Plain and simple, a debt collector counts on your ignorance and fear in order to collect. That means if you don’t know the most basic debt-collecting rights, which are quite simple to recall, you’ll be taken for loads of money and treated terribly in the process. Next time the collector comes calling, be aware they assume you do not know the following.
That you owe the debt in question. Sounds strange, but it’s true: Many third-party debt collecting agencies have extorted sums of money from consumers who didn’t owe them a nickel. Under the Fair Debt Collection Practices (FDCPA), within five days of contacting you the collector must mail you their idea of debt validation. In return, ask for the real thing: actual proof from original creditor.
Harassing you is perfectly legal. This means if a collector is anything but nice you can tell them to stop calling you completely, period. Harassment can be a loosely defined word, but if you experience foul language, legal threats or even repeated calls, file a complaint here with the Federal Trade Commission (FTC) as these actions are highly illegal.
A time limit exists to collect on the debt. Collectors have been known to trick consumers into paying time-barred debts that are way past their ripeness. This means as soon as an owed debt is reported to the credit agencies, no matter the amount a shrinking window of opportunity starts for collectors to shake money from you for it. Get your three free copies of each report to timeline how long they have left.
You don’t have to pay their huge interest amounts. Credit laws clearly state any expenses incidental to the principal obligation can be considered unfair. If you do owe, legally you are just barred to the original amount. If you decide to negotiate a payment, keep this smaller sum in mind.
You can negotiate the amount you want to pay. Got that smaller sum in mind? Now talk it down. Third-party collectors (sometimes called junk-debt buyers.) are in the business to buy bad debts for pennies on the dollar from the original lender, so make sure they receive a similar figure from your end. Any smart debt collector realizes something is better than nothing. Show them you know this and more.
Sometimes it seems like good credit is needed to enter just about any life-changing situation, from getting that great apartment to landing a solid job. Those with bad credit can feel as if their destiny is to always remain behind. However, many ways exist to get around the credit issue. In the process, you will pick up some helpful habits and clean up your financial past.
Pay cash. One of the best ways to get around bad credit is to live by a simple rule: If you don’t have cash, you cannot afford it. Set aside a certain amount of the green each month or week for your bills or bigger purchasing goals. If you need a clearer idea just how much you spend on various living costs, keep tally of your receipts and add up what you spend in categories such as food, gas and household items.
Get a secured credit card. Even those with bad credit can still get cards that work the same, even if the downfall is a higher interest rate. Unlike a typical unsecured card that offers no collateral for the collector, a secured credit card is opened up using a sum of cash that remains stored in your account like savings. The money is yours, but becomes the banks should you fail to pay your bill. This credit card is more for building credit repair than for falling into old habits. Use sparsely, pay the bill in full and pay it on time.
Correct or update financial information. The best babysitter you have when nurturing your credit report is yourself. Don’t wait for adverse information to just fall off your three credit reports. Find out about the statute of limitations for your state or otherwise known as the length of time you have left on a negative account before you can ask the agencies to remove it. If it is years from now, you have the legal right to send a statement explaining why the account is negative, which shows up on your report.
Show proof of a new financial path. Just as your credit report leaves a trail of negative information, it states the positive too, like the fact you’ve been paying your bills on time for the last six months. If your past becomes an issue with a potential landlord or employer, point out the solid proof you’ve committed to turning your financial ship around.
Stick to a budget. You most likely got into bad credit waters by swimming in over your head when it comes to everyday financial matters. Are you stuck with a car loan just because Cash for Clunkers sounded good at the time? If you really need a vehicle, instead of relying on fast deals or even good credit to land you a loan, set aside a reasonable amount each month into savings until you’ve accumulated enough to pay cash.
The good news about drowning in debt and bad credit is that there isn’t a lack of help. Assistance in the form of credit counseling, debt management, debt consolidation or debt negotiating seems to be sprouting up everywhere, from radio ads to email offers. If you’re going to start seriously shopping around for this type of financial help, how you figure out the bad guys from the good?
Figure out what needs to be done. Don’t become sold too fast on the promises debt reduction companies spin about eliminating your debt. Your best solution might be to just sit down with your bills and construct a better budget. Credit counseling is the least damaging when it comes to credit repair services and should be able to help you figure out how to divide your money, free of charge and contracts.
Look closely at your options. It can be confusing to figure out the difference between debt counseling and debt management. Even when you think you’ve got it right, many consumers find out later they still signed on for the wrong type of debt help. Read between the lines of the promises and study any contract you might enter.
Know sneaky tricks so-called debt repair companies use. Despite what’s being advertised, no repair company – no matter what they call themselves – has a special relationship with the three credit reporting agencies, credit card companies or the government. As this article states, the Federal Trade Commission has never seen a legitimate credit repair company.
Familiarize yourself with the Credit Repair Organization Act. This is another credit protection law to shield consumers from purchasing unfair, illegitimate or ineffective repair services. Here are five important credit laws you need to familiarize yourself with. A big one constantly broken is collecting fees before repair services are completed.
Understand your commitment. In some cases if you do hire a debt management company, this means you are taking out a new loan to pay off the old ones. Just make sure you are aware and prepared for changes that can happen with your both credit repair and budget.
