| Credit counseling - They do not have all the answers (credit counseling)
|
| ACS provides free articles on credit counseling, debt consolidation loans and refinance mortgage. |
Credit counseling - They do not have all the answers
[ Bookmark this page! ] [ get HTML Version ]
When you pull your credit report several times or when credit counselors do it for you, your credit score is not impacted. You credit report cannot be lowered due to the fact that you or someone accessed the credit file. This is a myth. There are different types on inquiries to your credit report. When a lender requests a credit report, it is termed as hard enquiry and will impact your credit score. However, if you are stuck with credit counseling, make sure you make you payments on time in accordance to your debt management plans aka DMPs. A credit counselor can review your debt situation and provide you will suggestions and services to reduce or eliminate your debt.
Fix and Repair Bad Credit
Don't you ever feel that's the only thing you can think of? While driving, at work, talking to people, anywhere you go your mind just fixates into "fix bad credit repair bad credit bankruptcy do it". Wouldn't you like that to stop? I know more than a couple of million people who do.
Having bad credit is terrible; it's like having a leash around your neck every time you go to a mall, loo... Read credit counseling article
Credit counseling - They do not have all the answers
Are "They" Right? I had heard (one of those things that "they" say) that checking your own credit report lowers your credit score. Is that true and will the score be hit three times if ordering all three free reports? I appreciate your time. -- Sincerely, David
Hi, David. As is often the case, "they" aren't quite right about the impact on your credit score when checking your own file. (However, feel free to follow "their" advice in matters of the heart and health -- "an apple a day..." and all that stands up pretty well to scrutiny.)
When you take a peek at your own file, it's counted as a "soft inquiry" as opposed to a "hard inquiry," which takes place when a lender asks about your creditworthiness. A hard inquiry, it's estimated, can cause a five-point (give or take a point or two) drop in your score. The damage -- if any -- reverses itself pretty quickly. A soft inquiry may not even show up on your report. (By the way, a record of inquiring entities is part of your credit report.)
Here's more on financial background checks -- which to avoid and which don't matter -- and tips on controlling the number of "hits" on your file.
The APR Shuffle
I recently acquired two credit cards with 0% APR on balance transfers for a year. I intend to use the full limit of these two credit cards to pay off my home equity loan, saving about $1,200 by doing so. I know this will affect my credit score, but by how much? Appreciate your insight on this. -- Regards, Ben
I admire your creative financial thinking, but the nervous Nelly in me is dwelling on the many ways this plan can go awry. The biggest "oopsy daisy" would be if that sweet deal suddenly turns sour. While that year-long 0% APR on balance transfers is a very tempting offer, particularly when it could save you more than a grand in interest on your home equity loan, 0% can become 12% or 15.99% or 23% in no time.
Creditors can legally hike your interest rate (promotional or not) at any time with just a few weeks notice. It's what's called the "universal default clause," and lenders will lean on that small-print passage if they see you applying for too much credit, paying another lender's bill late, or otherwise doing something that they deem financially threatening. Should it happen to you, that $1,200 savings could turn into $1,200 of additional debt instead. If you follow the law to the letter and are a Goody Two-shoes about all of your bills, the risk may be small to you, particularly given the potential savings.
As for the effect on your credit record, only the secret calculator used by the keepers of creditland know what kind of hit your score might take during these financial gymnastics. Thirty percent of your credit score is based on your debt-to-available-credit ratio. So the extent of any damage to your credit score depends on how much other credit you have extended to you -- and any other debts you're carrying. Ideally, lenders like your debt-to-available-credit ratio to be less than 30%. So do a little math before opening up another line of credit or acquiring significantly more debt.
When you change your credit profile (by borrowing more money or paying off a portion of debt, for instance), it can take a few weeks or a month for you to see the results on your report. I suggest keeping a close eye on the interest rates and deciding if a short-term hit to your score is that big of a deal in your financial life.
New Bride, New Credit
I recently got married and am still listed on my parents' MasterCard. They carry a high balance, and I am wondering how that affects my credit score. My husband and I are trying to get our credit scores looking their best so that when we find a house our history will be in order. What are your thoughts? We both carry American Express cards in our own names so it's not like I don't have credit elsewhere.... Thanks for listening! -- Jennifer
Congratulations on your nuptials. And an even heartier toast to you and your beau for prettying up your credit to court future mortgage lenders.
It sounds like you're an "authorized user," not a co-account holder, on your parents' credit card. Being an authorized user does not make you responsible for those debts, and therefore the card will not turn up on your credit report. (Many divorcees are happy to make this discovery.) Since you already have credit in your name, unless you actually use your parents' card, you might want to have them remove you as an authorized user. This can usually be done with a simple phone call to the handy 800 number on the back of the card.
