All American Credit Service..Helpful Articles

Helpful Articles

THE INFAMOUS CREDIT REPORT EXPLAINED

The American credit reporting system is the green-eyed monster of the world. Credit reports and credit scores have been accountable for producing well timed access to consumer credit at lowered expense to consumers. The Federal Trade Commission has named the well timed access to credit "a miracle that's exclusively possible due to our credit reporting system."

This is completed within the model of a law, the Federal Fair Credit Reporting Act, that furnishes consumers with disclosure about their rights as a consumer, alternatives for damages and liability provisions. Independent studies have substantiated the fairness and potency of the credit reporting and scoring system in assisting consumers to qualify for loans. Most importantly, the law ascertains seclusion of individual consumer data by restricting the uses of the information.

Facts about the United States credit economic system

* There are over a billion credit reports issued each year
* Two-thirds of the American economic system is driven by consumer spending
* Unpaid consumer credit amounts to $1.7 trillion
* Credit reporting saves the average consumer 200 basis points on their mortgage loan
* On the average, all United States families possess a car and one-third have a second car
* The average American has 8 credit cards or personal loans
* There are 7000 credit card issuers in the United States extending more than 27,000 types of payment alternatives

What's a Credit Report?

A credit report is a key source for creditors to report the paying history and habits of their consumers in an effort to simplify the qualification process. They rely on the data in the report to determine the risk factor of the applicant. Risk factor, standing for how likely is this consumer going to pay their debt to us. If you have a negative payment history, this may be an indication that you will default your account with them. The higher your risk factor the more likely the creditor is going to increase your rate of interest on the account or refuse the application all together.

What is in my Credit Report?

* Personal information. Accumulated from credit applications you have completed, this data generally includes your name, current and past addresses, Social Security Number, date of birth, and current and past employers.

* Credit history. The majority of your credit report comprises of particulars about credit accounts that were opened in your name or that list you as an authorized user (such as a spouse's credit card). Account details, which are supplied by creditors with which you have an account, include the date the account was opened, the credit limit or amount of the loan, the payment terms, the balance, and a history that shows whether or not you've paid the account on time. Closed or inactive accounts, depending on the manner in which they were paid, stay on your report for 7 to 10 years from the date of their last activity.

* Inquiries. Credit reporting agencies record an inquiry if your credit report is displayed to another company, such as a lender, service provider, landlord, or insurer. Inquiries stay on your credit report for up to 2 years.

* Public records. Matters of public record received from government sources such as courts of law -- including liens, bankruptcies, and overdue child support -- may appear on your credit report. Most public record information remains your credit report for 7 years. Bankruptcies may stay on the report for up to ten years. Outstanding tax liens may stay on your credit for up to 15 years.

What is Not Included in my Credit Report?

A credit report doesn't include data about your checking or savings accounts, bankruptcies that are more than 10 years old, charged-off or debts placed for collection that are more than seven years old, gender, ethnicity, religion, political affiliation, medical history, or criminal records. Your credit score is generated by data on your credit report, but isn't apart of the report itself.

HOW MUCH IS BAD CREDIT COSTING ME

The most costly and obvious problem with bad credit is the inability to obtain new credit. Credit Cards, most if not all, are completely inaccessible to consumers with horrible credit. The few credit cards that are accessible to consumers with bad credit are known as sub-prime cards, and may do more damage then good. Sub-prime cards usually require outrageous setup fees or recurring monthly fees, offer extremely low credit lines (from $100-300), often demand cash deposits, and in many cases will not report your positive credit to the credit bureaus.

If you're making payments on a car, you are likely paying between $6,000 and $10,000 more in interest, if you have bad credit. This additional interest increases your monthly payments and increases your time to pay you debt off. For Example:

$20,000 Auto Financed for 5 Years

Credit Status	Rate	Payment	Cost of Bad Credit
Good Credit	8%	$405.53	$4331.62
Poor Credit	14%	$465.37	$7921.84
Damaged Credit	22%	$552.38	$13,142.65

A home can cost anywhere between $50,000 and $150,000 more in interest if you have bad credit.

$100,000 home paid over 30 years

Credit Status	Rate	Payment	Cost of Bad Credit
Good Credit	5%	$536.82	$93,256.52
Poor Credit	9%	$804.62	$189,667.92
Damaged Credit	12%	$1,028.61	$270,307.77

Low credit scores can cost you hundreds of thousands of dollars over the life of the loan. Which is why it is crucial to restore and maintain your credit profile.

LIVING OFF OF CREDIT

More and more consumers are facing financial problems than ever before, owed mostly to our nonchalant mental attitude about debt, increasing credit interest rates, and a slow economy. Later on, the bigger the financial hole we dig ourselves in to, the more credit we will need. As the line of credit is used up, it becomes impossible to receive more credit because our credit reports reflect our financial foundation of ‘quicksand’, making it difficult to qualify for new loans, increased credit limits, or lower interest rates. The brutal cycle of robbing Peter to pay Paul finally catches up with America and we're coerced to reassess our spending habits.

