Credit Counseling: Managing Credit Scores
Some parts of recent legislation concerning consumer credit cards went into effect August 20:
- Instead of mailing bills at least 14 days before their due date, credit card issuers are now required to mail bills a minimum of 21 days before their due date.
- Credit card issuers must provide consumers an option for declining interest rate increases. If the new interest rate is declined, consumers have five years to pay off their credit card balance. No new charges may be made after opting out of the new interest rate.
- Credit card issuers are allowed to adjust minimum payments to ensure repayment of the balance owed by opt-out customers within five years. If you opt out of a higher interest rate, this could significantly raise your minimum payment amount.
In other news concerning credit cards, a study by FICO, the company that provides the most commonly used system of credit scoring, indicates that credit card issuers reducing consumer credit lines has varying effects on credit scores. FICO reports that between October 2008 and April, 2009, approximately 33 million consumer credit lines were reduced by credit card issuers, including 24 million customers with no obvious “triggers” for reducing credit. About 3.5 million customers experienced little impact on their credit scores, while about 8.5 million reported a drop in their credit scores after credit limits were reduced. Surprisingly, 12 million credit card customers saw their credit scores increase after their credit lines were cut. Mixed results may occur from variations in individual circumstances.
High Credit Card Debt = Lower Credit Scores
Credit experts usually recommend that you keep about 70 percent of each credit line available. Running up cards to their limits can put you at a high risk of missing credit card payments if you lose your job or become ill. If you’re carrying too much debt and need help, using a credit counseling service may help with reducing credit card debt. Here’s how credit counseling can help:
- You’ll review your financial documentation including income, obligations, and your credit history with your credit counselor.
- Your credit counselor will help you establish a cash based budget, and will contact your creditors to negotiate affordable repayment terms based on your ability to pay.
- You’ll sign an agreement or contract with the credit counseling agency that details the terms of your repayment plan, specifies payment amounts and due dates, and other terms and conditions of your credit card debt reduction plan.
- As with debt consolidation, you’ll enjoy the benefit of making one monthly payment instead of juggling bills and incurring charges for late payments.
When considering credit counseling companies, avoid paying “up front” for services, and don’t fall for promises of “instant” credit repair; it’s easier getting into credit card debt than resolving it.
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Loading ...Foreclosure Relief Efforts: Foreclosure Rates Rise 7% in July
Government foreclosure prevention programs are falling short of their purpose of preventing home mortgage foreclosures, as indicated by July’s rise in foreclosure notices filed. Financial experts estimate that 1 in 355 homes in the US is in foreclosure according to RealtyTrac, a firm specializing in reporting real estate trends. The worsening foreclosure trend is highlighted by foreclosure numbers for July 2009 as compared to July 2008. This year, about 87,000 mortgages were foreclosed as compared to July 2008’s estimate of 79,000 residential mortgage foreclosures. Federal Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan recently sent a letter to major mortgage lenders encouraging them to do more, and to do better with foreclosure relief efforts through programs including Hope Now and Making Home Affordable.
Mortgage Relief: Roadblocks, Logjams Not Helping Homeowners
Mortgage loan servicers, the companies engaged by mortgage holders to take care of day to day loan servicing needs, are reportedly overwhelmed with requests for assistance. Some lenders have established waiting lists, and while desperate homeowners wait, they may not be making their mortgage payments, which potentially increases losses associated with foreclosure. If you’re having problems getting in touch with your mortgage servicing company, getting help from a non-profit debt consolidation program can help you develop a household budget appropriate to your current circumstances, and may be able to assist with a mortgage modification or repayment plan. Go here to learn more about avoiding foreclosure and finding non-profit credit counseling and mortgage relief programs.
Debt Consolidation Programs: Reducing Foreclosure Risk
Homeowners faced with job loss or steep reductions in income due to layoffs or illness may be tempted to let a mortgage payment go in favor of placating aggressive collectors working to collect unpaid consumer debt. Faced with having wages garnished or making a decision between paying bills or buying groceries, it can be easy to “rob Peter to pay Paul.” Non-profit debt consolidation programs offered through consumer credit counseling services can help by negotiating repayment terms with creditors; reducing interest rates, late fees and other finance charges can help whittle down monthly payment amounts to affordable levels. Consumer credit counseling services work with credit card companies and other creditors to make arrangements typically not offered to consumers making individual requests.
Credit Counseling Services Caution Against Procrastination
The more you owe, the more difficult it is to make affordable repayment arrangements with creditors. If you’re having problems making payments on your mortgage or other debts, please seek help today. Non-profit debt consolidation programs can help you regain your financial footing as you learn how to manage and adjust your budget to suit changing circumstances.
(No Ratings Yet) Loading ...How the New Credit Card Rules Can Help with Debt
Credit card reform has been in the works for some time. But credit card regulations begin to go into effect on Thursday so it’s important to keep an eye on your statements. Here’s how the new regulations help with paying down debt.
Protecting Consumers
The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 is aimed at providing greater protections to consumers. Beginning Thursday, credit card companies must notify you 45 days before any significant changes in the terms of your account, such as an increase in the interest rate. Right now, credit card companies only have to notify you 15 days before increasing your interest rate. You also have the option of declining a rate increase or searching for a card with better terms during the 45 day period. Read the rest of this entry »
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno. She enjoys writing informative articles about debt management and personal finance.
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