All About Debt - Part I

Are you looking for ways to get out of debt? There is no shortage of agencies out there willing to help you out of your situation…for a price. But many of the things they suggest can be done without their help. So, how do you know you need the intervention of the debt consolidators?

Advertisers would make you think that the debt companies know more than you about solving your problem. Yes, it’s true that they have more experience helping people on a regular basis, but that doesn’t necessarily mean that your situation needs their assistance.

Depending on your answers to the following questions, you can make the determination if you should consult with a debt consolidation company.

1. How much debt do you have? People with minimal debt, say under $10,000, could negotiate with the creditors themselves to set up payment arrangements. As a consumer, you have the right to negotiate your interest rates on credit cards.

2. Will your credit score be affected? This is a concern since the reason for managing your debt is to avoid credit score issues. If a debt consolidation company informs the creditor that you are in a debt consolidation program, it can negatively affect your credit score.

3. What is the cost? You are trying to lower your outflow of cash. Many debt programs charge for their services and the price depends on what they are doing for you. They can provide counseling and suggestions without enrolling you in a debt consolidation program.

4. Have you looked at ways to tighten your budget? Debt consolidation programs are about negotiating with creditors to find the best payment amount for you and them. This might actually not be necessary if you can squeeze a little more money out of your budget. Consider expenses that you can cut out. If you can negotiate payments yourself and come up with the money to pay them, debt consolidation is not necessary for you.

5. Have you been through financial counseling? You may be one of the people who have trouble getting your spending under control. Financial counseling is the first step to correcting the debt problem. Once you face your spending issues a more positive financial situation is in your future. Considering debt consolidation without counseling won’t stop you from future debt.

6. Are there other options? Your bank may be able to give you some help and with a better interest rate because you are a customer. If you own your own home, an equity loan can help you pay off a debt that is not too terribly large and credit counseling can help you stay debt free.

Debt consolidation isn’t the only choice to clear up credit card debt situations. Before entering into any agreements determine if you really need the third party help.

No one likes having a debt cloud hanging over their heads. It is a mood killer. If you are dealing with mounting debt, here are five ways to save a little extra money and pay back that debt now.

The major barrier to paying off debt is having the money to do so. After all, you still have to eat, have heat, water, and lights. If you live in a remote area, you need your car to get to work. All of these bills are called necessary bills and they need to be paid in addition to the credit card debt.

Sometimes, there is credit card debt but the real problem is the necessary bills. In the economic climate, one or both people in the home losing a job can create a real financial hardship. Many have fallen behind in their mortgage payments. Credit card bills are a distant, distant second to more vital bills but by not paying them, late fees can accumulate and create another problem.

1. Cancel unnecessary amenities. We all like our satellite and cable television, but it gets quite pricey. The same goes for movie services like Netflix and Blockbuster. Going back to regular television and only renting movies from RedBox can save you as much as $150 or more a month.

2. Hold a yard sale. You must have a few things around the house that you don’t use very much. Hold a yard sale. If you have other family members in the same area, get everyone together and have a family yard sale. Whatever you don’t sell can be given away to charity. Don’t neglect stores that buy used books or merchants that buy old gold (they are everywhere nowadays).

3. Cook at home. There doesn’t seem to be enough hours in the day sometimes but you can cook a large meal and manage to get several leftovers out of it. Your reason for not cooking may be related to the fact that it is convenient. If you ever look at your bank account statements, a good portion of your funds are spent on convenient food. Spending $200 a month (double that if you have a large family) on groceries and cooking saves you at least $200 in extra food costs by not eating out. There’s no sense in going to the grocery store and the drive-thru.

4. Carpool. This is an option if you live near some fellow employees. Every person in the carpool can take turns driving for a week. It saves gas and money that can be used for something else.

5. Use cash. If you don’t have the cash to buy it, you don’t need it. Relying on credit card will only increase your debt and that is like going in reverse.

Saving money is almost as hard as paying off debt. Use these five suggestions to help with the saving money part so you can pay back the debt part.

Have you seen those commercials with the guy strumming the guitar and lamenting his credit situation? He’s not the only one who deals with that problem. Take your credit score in your own hands by reviewing your credit report on a yearly basis.

You used to have to pay for a credit report. There are companies that would give you one for free if you sign up for their credit protection programs. But, that is not necessary anymore. The federal government has decided that they would help you get at the resource you need by allowing everyone to get a free credit report from each of the main three credit bureaus once every twelve months. According to an amendment to the Fair Credit Reporting Act, you can go to www.annualcreditreport.com and get your report.

There are many credit agencies but the three that most creditors report to are: Equifax (www.equifax.com), Experian (www.experian.com), and TransUnion (www.transunion.com). Some report to all three or just one. It only takes a visit and a few bits of information to get a free copy of your credit report. If you have a computer and a printer, you can download your free copy and print it out.

Credit bureaus keep track of your entire credit history from that first credit card or line of credit that you acquired. They also track your credit payment history from month to month. The credit score that can help or give you trouble is derived from this information.

Here are some of the things you find in a credit report:

• List of creditors along with addresses and/or phone numbers

• Date opened accounts

• Monthly payment history

• Recent inquiries

• Liens, foreclosures, bankruptcies

The first thing to check is the personal information. Many people have been saddled with someone else’s bad credit baggage because of a wrongly recorded social security number or a problem with a name. Check to see that the credit bureaus know your correct name, social security number, address, birth date, telephone number, and employer. If you find any discrepancies, contact the agency immediately to have it cleared up.

After that, go over each entry carefully. If any information is wrong, you can dispute it with the credit reporting agency to have it changed or deleted. That process can take a bit of time but it is worth it. That errant information could be lowering your credit score and also your chances of getting a home or a car.

Your credit report is your first line of defense when disputing any issues related to identity theft. In fact, most people don’t find out that they have become victims of identity theft until they are contacted by a credit card company. You can discover the problem early on by reviewing your credit report every year.

Knowledge is power. Stay ahead of your financial situation with a copy of your credit report. You are entitled under law to receive a copy from each of the three top credit bureaus.

Continued in Part II...