Of course, not every consumer is ‘charge-card happy’ or responsibly manages their debts, still they collide with a string of unfortunate circumstances such as losing employment, incurring unforeseen medical expenses, accidents, etc. A life of good credit will end promptly due to a few unfortunate occurrences. Regardless, credit is the way of life for nearly all Americans, and most empathize the importance of preserving a good credit report. As we each supervise our own budget and spending, it is not irrational to conceive that we have control over our own credit report and that it contains accurate information about our responsibility in regards to our financial obligations.

Regrettably, we can not assume our credit reports are without error or mistakes. 79 percent of every last credit reports contain inaccuracies! Afforded our lifestyle and the undependability of precise credit scoring, numerous consumers are seeking assistance. Those who do not want the frustration of battling with the credit bureaus, or do not have the time, patience, experience or desire, are turning to credit repair services.

BEWARE OF THE 'SHADY' CREDIT AGENCIES

As you carefully research several credit repair organizations, compare costs, services and warranties, find out the actual process of each company. Browse their company websites and see how open they are about furnishing helpful information, and lastly do not hesitate to call and ask questions. Remember, your reputation, in addition to your money is at stake, be aware of the following guidelines when exploring credit restoration services:

• Avoid businesses that make affirmations like, “We promise to do whatever it takes to improve your credit score,” or “We can erase your negative credit – 100% guaranteed!”

• Do not pay any up-front or prepaid fees. Many companies ask for several hundred dollars or more up-front for services they promise to do in the future. Some of these will gladly take your money and disappear.

Beware of any credit repair agency that will not fully disclose their company information, or provide a complete address (beyond a Post Office Box).

• Stay away from companies that urge that you not contact a credit bureau directly. This is your right.

• Beware of companies that are unwilling to explain your legal rights as well as what you can do yourself. Lawful services will distinctly outline their processes for improving your credit.

• Do not deal with companies that are overeager for you to formulate a new credit report by applying for an Employer Identification Number to utilize instead of your Social Security Number. It is a Federal offense to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses. These companies are urging that you create a new credit identity. They suggest that by obtaining an Employer Identification Number (EIN) you can use that number instead of your Social Security Number to qualify for additional credit. (Of course the agency says it’s a common practice and is completely legal.) If an agency asks you to make false statements on a loan or credit application, misrepresent your Social Security number, or apply for an Employer Identification Number from the Internal Revenue Service under false pretenses, you are the one who will be subjected to personal liability and prosecuted for committing fraud. Furthermore, if you follow the advice of some crooked agency and use the mail or telephone to apply for credit and provide false information you could be charged for mail or wire fraud. It's a federal offense to make false statements on a loan or credit application and/or misrepresent your Social Security Number.

THE MEANING OF CREDIT SCORES

Credit scores will range from 300 to 900, with the average score being around 750. As your credit score increases, your risk of defaulting to the creditor decreases. Industry experience shows a direct connection between low scores and the high default rates. If you have low credit scores you are going to have a very hard time convincing a creditor to give you a loan – or at least one with an affordable interest rate. But interestingly enough, as your credit history vary from credit bureau to credit bureau, so may your credit scores. It is conceivable to have high scores with one and low scores with another. This is one more reason to always monitor your credit report. You do not want errors remaining your report for years. If they do, they just become more difficult to eliminate.

Though your credit scores differ from bureau to bureau, it’s uncommon for your score to vary dramatically; although some lenders admit to seeing borrowers with scores that vary by 100 points or more. To combat this, a lender usually averages the varying scores. Of course, that is of little consolation if your scores are 500, 550, and 700 and the interest rate for a borrower with a score of 550 is two points higher than the rate for a borrower with a score of 700. Typically, the discrepancies of the scores are not this drastic. The more common scenario is that of having scores such as 690, 705 and 685. Don’t lose hope if you have a low score. If you think the problem is caused by mistakes on your credit report, order copy of your credit report, check it for accuracy and fix the problems.

If you have a low score because of your payment history, don’t despair and start taking the steps necessary today to improve your credit score. (If you are in the middle of the loan process, explain the situation to the lender. Some lenders will override credit scores if they think you are a good risk despite problems with your score.) Improving Your Credit Score.

To improve your credit score, take the following steps:

• Pay your bills on time

• Update old accounts (accounts reporting a balance may have been paid down to zero)

• Avoid using finance companies when possible

• Keep your credit balances under limit (Don't “max out” your credit cards)

• Limit the number of times you apply for credit

• Maintain your accounts for a long period of time

FACTS YOU MAY NOT HAVE KNOWN ABOUT YOUR CREDIT REPORT

Most people have a vague idea of how credit scores work. At a minimum, they might know that their debt payment history and other financially-related information is somehow plugged into a computer, and out pops out their credit score. This credit score quickly tells companies that provide you with credit how likely you are to pay them back, based upon the potential creditee’s previous financial history. However, things are really not that simple.

