Credit Cards and Debt Settlement

Credits cards were originally designed to give the consumer short term borrowing ability. The cards were first used by major department stores for purchases only at their locations. In some cases, this was the consumer’s first credit card or credit in their name. Then the first major credit card issued by a non-retail company was the Diner’s Club card. This card was considered to be a business card to cover entertainment and meals and repaid in full each month. Then the major banks become players in issuing credit cards and the borrowers were on their way to creating new financial problems for themselves.

In the beginning, the consumer used the card judiciously and paid off the balance in full monthly. However over time, the consumer started paying only the monthly minimum payment along with a little bit toward the principal balance. The consumer was alright with this practice because they had enough monthly cash flow along with a good job and the economic was doing fine. From time to time because the economic climate was on the up swing, the consumer had equity in their homes. Because of the equity, the consumer would refinance their homes at a lower rate and take monies out to pay off their unsecured debt. This way of handling finances was alright as long as the economic was in a positive position.

This all changed over the past several years. Consumer’s started facing financial hardships, lost of job, reduced salaries, and divorce or faced a medical emergency along with the adjusted interest rate on their mortgages and increased unsecured credit card debt.

The consumer was faced with the reality of how to get out of debt. In most cases, this is the first time many consumers were faced with these uncertain financial times. So the consumer started looking for ways to payoff their financial obligations.

One of the options the consumer is selecting is a debt settlement program. Debt settlement is a method by which a third party negotiates with the lenders to reduce your obligation by up to 50% of the outstanding debt. The consumer puts aside a set amount of monies each month into a “trust/escrow” account over a period of 12 to 48 months depending upon the amount of their credit card debt. The debt settlement company starts to negotiate when at least half of the lowest balance is in the account. This proceed is repeated until all debts are settled.

Getting out of Debt

As the new school year begins it is time for the consumer's to take hold of their unsecured debt. This debt will only grow over the next several months as the holidays approach and will continue to add pressure to the family situation.

So how does the consumer stop this pressure and get out of debt? One of the ways to put the brakes on this situation is to consider a debt settlement program. A debt settlement program is designed to reduce the overall unsecured debt of the consumer.

The program establishes a "trust account" into which monthly payments are make until there is enough money to begin to negotiate with the lender. In most cases, the debt settlement company can reduce your debt up to 50% or more. This may be a better alternative than to file bankruptcy or doing nothing about the situation. If you are considering bankruptcy please consult with an attorney before taking that step or at least call a debt settlement company to understand your option.

The debt settlement program will have some possible drawbacks for the consumer which need to be considered. The consumer's credit report will take a hit in the beginning of this process however the consumer's credit may already been hurt by:

· Too high of outstanding balances
· Late Payments
· Too much credit
· Tax liens, judgment's, repossessions, etc

If the consumer does consider the debt settlement option. They then had started the journey of getting out of debt. One of the positives to possible come out of this unfortunate situation is the consumer is now motivated to learn how to handle their expenses and money in the future.
Other consideration that the unpaid balance maybe considered income and is therefore taxable under your normal tax rate.

There is no easy fix to large amounts of unsecured debt. But the consumer needs to face the situation head-on a deal with it in a responsible manner. So call a debt settlement company today to discuss the complete ins and outs of the program. Give you and your family a new peace of mind and start anew.

Credit Builders - Simple tips to raise your credit score

Credit Builders can be free and easy if you know what the rules for credit reports are. Don't cancel your credit cards even if you are not using them. Roughly 15% of your credit score is based on your credit history. If you cancel the cards, you are canceling the credit history with it as well. Pay your credit card balances off or pay them down to at least 30% of the available credit. The amount of your debt load will account for over 30% of your score. Paying off debt can have a big impact on your credit score.

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My credit is screwed

My credit is screwed. There is always something you can do to rebuild your credit.

Tips to rebuild your credit

What is credit repair?

Credit repair is the process of improving your credit score. Bad credit is the major factor for people not being able to finance their consumer or home purchases. It can also be a process of disputing or fixing discrepancies shown on your credit report in the credit bureaus. A credit must be able to show proof of the existence of a debt. If they can't, they must take it off of your credit report.

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Had a Bankruptcy - 4 Critical Steps To Good Credit Scores

Bankruptcy is not the end of your borrowing of money. It does provide a clean slate. However, to get back on track there are some critical steps to take following your bankruptcy which you need to take right away after your process is complete.

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8 Major Misconceptions About Filing a Personal Bankruptcy

Bankruptcy is a big step and can be quite helpful in the process of restoring your credit. Not filing a bankruptcy because of untruths about it can be a mistake. Read about some of the misconceptions of bankruptcy in this article.

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I don't want to file bankruptcy, what else can I do? Debt Negotiation

It has gotten harder to file bankruptcy. Given the changes to the bankruptcy laws in 2005, it is more difficult to file and discharge a bankruptcy. Debt negotiation is a possible alternative to explore instead of bankruptcy.

Alternatives to Bankruptcy

Consumer Credit Counseling - Is it right for me?

Consumer Credit Counseling or CCCS can be a great way to get out of debt. Beware however as there are some things you need to know before you start a counseling program. Don't get surprised once you are in the program because it will be too late to back out.


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Insider Tips - Why use a debt negotiation company?

Given the recent changes in 2005 in the bankruptcy laws, it has gotten tougher for us as consumers to file for bankruptcy. What else can we do, if we get in over our heads with debt and its getting old treading water every month? One alternative is debt negotiation.


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Tips on Negotiating your Debt with Collection Agencies

Settling your debt with a collection agency can be a rough experience. With some knowledge of how the system works you could save yourself a lot money and heartache.

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How much will my credit score go up if I pay my collection accounts off?

If you pay your collection accounts off your credit score can go up as much as 200 points. It can take a few months to report properly in your credit report. Typically once all the collection accounts are paid off your credit score should go back to normal in about six months. You can negotiate paying off your collections as well. You don't have to pay back dollar for dollar what you owe. You might want to start our negotiating your debt at 25 cents on the dollar and see where you end up. You may have to play with them for awhile however. They usually don't just roll over on the first offer. You may have to back an forth a few times before you will be able to reach a settlement.

If you have any questions about debt negotiation please let me know.

Alternative to Bankruptcy