Adding points to your score can take a while, so starting now is smart. If you haven't already checked out the credit area at Fool.com, I encourage you to take a peek. This article -- "How Lenders Keep Score" -- shows you what matters most to bankers. You'll notice that on-time bill payment is a biggie. So if nothing else, make sure you put the check in the mail on time, every time. And good luck to you and your husband on the house-buying venture.
Debt-Be-Gone
I currently owe just over $9,000 in credit card debt, spread out over three cards. I've been working with a credit counseling service for a while and paying off my debt through them. They've been a big help as I was over $15,000 to start with and they've given me stellar service whenever I've called their customer support line for help or to adjust payments on those cards.
I'm currently on track to pay off my credit card debt completely by December 2006. I'm more than happy with that target date, but I wonder if I should look into applying for a low APR credit card (lower than what I have now through the credit counseling agency), consolidating my debt onto that card and shav(ing) a month or three from the payoff period. -- Thanks, Kevin
Kudos, Kevin, on looking for ways to accelerate your debt pay-off plan. Hopefully your credit counselor is also pleased with your determination. Depending on how the program works, you may or may not be able to take over payments from the counseling service. (Do you remember signing any sort of contract?) Asking doesn't hurt, so go ahead and inquire. If it's not allowed, have them accelerate payments if you're able to devote more money per month to pay down the debt. It sounds like they are amenable to such changes. I'm sure the lenders on the receiving end of your checks would be.
If your current credit card accounts were terminated when you went into the program, you should probably start rebuilding your credit record. Again, talk to your credit counselor and see if/when/how you can apply for more credit. (Some credit counseling programs forbid participants to apply for additional credit when enrolled.) Best of luck to you and congratulations on getting that debt paid down.
Dayana Yochim cannot answer every credit question she receives, but ones accompanied by a fiver have a pretty good shot at catching her eye. The Motley Fool's disclosure policy reveals that Dayana cannot ask readers for fivers. But nice try, Dayana.
Bookmark this page | Search this site | E-mail to a Friend
Credit counseling - Get Out of Debt and Get Rich
With the right attitude and a little credit know-how, anyone can climb out of the hole and stay debt-free for life.
My name is John, and I'm a recovered compulsive debtor."
John and thousands like him meet across America -- in church basements and high school auditoriums -- every week. They talk about blowing the mortgage payment on gourmet restaurant meals, then scrounging to find enough coins for the tollbooth. They know that sick dread while opening the mailbox, wondering which bill is now due. They've seen how debt can destroy marriages and even lead to suicide.
They're members of Debtors Anonymous, a 12-step program modeled on Alcoholics Anonymous. They are clerks and executives, artists and electricians. Some have trust funds, others make minimum wage. Some overcharged on credit cards, others bought "fully-loaded" cars with seven-year loans, still others moved into lavish homes with interest-only mortgages. What they have in common is an overwhelming temptation to spend more than they earn. If you think that makes them different from the rest of us, consider this:
Americans bought over $2 trillion worth of stuff on credit last year.
Current outstanding debt on credit cards -- that's the "revolving" part that we don't pay off every month -- totals nearly $700 billion, up from just $50 billion in 1980.
Three of five American families can't pay off their credit cards each month. Their running balance averages about $12,000, which is one-fourth of the median household income.
By the mid-1990s, credit card debt held by Americans living below the poverty level more than doubled.
Senior citizens, once noted for their frugality, are sinking deeper into debt: Their average credit card balance increased by 89 percent between 1992 and 2001.
Total consumer debt in the United States comes to over $7,100 per person -- and that doesn't include mortgages.
Grim as that sounds, there's help to be had. With the right attitude and a little credit know-how, anyone can climb out of the hole and stay debt-free for life.
Just ask Wayne and Rebecca Denton of Clayton, North Carolina. In the 1990s, while Rebecca was in nursing school, Wayne, a lawn-care technician, began putting all their purchases on eight credit cards. By 1998 they were $88,000 in debt -- more than their combined annual income of $61,000.
At first Wayne tried to hide the debt from Rebecca. But it got so bad that he couldn't even make the late-payment penalties, much less pay the bills. Eventually the phone was shut off, and Wayne had to borrow money from relatives just to buy food. The couple hit bottom when Rebecca considered filing separation papers. "But the lawyer told me that we'd be fighting over assumption of debt," she recalls. "I was shocked. In most divorces, people fight over assets. We had no assets."
Rebecca says she "cried to God to save my marriage." The turning point came when she bought a $12.95 workbook by radio host and debt-reduction guru Dave Ramsey. The couple cut up their credit cards, and started working overtime to pay the bills. "Instead of getting mad at each other, we got mad at the debt," says Rebecca.