Here are the five surprising things about credits scores you probably didn’t know. In fact, some will probably shock you, they might just be the exact opposite of what you expect:

Your income does not have any direct effect on your credit score. You could be a billionaire, but have a very low credit score. Credit scores are based on information from credit agencies, but these agencies have no idea how much money you actually make! This means a billionaire can have a much lower credit score than the guy who cleans his pool.
Closing old accounts will probably lower your credit score. Your credit history is an important factor in your credit score, so closing old accounts (more than 1 year) will probably lower your credit score because it will remove that history from your credit report. It will also lower your credit ratio (the amount of credit you are currently using compared to the total amount of credit you have available to you). Even though you are trying to be financially responsible by closing these old accounts so you are not tempted to use them, this will probably cause a lower credit score!
Paying off collection agencies or other debt from more than two years ago won’t help you much. This one is pretty strange because it seems like the right thing to do, and in fact, paying down your current debt can definitely help out your credit score. However, credit scoring systems look at the last date of activity on your account, and if the collection (charge-off is how it’s usually called) is over 2 years old, it starts to lose its negative power. When you make that partial payment, guess what happens? The date of last activity clock resets to the day you make the partial payment on the charge off, causing your credit score to plummet! In this case it’s better to not pay anything, or negotiate a one time settlement with the collection agency in exchange for removing some of the negative info.
The entire credit agency system is comprised of and controlled by private companies that are regulated by the government. Credit agencies collect information about you for FREE from various companies that you do business with, and then resell the data back to other companies and to you. The government has never licensed these credit agencies to do this, but over time has started to regulate the industry. Remember that these credit agencies are public companies and are not government agencies. You could actually buy shares (become a part-owner of a credit agency) if you wanted to!
Timing is very important for credit scores. Most negative items lose their power on your credit score after 2-3 years. That is why we always teach our customers to focus their energies on recent, negative items first.

Credit scores are far from a perfect system, and can sometimes be determined in a way that seems counter-intuitive to you. Therefore, it is important to educate yourself as to how credit scores really work, so you will be able to make the right decisions to keep this very important number as high as possible.

URBAN LEGANDS OF CREDIT REPAIR

Most people we come across either have negative view of credit repair, or they listen to the large media outlets that basically tell you that you can’t do anything about your credit report or credit score. This is totally wrong. In fact, a recent study shows that 79% of all credit reports have factual errors. In reality, you can repair your credit. Below are the 5 biggest myths we have come across about credit repair in general:

There is nothing you can do to improve you credit score; you just need to wait for it to get better. There is nothing further from the truth. By understanding how credit scores really work and by making sure your credit report accurately shows your past history, you can improve your credit score. Anybody who tells you something different probably has an incentive to keep your credit scores low.
Negative items have to legally stay on your credit report for at least 7 years. Collection agencies and other companies have been saying this for years, but nothing could be further from the truth. These companies can remove any information they want, whenever they want. There is nothing legally stopping these companies from removing inaccurate information at any point of time. They do have to remove it after 7 years, but it could possibly be sooner with your intervention.
Credit repair is ethically wrong because you are trying to fix your past mistakes - you should have to answer for those mistakes with your bad credit. Again, most people assume credit repair is used by irresponsible folks who have taken on too much debt and then just stopped paying their bills. In reality, most cases we come across involve people who have had bad circumstances happen to them (divorce, medical issues, job loss, etc.) and are not simply irresponsible people who are trying to get around the system. Additionally, oftentimes the issues are not black and white, and there is fault on both sides of the issue. For example, were you really late on payment if you never got a timely bill from the company that says you were late? Technically yes, but in reality we say it’s not exclusively your fault because you never had a chance to get it right.
Filing a statement on your credit report will help you explain your side of the story. Although it might feel good to get your side of the story on your credit report, this is probably not a good thing to do. First, most companies just look at your credit score without looking at the details of your credit report, so they won’t ever see this statement. Another issue is that by giving a statement you might be legally admitting to things that you may not want to. Since there is very little positive benefit to adding a statement, we don’t recommend you do it.
My good credit history will offset my previous bad credit history so in the end everything will be fine. This is again a myth because negative credit history has a huge impact on your credit score, while positive history has a much smaller effect. By removing inaccurate negative history, you can rapidly raise you credit score. If you simply wait, it will take much longer. We tell our customers that negative items are at least 10x more powerful than positive items.

By understanding how credit scores work and taking a proactive approach you can keep your credit scores high. This does not have to take a lot of time or intricate knowledge — just a small amount of time on your part can save you hundreds of thousands of dollars over your lifetime!

FICO SCORE VS. THE CREDIT SCORE

Most folks confuse official “FICO credit scores” with the “estimated credit scores” that are usually advertised for sale by most credit companies. You should understand that there is a huge difference between the two credit scores.

First, 90% of all banks, credit card companies, and other financial institutions only look at your FICO credit score. The other “estimated credit scores” that are sold (freecreditreport.com, Trans-Union, etc.) are estimated credit scores based on each credit-score-provider’s unique credit scoring model.

So imagine that you were back in school and the grade you thought you received on a test was completely different than the grade your parents and educators saw! How useful is knowing your grade, if it’s not the one that really counts? Why should you care about, or more importantly pay for, a credit score that doesn’t really count?! We don’t think this is right.

