Financial Planning

What is Credit: A creditable personality is associated with terms like authority, esteem, fame, good standing, reputation etc. And credit in the financial standing is associated with words like balance, bond, securities, stock, trust, wealth etc. Why we mention this is that very often a credit mess in finance harms creditability of the persona.

What is Bad Credit: A bad credit will largely be defined by the following:

o A F.I.C.O. score of 620 or lower

o Two (or more) 30 day late payments in the past 12 months

o One or more 60 day late payments in the past 24 months

o A foreclosure in the past 24 months

o A charge off in the past 24 months

o A bankruptcy in the last 60 months

o A qualifying debt-to-income ratio of 50% or higher

About 10% of all American people have a credit score of 800 or higher. The average is 710 points and about 10% of the population has a credit score of 575 or less. A credit score of above 730 is considered excellent and above 700 is considered good. With a credit score between 670 and 699, lenders will take a closer look at your file before approving or denying you a loan. With a credit score between 585 and 669 it will be considered a higher risk to grant you a loan. At below 585 points you might face problems even getting one. With a credit score under 550 concentrate all your efforts on improving your score first.

Bad Credit Debt Consolidation: Before the advent of credit counseling companies in the early 1980s, people had few options when it came to dealing with debt reduction other than filing for bankruptcy. Now specialists constantly advise you never to file for bankruptcy. Credit counseling organizations were set up by credit card companies as a way of getting money from thousands of people who were failing to make their monthly payments due to various reasons like health problems, unemployment, or simply too much debt.

Though they called themselves ‘non-profit’ organizations, most were working with credit card companies to collect money for the banks from consumers. Since credit counseling services were backed by the card companies, usually over 50% of the people who started a credit counseling program never completed paying off the debt they owed. What may happen even now is that many credit counseling services do not reduce the total debt you owe. Instead they sell unknowing consumers on the concept of just adding up the total monthly payments into one payment. This may sound appealing but the cost of the subscriptions for credit counseling companies can often be five times higher than the regular monthly minimums. Most people seeking debt assistance need immediate monthly cash relief. Their monthly bills are already too high and they need a solution instead of ending up paying for the additional exorbitant interest charges. Now debt consolidation for bad credit customers is the new mantra with debt arbitrators dealing with their creditors and negotiating for an operational payment strategy.

Well then, the situation is quite different now. The options are more and the competition bigger.

Here are some of the common features and services offered by the modern day credit counseling agencies:

1. Consolidate all bills

2. Immediate relief from creditors

3. Do not offer a loan. So no question of qualifying

4. A non-profit foundation

5. A reduction of up to 70% through debt negotiation and debt consolidation.

6. Deal directly with your creditors saving you a lot of hassles.

7. Promise to make you become debt free in 12 months.

There are numerous sites offering services for debt consolidation that claim to give you 30% to 75% debt reduction.

Avoid the Debt Trap: Debt consolidation as we have seen above does not give you a transparent picture about the costs involved and the final salvation. Our advice for you is to try not to fall in this debt trap. Credit cards allow us the opportunity to enjoy our lives first and pay later for just about anything. We set the highest standards and many a dreams for us as we do not have to pay immediately. Without having any cash on our hands we make purchases that allow retailers and manufacturers to collect money from the credit card companies. As a result we end up having multiple credit card accounts and multiple bills to pay each month, but only one income to handle it all. This income has to spread itself so thin there isn’t enough to go around. This could lead to high stress levels, marital tension, creditor harassment or even bankruptcy.

You can avoid falling into this trap if you really desire so and then you can fully concentrate on how to go on improving your credit score. Without bad credit you will never need debt consolidation.

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The objective of offering credit counseling programs is to help the clients to gain control over their finances. When one loses control over his income and expenses it becomes easy for him to get into the cycle of debt which sometimes takes as many as 30 years before you can end it. The credit counseling has helped many debtors to get out of their debts in quick time. If you too are burned by heavy debt you can try one of the many reliable online credit counseling services that are available for free.

Most of the clients who need counseling are already troubled by debt and that is the reason they come to these services. They need a reliable debt help to eliminate their debt help as soon as possible. The credit counseling online is free but the company charges you with commission if you opt one of the debt management plans or other debt elimination program offered by them.

These companies know that you are already in financial trouble and cannot afford to pay money just for counseling. So many reputed companies offer these services for free and help you to stabilize your finances which enable you to opt for one of the debt management plan.