Seven years later, with one son and another on the way, the Dentons are debt-free, living in a larger house and building up their savings. "It's been a radical change in our thought process," says Rebecca, "but I wouldn't trade it for anything." They keep one credit card for buying gas, which they pay off every month. And they read the fine print. "The credit card companies are really trying to put one past you," says Rebecca.
It wasn't always that way. Back in the 1950s, banks introduced credit cards to promote customer loyalty, especially the kind of customer who would pay the bill in full each month. The business grew steadily but remained fairly genteel until the 1980s, when a series of state and federal deregulations made it possible for banks to charge more interest and operate nationally. Nationwide marketing opened the floodgates. In 2003, banks mailed out 5.2 billion offers for credit cards.
Today more than 75 percent of American families have at least one credit card, which makes it possible to rent cars, shop on the Internet, and buy plane tickets. "You need a credit card," says Terry Savage, the syndicated Chicago Sun-Times financial columnist.
What you don't need, she adds, is the long-term debt. Banks make more interest when people pay over time; that's why minimum payments on credit cards have shrunk to as low as one percent of the total balance. With payments that small, it sounds so easy.
But wait: The average college student owes almost $2,800 on plastic, and that doesn't include student loans. If she pays $50 a month, assuming an 18 percent interest rate, it will take her more than ten years to pay off the credit card -- at a total cost of $6,154.
Financial experts agree that personal responsibility could prevent most debt problems; don't spend it, and you won't have to pay it back. But they still put some of the blame on banks, which lure new customers with low rates, then jack up the interest if they're late on just one payment. Many consumers are unaware that banks can raise your rate if you're late paying a completely unrelated bill, such as your mortgage. (It's in the fine print.)
Banks argue that late payments indicate credit risk, justifying higher rates. But in recent years banks have redefined what's risky -- often raising rates and charging penalties if a payment is late by even a few minutes. According to Robert Manning, a noted industry expert, late fees rose from $1.7 billion in 1996 to $7.7 billion in 2003.
Officials at the American Bankers Association, the trade group representing the credit card industry, say this: "Lenders use penalty fees as a risk-management tool against customers who mishandle their finances."
Dave Ramsey has seen it all: "When you hear about a 78-year-old widow living on $800 a month in Social Security, and the credit card company lets her rack up $70,000 in debt, there's a lot of corporate immorality there."
How much debt is okay? Savage recommends that your mortgage payment plus property tax and home insurance total no more than 40 percent of your take-home pay; Ramsey says no more than 25 percent. If you haven't already consolidated your student loans, do so before June 30: "Consolidation rates are the lowest ever," she says, "and if you agree to have the payment automatically withdrawn from your checking account, they'll usually knock another quarter point off the rate." Car loans -- up to four or five years at a low interest rate -- are also acceptable. "If you need a seven-year car loan, you're buying too much car," says Savage.
Total debt, though, should never be more than half your take-home pay -- and that's assuming you're putting the maximum into a 401(k) before taxes.
As for credit card debt, most experts agree that any is too much. "If you can only make the minimum payment on your credit cards," says Savage, "that's when you know that debt has become your lifestyle."
Struggling to keep up with those payments, nearly 9 million Americans seek debt counseling every year. Sadly, many will wind up deeper in debt -- victims of overpriced schemes that promise to "Pay Down Your Debt!"
According to a 2003 study by the National Consumer Law Center and the Consumer Federation of America, many debt counselors are little more than telephone solicitors, raking in high-pressure "donations" from debtors -- as much as $50 a month plus a sign-up fee that can total a month's worth of debt -- in return for making payments and negotiating lower late fees and interest rates with banks.
But consumers can often get just as good a deal by calling creditors themselves. Furthermore, the plans almost never address secured debt like mortgages and car payments. That means a serious debtor could still lose his home or car, even if the credit card bills are paid -- not much of a deal.
Five years ago, Dolores and Aldo Porziella of Hyde Park, Massachusetts, were in debt "up to our eyeballs" -- owing $10,000 on credit cards while getting by on Aldo's modest income as a hairdresser. The Porziellas signed on for a debt-management plan with Florida-based Consolidated Credit Counseling Services.
For a fee of about $30 a month, Consolidated offered to negotiate lower interest rates on three Porziella credit accounts. But Dolores was looking for even lower rates, and after just one payment, decided to take her business elsewhere. "They may say they're nonprofit," says Dolores, "but I don't think they're in business to help you out."
