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.

Debt Settlement Company

If you are looking at bankruptcy, a debt settlement company may be an option. A debt negotiation company can have you out of debt in less than four years. A bk can stay on your credit report for up to ten. You can expect to pay back about 40-60cents on the dollar with a debt reduction company. Debt negotiation is different than consumer credit counseling. CCCS programs require that you pay all of your money back plus interest. Debt Settlement will have you pay less than what your originally borrowed. There are consequences however. Your credit will be messed up for awhile.

The reality is that there are not to many great choices when you get into debt.

Should I do credit counseling?

Should I do credit counseling? If you just want to lower your interest rates on your credit cards and you are in good financial condition, the answer is no. Joining a credit counseling program should only be if you are experiencing a financial crisis. You may be over the limit or have rolling late payments and are getting saddled with late fees and over the limit fees. Once you start this cycle, your creditors will raise your interest rates that are commensurate with the universal default rate that is in your credit contract. Once you start a cccs program the creditors will stop the over limit and late fees. You will also be given lower interest rates. The rates will depend on the creditor. They are all different. I like Bank of America in general. If you do join a credit counseling program, they lower their rates to 0%. Other credit card companies can be across the board when it comes to rates.

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Paying off old debts is no longer bad for your credit scores

It used to be that if you had an old debt that was unpaid and then paid it, it would drastically drop your credit score. According to Liz Pulliam Weston this glitch has been corrected. If you settle a debt make sure that the creditor will change the status on your credit report from unpaid collection to a paid collection. Leaving it as an unpaid collection can wreak havoc on your credit score. Believe it or not a paid collection is looked at as a positive mark for your credit score. You don't need to try to get a paid as agreed, most creditors wont want to give you that anyway.

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Can a debt collector talk to other people about my debt?

If you have an attorney, the debt collector can only contact the attorney and not you. If you do not have a lawyer, a bill collector can contact other people but only to find out where you are. The cannot tell you about the debt and their opinion about you and the debt. Most collectors are usually prohibited from contacting such third parties more than once. Usually the collector may not tell anyone other than you and your lawyer that you owe money. If you have any questions about collections, you should read the Fair Debt Collection Practices Act.

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Instant Credit Builders - pay off your old bills

Instant credit builders are for real. When you pay off or pay down debt, your credit score will be impacted almost immediately. Doing debt negotiation and paying of a collection can raise your score 200 points or more in some cases. This could be the difference between buying a home or continuing to rent. The other thing that has an impact on your credit is what percent of your credit limit you have used on your credit cards. Once you go over 30% of your available credit on your credit cards, your score will be negatively affect. So if you have the money and want to raise your credit scores, just pay them down to 30% of what you owe.

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What is bad debt?

What is bad debt? Bad debt to a company that is lending money, is money that is owed and not being collected. People who borrow money for various reason just stop paying. They may have lost a job, divorce or even a death in the family will halt a persons ability to repay a debt. A company when declaring it a bad debt, no longer has to count it as a receivable and they are able to write off the loss on their taxes.

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What is consumer debt?

What is consumer debt? Consumer debt can take many different forms. It is typically understood to be any debt that has to do with the acquisitions of goods that are consumable. A car is a consumable good because they don't last forever. Typically a consumable good will depreciate in value over time. It is very common now for people to buy consumer goods with their credit cards. Any balance that is carried on a credit card is considered to be consumer debt.

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Feeling like you are starting to get piled on by your mounting bills? You may want to look at where the money is going. It may not be fun to get it debt but doing nothing about it can make a problem even worse. You may not want to hear this but it may be time to start living by your needs and not your wants. That's right, do you really need the premium channels on your cable tv? I don't think so, I don't know anyone that died without having cable tv. Instead of your Starbucks runs, you can make coffee at home. Don't go to the movies, check out movies from the library, they are free. Do you really need a cellphone? There was a time when people actually didn't have a phone with them all the time. It wont kill you. What will kill you is being in debt. Do yourself a favor and get started on something now. Anything would be good.


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What is a debt management company?

A debt management company is a third party company that assists consumers in their repayment of debt. Many companies that do this kind of service is called credit counseling or consumer credit counseling. Consumer credit counseling is referred to as CCCS as well. They will also help you work out a budget so you can save more and allocate more money to getting out of debt. Often times they will lower interest rates and get over the limit and late fees to stop accumulating. It used to be that signing up with a debt management company was like doing a chapter 13. Those days are over, you can actually buy a home while you are still in the program.

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Can I get sued while in a debt negotiation program

If you thinking about enrolling in a debt negotiation program and the company is telling you that only a small percentage of the clients get sued, they are lying. Over half of the clients get sued. A good debt negotiation company will know how to negotiate with the creditors so you wont end up in court. Debt Negotiation is a great option to settle your collection accounts. You just need to be informed about what will be in store for you in the future. It can be a bumpy ride, but if you are committed to being debt free, debt settlement is a great option. Anything you can do to avoid a BK is your best option. Just know that debt negotiation will take some effort on your part. Don't expect the debt negotiation company to do everything for you.

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5 Old-Fashioned Ways of Digging Yourself Out of Debt

In some respects, digging out of debt is not so glamorous. We have grown to love our modern conveniences, but these things have taken their toll on our pockets. For most of us, solving our debt problems requires no secrets, perhaps only some common sense and a reminder of what some of these conveniences cost us. Life does have a way of training us. Hopefully we can learn from our past mistakes that we have made with our money.

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Debt Consolidation As An Alternative To Bankruptcy

There it is again, the phone. You know that it is a bill collector, you just know it. It is dinner and they always call during dinner. You are at your wits end. You think that your next step is filing for Bankruptcy. Before you do, consider debt consolidation.

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Student Loan Consolidation Rates - Helpful Tips

There are many things to consider when qualifying for a mortgage. One consideration for qualifying is your debt ratio. If you have student loans, consolidating them could help you qualify for a mortgage. Here are some valuable tips on consolidating your student loans.

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Consumer Credit Counseling for Good Credit, Debt Settlement for Bad Credit

With many alternatives for getting out of debt, you need to do your homework before you choose a method. Typically, consumer credit counseling or CCCS is a great alternative for someone with great credit. But, debt negotiation is probably better suited for paying off bad credit accounts.

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Will my credit score go up after Debt Negotiation program

If you are in a debt negotiation program and are wondering if your credit score will go up while you are in the program, the answer is that it will. Each time that you settle an unpaid collection account your score will go up. It will be at its highest point once all of the unpaid collections have been settled and paid. Even though it will report as an unpaid collection it is still looked at by the credit reporting agency as a positive mark. Your credit score will always go up when you go from an unpaid collection to a paid collection.

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Beware of third party debt negotiation companies

If you are considering signing up for a debt negotiation company, you may want to consider using lawyer and not an unlicensed entity. An attorney is held to a higher standard. Their are many stories of debt negotiation companies disappearing in the middle of the night. If you don't believe me just Google Jubilee Financial. This kind of thing goes on all the time. An attorney has to answer to the state bar if there are any complaints. They don't want to loose their license to practice law.

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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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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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