The online credit counseling helps you in learning to manage your money without using credit cards or other form of loans. You may learn an entirely new way to handle your income and expenses for which you will also need to cultivate an entirely new way of thinking about your money. The credit counseling also helps you with skills to make a realistic budget that helps you to live without overextending your income limits. The program will enable you to save money and move onwards to eliminate your overwhelming debts.

The recent revisions made in the laws of bankruptcy makes it essential for the debtor to have credit counseling before he files an application for insolvency. It is therefore very essential that you approach very reliable services to avoid the scammers or fraudulent companies. If you are looking for such company online you can find one through reliable online debt relief networks.

Whenever you need credit counseling to be sure of its reliability you can check for one of the factors like membership of Better Business Bureau, Chamber of Commerce or The Association of Settlement Companies. If you go through such organizations you will find reliable debt help to regain control over your finances.

There is a lot of Free Money available in the the form of a Government Grant but you need to know were to look. If you are trying to get debt relief then a Government Grant can help you eliminate any personal debt that you may have. It seems like it is becoming harder to make ends meet because of the rising price of oil everything from gas to groceries keeps going up.

To keep up with the rising price of all things that we use it seems that it get us further into debt every day because we are charging the things we need because we do not have the money to just pay for them. Although the price of everything we use on a daily basis keeps going up our salaries are not going up to keep up with these high prices and it is causing us to have an alarming amount of debt.

Seeking a Government Grant to eliminate this debt can be a great alternative to consolidating your debt into one loan payment. The advantage you will get by getting a Grant is that the money you receive to pay off your debt will not have to be repaid. This can be a big advantage because even a consolidation loan you will have to pay back and the interest alone can make it difficult.

Remember that when in debt you can get a Government Grant to help eliminate your personal debt and get you on the road to financial freedom.

It is truly sad that more people are not aware that it is very possible to settle credit card debt personally without ever having to deal with a legal representative. If the credit companies that you owe money to decide to take legal action against you, they will charge you with their no doubt costly legal fees.

It would be wise to call the credit card companies yourself and try to work out a settlement agreement with them on a personal basis. The credit card companies really don’t want the situation to progress to the point where they have to take legal action, so they will probably be willing to negotiate even if your account has been delinquent for several months.

Start by trying to adjust your interest rate and lower service charges that have been applied to your account. Once you know what the credit company is charging you, you will be more prepared to negotiate effectively with them on a settlement.

In your efforts to reach a debt settlement with the credit card company you should focus your efforts on negotiating over the interest rate and service charges first, not discussing the principal. The credit card companies make their money off the service charges and interest rates on your account, so try to make a deal that benefits you both mutually.

Next Comes the Hard Part

The money that you spent on purchases that has already been paid by the credit card company, called the principal, is the hardest aspect of your debt to negotiate over with credit card companies. They don’t want to have paid for something and not have you pay them back.

Getting your way with negotiations over the principal is not easy, so don’t feel bad if the credit card company refuses to budge. Even getting the company to adjust your interest rate or service charges is difficult. Remember that the credit card company’s goal is to get their money from you, not repossess your things.

Regardless of what agreement you reach with the credit card company, you need to be prepared to follow through with your end of the deal. If you fail to meet the terms of your settlement plan, you can expect the credit card company to take aggressive action to get their money, not a second chance.

I have been in the credit card debt relief industry for just about 10 years now and have been in the financial industry for over 20 years. The point of this article is to give people a heads up on debt relief companies also known as debt settlement or debt negotiation companies. I will give you the pro’s and con’s of this process and what to watch out for when interviewing a company to help you get out of debt. Before I go on I want to let you know that this will be a rather long article and by the end of it my goal is to have you understand how the debt negotiation/settlement process works in case you don’t already know and I would like you to understand the tactics of companies out there that do not truly have your best interest at heart.

First I would like to state that the process of debt negotiation as your means of consumer debt relief is not for everyone, some people are better suited for bankruptcy and others do not have the correct mindset to go through this process.

I would like you to first understand what debt negotiation is and how it works. The goal of a debt negotiator is to obtain a debt settlement for you on the current debt amount you owe your creditor. So for example you may owe one particular creditor $10,000 so the goal of the negotiator would be to have you end up paying back say $6,000. The two main benefits of going through this process are to save money on what you currently owe your creditors and to save time. By just paying the minimum payment with even a modest interest rate you will be looking at 30 or more years to become debt free, with a sound debt negotiation program you will be out of debt within 2-3 years or sooner depending on your current financial situation.

