthly payment. Typically, they take your payment and distribute to pay each creditor a small payment. The good thing is well there is no good thing. Credit counseling programs hardly ever do what they claim, and many creditors no longer participate. Most have found this to be a serious waste of money and time. The bad thing is that your creditors will enter a statement onto your credit report for every account in credit couseling that states that the account is handled through a program. This is a seroius negative for anyone looking at your credit.

Debt Settlement: This has become, by far, the most popular and most effective program for getting out of debt in a short period of time. However, you must truly be in a financial hardship and not able to pay your current minimum payments. The idea here is to negotiate an accepted settlement of less than what is owed with each of your creditors. All creditors will accept settlements as long as you are far delinquent, and have shown valid reason. It seems that attorneys have been most effective in negotiations with creditors due to the fact they cannot be easily bullied by debt collectors. The positive is that you can completely pay off your accounts for a fraction of what is owed in a very short time-frame; usually 36 months or less. The negative is that your accounts must become very delinquent before creditors will accept settlements. This is not a problem if you are in a financial hardship; after all, you already have an inability to make your minimum payments.

Bankruptcy: It once was that anyone could file chapter 7 bankruptcy. In the post-bankruptcy reform era most people now don’t qualify for bankruptcy, and have no other alternative except the options outlined in this article. The good thing is that once a chapter 7 bankruptcy is fully discharged, the owed amounts are written off and will not pursued further. The bad thing is that it is that you will have a permanent public court record, and will also have a public record on your credit report for up to 10 years.

This information should provide you with foundation of knowledge that will allow you to select the best debt relief option for your specific financial circumstances.

One of the biggest mistakes of debtors is to use their credit cards carelessly and live off paying them on time. If one can only hope the credit card debts will just disappear when not mind at all, but this is not the case with your lenders. This irresponsible move can only worsen your financial situation. When your credit will ultimately be fully used, paying the bills on time will be more difficult than ever. Putting these problems aside is one of the worst solutions. Ask for help!

There are organizations which help consumers with debt problems. They generally refer themselves as credit counseling agencies. There are a number of these agencies in the neighborhood. Some ask for a fee while others are not-for-profit. Your homework is to find a legitimate credit counseling program which will honestly help you get rid of your credit card debts.

Your credit counselor will analyze your current income and your living expenses to uncover the extent of the problem. The counselor will then come up with a budget and an action plan for your debt management. These are all carefully studied to suit your needs.

Your counseling agency will go with you through the process of finding the best debt management plan. They can negotiate with your credit card lenders terms that will both be beneficial to you and to the lender. This proposal, however, will close your accounts to erase all the late charges and other extra fees while you are on the debt management plan.

Along with the plan, the counselor can suggest ways to manage your finances well during the plan duration. You will also get to decide to sacrifice some expenses in your daily routine.

By helping you go through this challenging part of your life with your debts, your credit counselor will most likely educate you of ways to save money and will even recommend you take further financial education sessions. By learning the hard way, you will know first-hand how difficult it is to escape this financial dilemma. With realization, you will be more aware to prevent these financial problems in the future.

Paying off your balances with your credit counselor’s suggestions is only the product of the entire process of credit counseling. What truly matters is that you learn the financial literacy as a consumer. By using credit only when needed, you will control your financial impulses and financial life in general. By being honest and courageously asking for help, you saved your life from great disaster.

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Credit Scores are an important part of any person’s finances. Most people underestimate the power of a good or bad credit score and its implications on everything from your insurance rates to being able to buy a home. Here’s an example of how your credit scores can affect you that just happened to a client of mine. Two months ago this person decided to buy a home and got a pre-approval from their lender. Two weeks ago they found the perfect home and we wrote an offer on it that was accepted. During the underwriting process, the bank pulled another credit report. My client’s score dropped 3 points and knocked them out of being able to buy the home. Nothing changed but those 3 points. So now no home for them! Crazy!

Credit score is being used more and more these days. Everything from car insurance, employment, promotions, and loans of any size and shape. Your credit score may turn out to be one of the most important numbers that you will have. For better or worse, that the credit reporting companies will have great power over your life.

Like it or not, YOU HAVE TO BE PROACTIVE! Know how to manipulate your score to improve it. Don’t expect much help from the credit reporting agencies because every time somebody pulls your report they get paid. When you shop around for a better deal on that car or home, they make money. The lower the score, the more money the credit reporting agencies make.

Please note that I do not do credit repair. I recommend you use a professional credit repair company to work with. That being said there are some rules that I have learned about that will help you along the way:

1. Check your credit score every year. Every person can and should get a free report form each of the credit reporting agencies every year to see what is being reported and if that information is correct. You might be surprised at what you find.

2. Make your mortgage payments on time. What causes your credit score to be hit the hardest the fastest? If you are late on just one house payment your score drops 100 points! That’s right, and if you have ever tried to bring it up it will only go up a few points at a time and over time.

3. Make your mortgage payments on time. What causes your credit score to be hit the hardest the fastest? If you are late on just one house payment your score drops 100 points! That’s right, and if you have ever tried to bring it up it will only go up a few points at a time and over time.

4. Pay all medical expenses promptly. The other things that will hit your score very hard are medical collections. These collections can pound your score worse then an Iron Chef smashing a piece of meat with one of those metal hammers with little spikes. Get these paid off ASAP or set up a payment plan. Some hospitals will settle for this than what is owed. It never hurts to ask.

Check back for more tips and articles to help improve your credit score. Credit repair is a process, so stick with it!