Companies that sell these estimated credits scores take advantage of you. Most of the US population has no idea that there are different types of credit scores, and that what they are purchasing will never be seen by potential creditors who check their credit. These companies who sell “estimated credit scores” use the exact same scoring terminology as real FICO credit scores (a scale between 350-850) to further confuse customers into thinking that these credits scores are legitimate.

So where can you get real FICO credit scores? The only place you can buy you FICO credit scores is either from myfico.com or equifax.com. All other vendors are simply selling you an “estimated credits scores,” which again may or may not be close to your real FICO credit score.

Remember this - only Equifax.com and MyFico.com sell official “FICO Credit Scores” - the Credit Scores 90% of all lenders use - directly to consumers. These are the only “Credit Scores” you should care about (and ever pay for). By doing this you will know exactly how lenders see you, and you won’t have any nasty surprises when you are buying your next car, house, or applying for a new credit card.

WAYS TO SAVE

Saving money is not as hard as it seems. Here are ten practical tips that you can do to begin saving money, without changing your lifestyle.

1. Replace incandescent bulbs with compact fluorescent (CFL) bulbs. CFL bulbs consume 80% less energy than incandescent bulbs, but give the same illumination. Make sure to buy only lamps and bulbs that have the Energy Star rating to ensure quality compliance.

2. Make a list when going to the grocery and stick to it! Anything that is not on the list is not a “need”, but merely a “want” so avoid busting your pockets for unnecessary items. Buy non-perishable consumables in bulk to benefit from bulk discounts.

3. Use coupons when available. Take the time and have the patience to clip and organize grocery coupons. When added together, savings from using all coupons in one grocery trip can be as much as $20-$30. Purchase dining and shopping coupons online and print them at home. Doing so can save you at least 50% on the face value of the coupons.

4. Buy online, whenever possible. Online stores pass their savings from rental costs and warehousing to the online consumer, thus they can afford as much as 70% off their rack price. When buying items online, Google it first together with the word, “discount code”. This can give you further reductions on the item you want to purchase. Try also online bidding: they offer at least 75% off the original purchase price, for practically new (slightly used!) items.

5. Take lunch to work. Buy potato chips and soda from the grocery and make a homemade sandwich and pack them in a brown bag.

6. Eat homemade dinners as often as possible. Plan menus that are practical and easy-to-cook to encourage eating at home. Save money by dining out only on special occasions.

7. Use everyday pantry items for skin and body care. Cucumbers, honey, milk, lemon, salt and baking soda are some items in your home that can also be used to take care of your skin.

8. Avoid shopping to de-stress. Try walking around the park or watching a movie instead.

9. Bring your own sodas and snacks when watching a movie. The cost of sodas and snacks are at least 25% higher in movie houses. Plus, homemade popcorn tastes much better: you can put on all the salt and butter you want!

10. Pay off your credit card balances each month and avoid finance charges. Better yet, use cash as much as possible, unless using plastic will give you a better deal (0% interest on appliance purchases, or cash rebates).

THE PURPOSE OF BUDGETING

A budget is basically a money plan, outlining your financial goals. Having a budget, you can well establish and regulate funds, set and achieve your financial objectives, and make advance decisions as to how you want your finances to function well for you.

The main idea in budgeting is for you to put aside a certain amount of money for expected as well as unexpected costs.

Simply put, budgeting means an estimation of monthly home expenses basing it on previous expenses and bills.

The initial step to take in budgeting is to find out how long will your compensation last. Define fixed expenses like car payments, home rental, insurance, etc. Likewise follow up your expenditures thoroughly for a month so you can discover and understand where your funds are going. Through proper determination of your “spending patterns”, you can immediately identify solutions for effective budgeting.

For instance, when you have a steady monthly income of $4,000, you should subtract all your identified monthly bills from that income.

Other bills can be assessed and then subtracted from the amount of your income. The balance that remained after fixed costs can now be your budget in the household. Rather than allocating money for miscellaneous like gas, clothing, entertainment and groceries, financial planning will allow you instead to use proportions or percentages of it.

The strategic solution in order for budgeting to be successful is inflexibility as well as flexibility; there are fixed expenses so payment must be an inflexible factor.

Budgeting will best work when very scarce omissions are made to greater limits. The idea here is to formulate goals and plans, then abide by it as much as you possibly can.

Here are tips on how to budget:

1. Have good sense of money management. Your attitude is essential. Reach an agreement and compromise and know the significance of reducing expenditures; it all involves a lot of sacrifice.

2. Plan your situation. Make a listing with your earnings to one side and your overheads on the other side.

3. Know the difference between luxuries and necessities. List down what you believe as luxuries, with it, split the list in half, crossing out half the list.

4. Practice frugality but with dignity. You can have fun with little or without spending at all. Rather than going shopping, play with the kids at the beach or at the park.

Budgeting is an effective and fundamental tool that is readily available to everyone. Consider it, and benefit from it.

A CLOSER LOOK AT BANKRUPTCY

Bankruptcy is a process of the federal court that is aimed at helping both businesses and individuals in clearing up their debts and repaying under the protection given by the bankruptcy court. There are basically two types: liquidation and reorganization.