Now you must understand these are great benefits but as with anything in life there are drawbacks, nothing is perfect and this consumer debt relief procedure is no different. For starters your creditors will not be willing to negotiate a debt settlement at all if you are current with your monthly minimum payments. They would prefer you to stay on their credit treadmill for the next thirty years and pay them back over four times the balance in interest alone. So you must fall behind on your payments to put the creditors into a position where they will be willing to settle. Once you stop paying them the ball game changes completely and they will then be willing to talk in terms of negotiating a settlement.

So obviously for some people the beginning of this process will have a negative effect on their credit score. For those who are already falling behind then the negative effect will be no different than it already is. Unfortunately for some people this will be the deterring factor that keeps them from going into debt settlement making them a slave to their creditors for the next thirty years. The good news is that this negative effect does not last forever, in fact once the settlements start coming through your credit score will begin to rebound and go back up. The reason being over 30% of your credit score according to MyFICO is based on how much debt you owe. But if you are stuck in a bad debt situation even if you are current with your payments your score is probably not all that good in the first place, and besides when stuck deep in debt your focus should be on how to get out of debt as quickly as possible, not on your ability to accrue future debt.

Now by falling behind on your debts you must understand that these creditors are just not going to roll over and play dead, they will be calling to try and collect the debt. For some this is not a problem at all, for others it is, that is why I stated above this process is not for everyone and the consumer must be in the correct mind set. From my years of helping people there is no rhyme or reason to how many calls you will receive some clients of mine barely get calls while others get them almost everyday. Something to keep in mind too is that no company has the power to legally stop the calls, so any company that tells you they can is flat out lying.

As you can see like I said earlier there are pro’s and con’s, but if you can accept the con’s you will be quickly on the road to financial freedom and will save a lot of money in the process. Now to get to the meat of the matter and why I named this article “consumer credit card debt relief scams”.

We here in America over the past couple of years have been experiencing a very negative downturn in our economy. Thus putting many consumers in a compromising position financially, leaving boat loads of people stuck in credit card debt. So naturally this opened up a much larger market for debt negotiation. Many fly by night companies have been popping up all over the country, many of which are ex mortgage brokers who sold people bad loans and helped them get into this sticky position in the first place. Now I use the word scam which can take on a few meanings, while yes there are some companies out there that are flat out scams and have no intent on doing any work for you at all, most of the times that is not the case. Instead many companies simply do not give people all the facts on how debt negotiation works nor do they truly put them on a plan for success, which I will explain in a minute.

One common issue that most consumers have with debt settlement companies is they do not fully tell them about how the process works, instead they sugar coat things and just preach about the great benefits. I have spoken to countless amounts of people who have signed up with companies and were under the impression that they were going to stay current with their creditors and will never receive any calls. So needless to say this became a huge problem once they began.

Another major problem a lot of these companies have is deceiving people into the kind of savings they will be getting on their debts. Some companies will say they will save you 70% of what you owe. Now while they may get settlements that low what their opting not to tell you is how much you will be saving after you have A) paid them their fees, and B) paid back the creditors. Honest companies will tell you what your true savings will be. If you will save somewhere between 40-50% of what you owe including their fees and paying the creditors than that is pretty darn good. Plus many of these companies will try and guarantee a certain amount of savings, if you hear this run for the hills. NO one in this industry can guarantee a certain amount that is why it is called DEBT NEGOTIATION! They are negotiating to get a settlement for as low as they can get.

Then there are the companies who will let you pay whatever you can to get on their program. These are the worst because they do not truly have your interest at heart and know they are setting you up to fail and not succeed. You must understand to achieve the type of savings I stated above this process should take no more than three years, preferably two or less. And the bottom line is some people simply cannot get it done in that time frame and should realistically be looking into bankruptcy. What these unscrupulous consumer debt relief companies will do is put you on a program for 4 or more years and basically accepts whatever payment you can afford. Knowing full well you are not going to be saving much of anything and will more than likely fail off the program, all they care about is getting the fees and that is it. An honest company will diligently review your budget with you and make sure this is something that you can manage, as well as fully explain to you both the benefits and drawbacks of doing this. And let you make the conscience decision as to whether this is the best consumer debt relief method for your situation.

Another very good way to evaluate a company is to make sure they are registered with the BBB (Better Business Bureau) and that they are in good standings with very few complaints. And if there are complaints make sure they were resolved to the clients liking.