Technically speaking, Consolidated is not "in business" at all; it's a tax-exempt charity. In 2003 the organization reported revenues of nearly $23 million. Some of that revenue was paid to for-profit companies with ties to officers of Consolidated, for bill processing and other operations. Consolidated spokeswoman April Lewis-Parks notes that the company pays under fair-market value for such work. Lewis-Parks also says that the Porziellas dropped out of the program too soon to see results, and withheld information about some of their creditors. "We have over 50,000 clients, and we strive to provide each person with exemplary service."
For just $9 a month, the Porziellas switched to Consumer Credit Counseling Service of Southern New England, part of a counseling network endorsed by Terry Savage and other experts. CCCS got the couple's Visa card rate lowered from 20 percent to 6 percent. In December the couple made their last payment on that card.
Living debt-free is about more than getting creditors off your back. Knowing you have the financial leeway to weather hardships brings priceless peace of mind to Gary and Sue Cowan. When Tropical Storm Allison hit Houston in June 2001, the Cowans' home was flooded. "We had to leave our house by boat," recalls Sue, who was five months pregnant with her third child. But with their credit cards maxed out at $50,000 and no savings, they couldn't afford the repairs that insurance didn't cover. Six months later, Gary was laid off from his $60,000 technology job. "We were devastated," says Sue. The couple declared bankruptcy.
Soon, though, fresh credit card offers began arriving in the mail. "Bankruptcy doesn't mean anything to them," says Sue. "They just jack up the interest rates." With Gary scraping by on a series of short-term jobs and Sue working at a grocery store, the Cowans quickly rang up $30,000 in new debt.
Sue admits she was a shopaholic: "I wouldn't buy my kids' clothes at Target," she recalls. "I shopped at Dillard's" -- an upscale department store. The Cowans finally changed their habits, selling off the house to pay debts and committing to living within their means. "There's a mentality in this country that if you can afford the payment, you can afford the thing," says Sue. "Now our attitude is if we don't have the cash, we don't buy it." It's a way of life they're trying to pass on to their kids. "Our 11-year-old has $1,000 in savings, and she even made a donation to an orphanage," says Sue with pride.
Leading by example could be the best hope for a debt-free future. "Right now we're teaching our kids how to be great consumers," says Dallas Salisbury, chairman of the American Savings Education Council. "Spending is like binge drinking, and the comedown can be very harsh. Moving away from the consumption message will take a personality transplant for the nation."
Top rated articles for credit counseling
1. Bad Credit Home Loan To Get You Out Of Debt
A "bad credit home loan" can help you climb your way out of debt and get you started back on the road to upstanding, good credit. There are many lenders who are willing to make bad credit home loans t... Read article
2. Credit Counseling Organizations - The Good and the Ugly
You can find credit counseling organizations by using a search engine such as Google. Go to google.com and type in credit counseling. Google will more than likely return 20 or more pages of credit cou... Read credit counseling article
3. Drive Car by Availing Bad Credit Score
You crave for a car. Your present financial condition does not allow you to buy a car. There is a second thought, availing car loans. But your bad credit score raised doubt about the probability of ge... Read credit counseling article
4. Debt Consolidation Through Consumer Credit Counseling
Consumer Credit Counseling agencies don't offer loans but restructure a consumer's debt with special channels available only to non-profit consumer credit counseling agencies for debt consolidation. M... Read credit counseling article
5. Wedding Ring With Bad Credit
Bad credit personal loans are fast emerging as the most special loans in the American credit market. Bad credit personal loans are specially designed for people with bad credit. There are millions of ... Read credit counseling article
6. Home Mortgage: Bad Credit Won't Rule Out a New Home
When you're looking for a way to afford your dream home, home mortgage bad credit options can offer a way to get you into the home that you want to buy. Not long ago, people with less than perfect cre... Read article
7. Erase Bad Credit With A Little Help
Everyone has a little trouble now and then. If your little trouble ended up recorded in your credit history, it may take a little effort to erase bad credit and get a clean start, but it's an effort w... Read article
8. How to Fix Credit
Are you overwhelmed with debt, have bad credit, and have been told that you now have You Fix It Credit? That is, credit so bad that the only one who can fix it is you?
In order to fix it yo... Read credit counseling article
9. Using a Consumer credit Counseling services
More and more people are turning to credit counselors to help them get out from under a mountain of debt. Some consumers are finding out the hard way, however, that not all credit counselors are creat... Read credit counseling article
10. How to Handle Bad Credit Management
In today's modern world, you are greatly limited if you have a poor credit rating. You may not realize it, but many companies may require you to have a high Beacon score before they will even consider... Read credit counseling article
Credit Counseling and Debt consolidation services in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi,
Credit counseling - They do not have all the answers
Debt consolidation services in Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania,
Debt consolidation services in Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Washington DC, West Virginia, Wisconsin and Wyoming.
Add website or submit URL link of your site to 1000 free directory