Liquidation bankruptcy, under Chapter 7 of the bankruptcy code, occurs when you plead the court to have your debts discharged. Some of your properties will then be liquidated or sold by the bankruptcy court, returns of which shall be divided among your creditors. This type of bankruptcy proceeding lasts for four to six months which is quite fast and only one appearance at the courthouse is necessary. It is very convenient and doesn't require payments stretched over time.

Chapter 7 bankruptcy isn't available to everyone, though. You may won't benefit from it if in the past six to eight years, you have benefited from a bankruptcy discharge. Likewise, if after examination of your income, expenses, and overall debt, it was found out that the other type of bankruptcy proceeding is more appropriate, then you can't insist on pursuing this kind. Veterans who are now disabled and who incurred their debt at the time of their active duty are almost automatically allowed to file. In addition, those people whose debts are caused by running a business are qualified as well. For those people not belonging to any of these categories, certain criteria must be met.

The criteria has been affected by the new rules imposed on bankruptcy. One of the considerations is your current monthly income which in turn will be compared against the median income for a family of similar size in your state. This isn't your income at the time of your filing. Instead, it is your average income for the past six months before filing. Social Security benefits like retirement and disability benefits aren't included in the computation. If your income appears to be enough to support the other type of bankruptcy proceeding in spite of permitted expenses and payments for child support, tax debts, and others, liquidation bankruptcy is unfortunately not allowed.

Many people, if given a choice, would prefer this type since repayment of a portion of the debt is unnecessary. You may lose some of your properties but some courts permit some sort of a leeway that doesn't take all to give you something to start with afterwards.

On the other hand, reorganization bankruptcy, usually under Chapter 13, happens when you file to a bankruptcy court a plan on how you intend to settle your debts. You indicate how much each of your creditors will get, depending on your finances. There will be a three- or five-year repayment plan, only after which can you be discharged of your debts, if any still remains. At times, however, due to obvious financial difficulties, the court itself decides to give a discharge earlier than planned and this is what usually happens.

An additional requirement for both types of bankruptcy is completion of credit counseling conducted by an agency recognized and approved by the United States Trustee’s office. This helps you look closely at the situation at hand and identify if bankruptcy is really essential. This allows you to see several possibilities of informal repayment which you may have overlooked in the past. Even if such is obviously impossible, counseling remains a major requirement.

Furthermore, completion of post-counseling is required after the proceedings. This aims to teach you financial management to avoid encountering the same situation in the future. The bankruptcy discharge will not be released unless this is fulfilled.
Bankruptcy may be beneficial for both the debtor and creditor. This is a way of recognizing one’s responsibilities and mistakes that led to the financial difficulty. The entire process takes into consideration both parties’ interests and leads to the development of an action plan that fulfils them. As such, this law shouldn't be abused by any debtor thinking that a court is there to intervene.

Bankruptcy, although generally advantageous, must be considered as a last resort. You should, in all circumstances, work hard to be in full control of your finances to avoid being estranged in difficulties. Discipline is indeed a very crucial trait that must be maintained at all times.

BEWARE OF DEBT CONSOLIDATORS

Debt consolidators usually attract positive attention at the start because they give the impression that they will neatly arrange all your debts into an organized and even lighter one. Their campaigns make debt relief seem to be so straightforward. They will just consolidate all your bills and convert the interest rates to as low as 0%. Unfortunately, people who have fallen prey to them have experiences worse than the opposite of these empty promises.

Normal tendency when experiencing financial crisis is to get loans to cover up for previous credits. This being a well-known phenomenon, debt consolidators do their best to entice people into these types of situations with debt consolidation loans which promise easy and immediate processing and approval as well as lower monthly payments and interest rates. Being close to desperation, people tend to become easily lured by such and grab them without a second thought.

If these people only compute how much they actually pay in totality, they will surely be surprised that it is a lot higher. Sure, the monthly payments are lower but this is mainly because they are spread over a longer period of time. What are usually unnoticed are the interest rates which are, in fact, higher. In most instances, rates go as high as 21% or 22% and these subtly and discreetly wring people in their necks while burying them deeper into a financial rut.

Debt consolidators also assure customers that they will be in charge of everything. They will apparently coordinate with your creditors. All that is left to do is make one easy payment every month. However, what happens in reality is that they actually charge for such service by taking hold of about 10% of payment given monthly. This is about $50 for every $500 monthly payment. Instead of such amount being used to significantly reduce debt, it automatically goes to the deceiving hands of debt consolidators.

Most of their services are obviously those which you can do on your own given the right information. You yourself can negotiate with your creditors to make payments more manageable in the light of a current financial difficulty. You need not shell out such a big amount for that. Most creditors are willing to bend a little if only they will be aware of the circumstances.

What makes doing the negotiations and payments on your own a lot better is that certain cases have already been reported where the debt consolidators themselves are making late payments. They regularly ask the payment from their customers but they remit them late thus causing the customers more charges which they are not made aware of. Such will only be added up to the monthly payments unnoticed.