So you’ve decide to take control over cleaning up your own credit. This is quite possible for any consumer to do without hiring so-called credit repair services. However, you’ll want to be careful with how you word your requests to the three agencies when organizing your most crucial financial information.
Pay for only what you need. Federal law states your credit reports are free once a year from all three credit reporting agencies. Your FICO score will cost a small fee should you want it. Although important, it is only really needed if you’ve never seen it before or will be looking into a car or home loan.
Use pre-form letters. When you’ve studied your reports and find errors or updates, use proven pre-form letters when corresponding with Equifax, Experian and TransUnion. They contain proper legal terminology which helps push along the timelines of getting bad data off your report.
Word your explanations carefully. If you do have a very dark mark like a Charge-Off that won’t be coming off your report any time soon, the Fair Credit Reporting Act (FCRA) law allows you to send a personalized explanation to the three credit reporting agencies regarding the adverse information. Stay away from launching into a long recount of your troubles. And make sure you indicate that the matter has been resolved.
Proofread your correspondence. Make sure you write down dates, names and any other vital information at the top of documents you both receive and send. Double-checking numbers like statute of limitation expiration dates can save time and confusion.
Keep organized copies of everything. When you have to contact three separate credit agencies to correct on negative mark, paperwork can start flying around and get lost or forgotten. Create file folders for all three agencies. Remember to always shred your outdated reports.
Armed with credit right legalese, let’s say you properly tell a bothersome debt collector to buzz off to buy more time over a debt you are struggling to pay. Yet a few weeks later you are summoned to appear in court over the matter. Are you looking to fight fair with collectors, but you’re not sure exactly how much wiggle room you have? Here’s when you know it’s time to comply with a debt collector.
They show written proof you owe the debt.If it’s a third-party or junk debt buyer that is after you, don’t confuse your first debt validation notice as written proof you owe the debt from the original creditor. Make sure you get back to the collector within 30 days asking for the proper information. This request shows you know your rights and often is enough to keep you out of court.
They assume you acknowledge the debt. Give an impression from the get-go you aren’t just going to roll over and take a legal beating. Meaning you reduce your chances of being taken to court if you dispute the issue. While we have a moral obligation to make good on debts owed, your challenge recognizes to the creditor you do have an opinion – and thus likely a settlement number – which can keep you both out of the courtroom.
They think you have the assets to pay up. It isn’t enough to say you don’t have the cash. Even if all you have is a steady job, you might be worth the risk to come after because if a judgment is granted, your wages can be garnished. This means as much as 25% of your take-home paycheck is automatically delivered to the collector.
They think they can break the law. While a trend is up to sue consumers over credit card debt, the collectors and creditors seem to be breaking a lot of laws doing so. They take this chance if you’ve proven to be an easy target to take advantage of, which means you’ve been avoiding their calls and letters.
Teens want to walk a clean financial path, but currently don’t seem to understand enough on the subject. The Federal Reserve’s 2008 test of high school seniors resulted in an average financial literacy score of just 48 percent. How can we best educate our youth to build a health credit history?
Care about your credit now. At WalletPop.com, the number one teen money myth is not believing a need to worry about credit exists at this age. Teens can become aware of the three credit reporting agencies and their FICO score and how they affect everything from landing a job to a securing a residence.
Trusted people can screw up your credit. Let’s say a teen needed a parent to be co-signers on a credit card or auto loan. If mom forgets to pay the bill, it reflects poorly on both credit reports. The new Credit CARD Act laws make it harder for a person under 21 to get a card, upping the chance for loan default if the parents aren’t financially responsible.
Learn risky identify theft behavior. Teens are much more plugged into technical devices and thus frequent targets for Internet identify theft. Here are some more ideas about what teens can be learning about protecting their money.
Take a close look at the punishments. Without a decent FICO score, we know we’ll pay a higher interest rate on a loan and in result lose a lot of money. Teens need to crunch these numbers and think of all the other fun ways this money could be spent rather than fees. Failing to pay an owed debt results in a negative mark which hurts as much as a nasty high school rumor. And in the future, if they fail to pay off student loans, their wages could be garnished.
That old hospital bill has come back. This time it is haunting you in a court of law. Not only is it perfectly legal for a creditor to sue you for debts owed, but courts are siding in their favor.
That means more consumers are being hit with garnished wages and racked up interest and late fees for not paying bad debts. What are your rights when it comes to being sued by a creditor?
You have the right to stop this from happening. Collectors act just like bullies, picking on weak accounts or consumers that don’t know their consumer rights. Once accused or contacted, ask for validation you owe the debt – by law the creditor must comply and within 30 days. If you feel a creditor is harassing you or threatening legal action, file a report with the Federal Trade Commission (FTC), as both these activities are illegal.
You have the right to show up in court. If you have been served to show up in court, you have 30 days to reply. There are certain terms you can use or defenses you can raise in response. If you do not know why you are being sued, you can ask for a breakdown of the debt from the plaintiff (or the creditor doing the suing). In court, you have a chance to present your case.