Balance transfer cards are also prevalent nowadays which are usual debt consolidation tools. Just the same, they promise lower interest rates. However, you have to take note that such low rates aren't going to be the case forever. After a few months, they will increase. Of course, when that happens, you will look for another provider. The network of credit companies sees this kind of activity and considers you as a risk thinking that something else is behind your switching. Thus, your switching may not be approved and you are left without a choice but hold on to the card and suffer with its high rates.

It is obviously wiser to think of other options instead of resorting to the services of debt consolidators. Home equity loans, for example, are better options because of their single-digit interest rates which are even tax-deductible. In such cases also, since you do have a home equity, your property may be up for a higher amount refinancing. In turn, you can use the excess money to settle your debts. You may also try personal loans especially if you used to have a good credit history. The interest rate may still be high, around 11%, but this remains to be a better alternative as compared to the 20%++ rate of debt consolidators.

There are several other options that you can try out. If you want to know more about them, you can seek advice and gather information from certain organizations providing credit counseling. Once you have the information that you need, you deal with the situation yourself. Most debt consolidators have already been proven to be unhelpful thus should not take part in your alternatives anymore. You need not worry about being exposed to harassment as there are laws such as the Fair Debt Collection Practices Act to protect you.

HOW TO TAKE CHARGE OF DEBT

The rising cost of living and dying has made people more reliant on loans and credit that most people have been indebted to someone at some point in their lives. A debt is an obligation that should be paid and accounted for no matter how meager the amount.

Being in debt is normal considering that no one has a monopoly of all the money in the world. People will always have the tendency to accumulate debts no matter how rich. In fact, rich people have more debts than poor people because they have more needs and they have more collateral or security.

Being indebted isn't something that you should be ashamed of provided you are a responsible debtor. This means the money was used for a very good cause or purpose and the debtor is religious in looking after his responsibility to pay his debts.

Even a person who is savvy is financial management can get into debt for one reason or another. However, a person who is good in managing his finances should also be good in managing his debts. Managing debts would include the ability to know how much a person owes and from where he would get the money to pay such debts.

The ability to know the total indebtedness is a must in debt management because the person who is in debt is aware of the total amount he has to produce to pay off his debts. There are people who don't practice good debt management and they keep borrowing money without being able to monitor how much they already owe people or the financial institutions.

Debt management means that at the time the loan was made, the borrower knows where he would source the payment for such debt. This makes the debt manageable because it would appear that the person has some source of income and he is just not liquid at the time he borrowed the money.

People who don't have a steady source of income should be discouraged from borrowing because there is a tendency for their debts to pile up without being paid at all. Unemployed people who resort to borrowing for their essential expenses like food and daily subsistence would borrow from another creditor to pay off a debt that is already due and demandable. The same thing happens to the second and the next loans after which it becomes a cycle.

A person who is indebted to someone should take an inventory of his assets that can be used to pay off his debts. There is no problem if the debtor is looking at a possible income that hasn't yet been paid. Such unpaid income can be considered an asset which can be used to pay his debts.

Debts are easily made but they are difficult to pay. Thus, every person should be careful when borrowing money form others. Make sure that you have something to pay for the debt like an incoming income or check, or assets that can be sold to pay off the debt.

Some people get indebted by virtue of loans which have varying interest rates. This means that aside from the principal amount borrowed, the debtors still have to pay for the interest rate. A person who borrowed $100 at ten percent interest rate per month will have to pay the principal plus the interest rate of $10 per month. Some interest rates are based on the actual balance like if the debtor has already paid $20 then the interest rates would only be pegged on the balance of $80. However, there are some interest rates pegged at the original amount borrowed.

While being in debt is a natural thing, every person should learn how to manage his debt and how to stay out of debt if possible. One of the major factors why most Americans are indebted today is the misuse of credit cards.

Credit cards are those plastic cards that can be used to pay for almost any purchase even if you don't have cash. People find it easier to spend when using their cards because they just swipe it and voila----it works like a genie granting their every wish!

However, most people who fail to use their credit cards wisely become indebted and are faced with legal actions for failing to pay their cards when they become due and demandable.

Go ahead, borrow if you must but always take charge of your debts to make sure they don't lead you to declaring insolvency or bankruptcy.

CHANGING LIFESTYLES TO BECOME DEBT FREE

Too many temptations in this world lead to being piled with insurmountable debts. Advertisements tell us that with credit cards, nothing's impossible. Salespeople and credit businessmen tell us that it won't hurt to have a debt here and some debts there. Little do we know that debt could actually lead to death! It's POSSIBLE to DIE from DEBTS.

How, you may ask. Ever heard of suicides committed just because one has too much debt that that person could not think of any other solution but to get out of his debt-laden world through killing himself? No? You're not reading enough news, I'm telling you.

So, how do you avoid being victimized by debts? Learn a thing or two from the following bits of advice on how to manage a debt-free life:

Get the Drift of Being Thrifty

One major way to avoid having debts is to have enough money for your needs and even for your wants! How? Aside from landing a high-paying job, being a savings-savvy person at the same time is the solution. But what if you don't have a quite well-paying job? Knowing how to save up will still help you in your goal. Here are some simple tips:

Budgeting well whatever amount of money lands in your wallet every payday should be one of the major goals of a debt-free life advocate. You have to evaluate yourself to know what type of budgeting will suit your tolerance and lifestyle. Do you need a daily budget scheme? How about a weekly or a monthly one? You cash flow will be better monitored if you list all of the your expenditures and actual expenses.

Brown bagging should become a common practice if you are to make yourself debt-free soon. Now if you haven't fallen for the culprit yet and you are just so not into the food you prepare yourself, consider compromising. Instead of bringing a lunch box of some sort, learn to drink your office coffee so that you have enough money for your lunch.

Coupon clipping is a good move, too. This will not only make you help save but can earn you some friends too that may support you in your debt-free life campaign. How? Look for other coupon-clippers and trade.

Do you know how to save on phone services? If you need to make long distance calls, don't be sweet-talked by the smooth operator. Asking for help from the operator means having to spend more. If you use phone cards, check the expiration date and know if there are any hidden charges.

Club memberships that are rarely used should be dumped, too. What could be more stupid that wasting money on things that don't get used, right? Speaking of rarely used things, how about stopping credit card use all at once? Learn to afford not swiping that evil card if you want a debt-free life. It's one of the biggest temptations in this world!

Distinguish the Evil Forms of Debt

There are two kinds of debt. The good one is that kind of debt with which the item that caused your debt could be sold and the proceeds could help you repay the debt. The bad one is a loan that has a diminishing value.

An example of a good debt is a home loan that is if such home loan, particularly a home equity loan will add value to your home but if you will acquire such loan for unnecessary items, you're doomed. An example of a bad debt is clothes, unless you're a celebrity of course, wherein you can auction off your clothes when you get tired of them. School loans aren't advisable because it will most likely be hard for someone to pay off his or her debt even after landing a good job since there are various expenses that will come when working life starts.

So, how do you stay debt-free or at least be able to manage well your debts through the abovementioned information? Avoid bad debts!

None of this would be possible without taking the first step. Start tracking your spending habits today and tailor your moves to your debt-free life goals. Self-discipline will help you breeze through it all.

THE BASIC CONCEPT OF DEBT

Budgeting is an important aspect of living and a person who knows how to budget will go a long way in this commercialized society. Budgeting has a lot to do with keeping the expenses less than the total income of the household. Those who are very good at budgeting can even come up with savings even if they have meager incomes.

The problem sets in when a person fails to make an efficient financial plan and his expenses exceeds his earnings. When this happens, a person has no choice but to borrow money to make up for his financial deficiencies. Borrowing once or twice because of a mismanaged financial plan is normal but when borrowing becomes a regular thing then that can put a person in serious debt problems.

A person who borrows money from another is said to be in debt. The debts of a person can be minimal or it can reach up to millions depending on the credit limits of such person. Sometimes, a person who has assets but isn't liquid can use these assets to get cash. Under this term, the person can be indebted for an amount mess or more than his assets.

There are laws which provide that a person can never be forced to render services as payment for his debts. This is already called undue servitude which is prohibited by the laws of some countries. However, there are situations when the person who is in debt opts to settle his obligation by rendering his services.

This can happen if a person is so talented in his craft like painting and he opts to pay for his debts by creating a painting of the creditor or the assignee of the creditor. Sometimes, a person can pay his debts gradually or on an installment basis.

When a person dies, the law has provided for a hierarchy of preferences in the payment of such debts. Of course, payment of taxes to the government will always come first. The second priority for debt payments includes funeral expenses of the deceased and the payment for the wages of people.

Debt is really just a simple concept which provides that a person who borrowed something from another is duty bound to pay that debt. However, the concept of debt becomes more complicated with the introduction of other concepts like mortgage, interest rates and other charges. Interest makes most debts double or even triple in amount. More often, the interest rates due for a certain debt is even higher than the principal amount borrowed.

A person who wants to get credit can do so in the form of a loan. A loan can either be secured to unsecured. A secured loan means the debtor borrowed some money and supported by collateral or a security for the loan. The security or collateral can come in the form of a house and lot, a car or any asset of the debtor. An unsecured loan means otherwise.

Most creditors require a security before granting a loan because it gives them something to hold on to or to forfeit in case the debtor defaults in payment. When the debtor fails to pay the debt within the agreed timeframe then the creditor can foreclose the security or the collateral.

However, having an unsecured loan doesn't mean that the debtor can renege on his debts. When the debtor fails to pay his loans, the creditor can still run after him by filing a case in court. When this happens, the debtor who has no cash can sell some of his assets to pay for his outstanding loan.

Being in debt is common even for the rich and the famous, the only difference between them and the common people is that their debts can be in the millions since they have more assets to support their loan. Unsecured loans most often have higher interest rates to make up for the lack of security.

Even third world countries are indebted to more developed countries. However, the debts of a country can go on forever because they keep on paying their loan but they also get new credits as their credit ratings go up.