You have the right to not settle. Creditors might try to save (or fool) you into a costly payment agreement. Read these contracts carefully. If you do go to court and lose, you could experience a money judgment. This comes in the form of garnished wages, a lien on the home and a seizure of personal property. You best bet to avoid being sued by a creditor is to not avoid the creditor from the start.
You thought harassing calls and threats from creditors for defaulting on your debts was hitting credit repair bottom. Creditors are taking it a step further as lawsuits are rising against consumers for not paying up on unsecured amounts owed, like credit card balances. When and how might a creditor come after you for past money due?
The original creditor proves you owe. Typically the original creditor provides a signed document (like a credit card contract agreement) that proves you owe the debt. Don’t allow a third party collector to threaten legal recourse as both these actions are illegal according to the Fair Debt Collection Practices.
Your wages can be garnished. This is when the court allows the creditor to seize your paycheck to have payments automatically taken out, which can be 25% of your take-home income each time. Garnishments jumped 30% in Cleveland according to this New York Times article on struggling borrowers. Unpaid student loans have a good chance of going this route.
Higher interest rates and other fees can be enacted. If a court rules in favor for the creditor, your interest rates can hit sky-high numbers. You can also be hit with lawyer fees. To learn more about your legal rights and court terms used in debt cases, try this legal aid link.
Your state court laws allow aggressive collection tactics. Depending on where you live, many of the above actions can happen without the creditor even taking you to court. For state-specific overviews on debt laws, go to this PrivacyRights.org link.
You’ve done nothing about it. Silence equates to an easy target for collectors. The best way to deal with debts in default is to remain a part of the process. Remember you have rights and to stay away from certain activity. You have the case in your favor if you can prove you’ve attempted to negotiate a payment plan or reported harassment from the creditors.
Know how to make your credit worse? Hundreds of supposed helpful financial companies do. Consumers today are swapped with promises to erase debts or have their credit managed on a daily basis for a small fee. Instead of healing your credit, these moves often leave new marks. How do you avoid terrible credit repair advice?
Don’t believe credit repair costs a lot. Aside of purchasing your FICO score, the only other investment you need to make to fix up your credit would be to pay down debts owed. This means a lot of credit repair services like credit monitoring do nothing more than what you can do for free yourself. Also, credit reports are free from all three reporting agencies once a year. And despite all the advertising noise, no other score aside of FICO is necessary.
Accounts never need to go into collections. Some debt management or credit consolidation programs claim your original accounts must go unpaid as part of their program requirements. While you might have more negotiating luck if your debts did show past due, debts unpaid is bad repair advice and can result in a collection agency or Debt Management Program (DMP) being reported and is just bad press.
Thinking payment on an old debt erases the mark. When an account becomes so negative a Charge-Off is reported, the mark is likely there to stay there until the statute of limitations expires. Also, paying up means account activity, which legally resets the time clock to lengthen how long the marks stays. One free thing you can do is send a statement to the three reporting agencies explaining why you didn’t pay.
Bankruptcy isn’t a credit repair plan. Claiming bankruptcy in an unfavorable answer and meant for unique personal finance situations. If any credit repair company or even a lawyer convinces you to file for a Chapter 7 or Chapter 13 bankruptcy, it is likely because there is something in it for them. Some debts cannot be erased, like student loans, and yet many debts are still under order to be paid off despite any type of bankruptcy filing.
Your credit has already been hit with costly negative marks. Do you really need to pay for credit repair services just to revive your financial health? While investing some dough to build a high credit score is necessary, the majority of services offer little else than what you can do for yourself.
Don’t be tricked into paying for your reports. Federal law states the three credit repair agencies must deliver one free credit report each year upon consumer request. Furthermore, a new Credit CARD Act laws states any credit repair business must make it known the government-mandated site AnnualCreditReport.com is the place to go. Also, remember the report information can vary.
You don’t need professional credit products. Often advertised at an additional fee with repair sites, these services don’t offer much more than what the federal credit laws can do for you for free. For example, no need to sign up for credit monitoring when you can simply request with each of the three credit agencies a fraud alert is placed on your report. When anyone inquires after your credit, you will be contacted, for free.
Debt negotiating or credit counseling is too costly. And expensive in more ways than one with hidden fees and potential damages being made to your report. Don’t believe any agency that asks for up-front fees to call up your creditors and talk the debts down. The cheapest and most effective thing you can do is gather information and handle your accounts using the same strategies a paid credit repair service does.
Do pay for your FICO scores. The only credit service you really need to shell out money for is your FICO score. A trusted site to buy from would be any of the three agencies. Your FICO is only really needed before inquiring about a major loan like a mortgage to determine what kind of interest rate you might be offered. Just be careful of any unnecessary additional services tacked on at checkout time. The Credit CARD Act has some repair agencies skirting new laws by advertising free credit report scores, but don’t believe this.
Trusted credit repair sites give first and ask later. It’s best to visit sites you feel offer enriching credit repair advice free of charge. After much browsing, if a service on the site is explained in its entirety and you’ve read consumer reviews in free forums or elsewhere about their practices, you can feel safe knowing it is credit repair money well spent.