TIPS ONDEBT NEGOTIATION

You may try debt negotiation with your creditors if you have realized that you can't settle any due bills. In this way, you can find ways on how you can find the needed money before creditors start calling you.

Before starting debt negotiations, you should be able to review and know what bills you should pay first. Identify the payments that are nearing their due dates. Then you can plan for your finances and determine how you can subdivide your payments.

Many bank creditors are more than willing to negotiate with your financial problems rather than passing your account statements to collection agencies. They also don't prefer filing cases of bankruptcy against you. If in case you come across of creditors who don't want to have debt negotiations, make a communication plan that will allow yourself to take steps on how you can settle all your debt problems. Here are some debt negotiations tips that can help you arrange with your creditors.

1. You may request for agreements with your creditor to pay your bills in installments or settle for a much lower cost. Make sure that you get a copy of the agreement before making any payments. You might end up realizing that your account is on a rolling late status. This means that you will be given negative points on your credit report because you are only settling your payments on a partial basis.

2. You should also be aware on those spreading scams on credit cards. You may find some payment collectors that mislead payers on their credits and balances. It is recommended that you become cautious on the people you transact with. You shouldn't provide any personal information such as credit card numbers, bank account numbers, or employment information.

3. One way to ensure the safety of your payments is to pay your debts via certified mail. Make sure that you should also be provided with a return receipt. You may request certified mail through a cashiers check or through money orders. Remember to keep all receipts and documents.

4. It is recommended that you don't confirm any assurance that you can pay your bills on time. You should exert an extra effort to notify your creditor about your difficulties on settling your payments.

You may ask your creditor if they can provide you with new payment terms. Never forget to inform your creditor about the changes in your plan before making any payments. Most importantly, stick to the promises that you will give your creditors to avoid future problems

PAYING OFF YOUR CREDIT CARDS

Having a credit card is very convenient. You don't have to carry a lot of cash around and won't feel bad should it be stolen. This is because one phone call can have the credit card cancelled while there is no way to replace money that was lost.

But if the shopper spends too much, this could be a problem. The individual will be paying these off with interests, which is much more than the amount that was actually purchased. Here are some tips that can help get anyone out of credit card debt.

1. You should write down all the expenses over the last 3 months. If these are too much, its time to sit down and work on a monthly budget.

This should be stripped down only to the necessities such as rent, food, gas, utilities and insurance payments. This will give you the extra cash needed to pay off the credit card debt.

2. Sometimes it is hard to monitor all the expenses if there are a lot of credit cards in the wallet. Financial experts advise those in debt to only keep two and cancel the rest. One will be used regularly while the other is kept for emergencies.

This makes it easy to monitor especially when most banks send the monthly statement at the end of the month.

3. Most banks will either call or send a letter if payments are late. You should talk to these people about the steps being taken to remedy the situation to avoid getting a bad credit rating.

Those who don’t will have a hard time later on in getting another credit card or a loan since nobody will trust the applicant anymore.

4. Setting aside a portion of the salary each month may not be enough to pay the credit card debt. Should this happen, the owner will have to get rid of some of these expensive items. An example will be giving up on the car since a certain amount is spent just to make the monthly payment.

5. Some people decide to get a home equity loan to pay off the credit card and other debts. Going through the phone directory or asking around can help the individual find a firm that can combine everything into one payment at a low interest rate.

Getting out of credit card debt will be a challenge. You should stick to the plan and be committed to doing it. Otherwise, all the planning and cutbacks done will amount to nothing.

PREVENTING DEBT

The only time people go to the doctor is when there’s a problem. Working out regularly, taking vitamins and visiting the physician regularly are the best ways to prevent sicknesses. These steps prove that the proper precautions can help patients from ending up in a hospital bed.

Prevention in another form can also be applied to the consumer. Instead of getting sick, the individual can work on a budget to avoid getting into trouble and paying off debt.

The first thing anyone should do is to write down the list of expenses. This can be done weekly or monthly which should includes the amount spent on gas, rent, utilities and clothing.

Next, the person must determine which of these are luxuries and which are necessities. The objective of this exercise is to check how much is earned in a month compared to the amount that is spent.

Should this be more than what the employee is earning, then some cutbacks needs to be made. This should be stripped down only to the essentials so that there is money available in case of emergencies.

Before buying anything, the individual must always ask if this is really necessary. If not, then this is one thing the consumer can walk away from without feeling any regrets.

Sticking to this is very difficult if the person has always lived a lavish lifestyle. The reality is that there isn’t that much money around so it will be a good idea to just put up with it until maybe the salary increases or a better opportunity comes knocking at the door.

The only way to know if the plan is working is by writing down all the expenses made daily and comparing this with the original list done a few months ago. If some money has been saved, then it is effective.

The cash should be deposited in the bank or invested in stocks so that this will grow and earn some extra income.

People need money to survive every single day. This is to put food on the table, clothing to wear, gas for traveling and payment for utilities.

Regardless of the amount of dollars earned monthly or in a year, the person must still know how much money is on hand and where it is spent. This is because it is only through budgeting that debts of small or large amounts can be prevented.