Debt Relief Tips - The Ten Key Questions That You Must Know About Debt Relief Companies. It Will Help You To Save Alot Of Time And Money
10 Questions You Need To Ask About Debt Relief Companies
By Brian Miller
If you decide to use a debt relief company it is very important that you find the right company. A competent debt relief company will be able to answer all your questions. In choosing a company, you must do your homework (due diligence). Compare rates, fees (hidden fees) and service of each debt relief company. Buyer beware and be thorough in your research.
Here 10 key questions you should ask yourself when conducting a search for a debt relief company:
Is the company legitimate? Do they have a phone number and does a person answer the phone? Check their business history to see how long they have been in business. Try to find one that has been around for some time. I have heard stories of companies changing names just to remain in business so you should:
• Check out the debt Relief Company through the Better Business Bureau to determine if complaints have been filed against them.
• Check with the Attorney Generals Office for your state.
• Check online debt relief forums. Many allow you to post questions about specific companies. Get feedback from others.
• Check your local consumer protection agency
What services does the debt relief company offer? Determine if they will be offering you the loan, or will they refer you to another provider. Some companies negotiate with creditors on your behalf others just offer one big relief loan. Find out whether they also offer other services such as debt management or financial counseling.
Do they offer a free consultation or free quotes up front? If the company charges fees up front before they know anything about your debt situation or before giving you a quote, then they are not the right choice with whom to trust your finances.
How knowledgeable is the staff? Talk a company representative; are they familiar with the loan relief process? They should be able to address your requirements and answer your questions.
Are the fees reasonable? Extremely high fees should be a red flag warning sign while very low fees could be indicative of high hidden fees. You really need to understand how the company will charge you for the service they provide. If the debt relief company tells you they can eliminate your debt in a very short period of time then you should be wary of such offers. Getting out of debt doesn’t happen overnight.
Will the company consolidate all your debts? You should avoid those that will only consolidate a few. This allows you to manage your debts more effectively. Ask how the loan will be structure. If you were asking for a loan without the help of a debt relief company, most, if not all, companies will only consolidate unsecured debt such as credit card bills, medical bills and signature loans. In that case you will be required to put up collateral such as your home because relief loans are often structured as second mortgages. This means that you could end up losing your home if you default on relief loan payments. Your credit rating plays a role in the amount of the loan as well as the interest rate.
Is the debt relief company allowed to provide funds in your state, are the bonded and insured?
Have you read the debt relief agreements? Read the fine print. Read the contract/agreement thoroughly and ask questions to clear up any doubts you may have.
Do they pressure you into making a decision immediately? Don’t make an instant decision. Take time to research all options so you can make an informed decision.
Do you feel comfortable with them? After all due diligence you should have a good idea on which company best fits your needs, if not continue the search, or find a way to do it yourself. Also take a good look at all your debts, the payments and interest rates to find out how long it will take to pay off the loan. Compare that to the terms of the relief loan. Look at the terms of the loan, how long will you be paying on the loan and what is the interest rate.
For help in selecting a debt relief company, visit http://www.debtsolution-strategies.com/debtrelief.htm
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Debt Relief Tips - What Is FICO Scoring System ? FICO 2008 is coming and How It Affects You. Read It More From Here
FICO 08 Is Coming - Changes Won’t Increase Most Peoples Scores, Just Their Interest Rates
By Jon Noble
New FICO 08 is coming - I suspect that based upon current conditions the increase won’t be peoples scores but, their interest rates.
Starting this May, Fair Isaac, the company that provides FICO scores to 90% of the largest 100 banking institutions (according to them) will institute a new and as they claim “improved” model. This model, they predict, will help lenders reduce default rates on their consumer credit files by 5 to 15%.
Scores will still range from 300 to 850 points. A consumer with a higher score will have a better chance of getting a loan at a lower interest rate and the consumer with a lower score will have a more difficult time getting credit and will expect to pay a higher interest rate on that loan or line of credit.
Factors that are taken into consideration when calculating these scores will still be the same: the level of indebtedness and payment history (this is the one to watch and I will explain more below) length of credit history, the number of inquiries and the recent establishment of credit, and the “type” of credit used (department store cards, gas cards, authorized user (this is going to change too), mortgage or auto loan, etc.)
In theory, 2 people that used to have the same scores could now see one score rise and the other score fall. FICO 08 will presumably give more points to consumers who maintain a variety of credit types, a mix of auto, mortgage and credit card debts. This is not unusual as it has always been taken into consideration and valued the different types of credit a person has established. A person with a department store credit card that has always made their payments or even paid the card off every month will usually not score as high as someone who has a mortgage payment that has made their payments on time each month. That would be expected. However, with the “new and improved” model - FICO will penalize an individual who carries a high percentage of their available credit. This means that if you have a good mix of credit, have been making all of your payments on time but carry some high balances on your credit cards - your score will go down. Those that have low credit balances and have maintained good payment histories will see their scores go up.
Those of you that have added “authorized users” to help build up that persons credit profile (you added a spouse or your son/daughter to help them establish credit) will also see a change. This practice, referred to as “piggybacking”, won’t impact the person’s credit score that you were trying to help anymore. It seems that in the past, there have been some companies that provided this service to people with “less than desirable” credit profiles to help improve their client’s scores. They would use people with good scores and lines of credit and add people with poor credit as authorized users, in order to boost their scores.
I have read that Fair Isaac claims that with the new scoring system that overall, more consumers will see their FICO scores go up slightly vs. those people that will see their scores drop. Remember, a drop in your score can not only mean that with any new credit that you are seeking you could pay a higher interest rate or even be denied but, your creditors could immediately lower your lines of available credit (triggering a maxed out credit line which could also hurt your score again) and raise your current interest rates based upon your new “risk” factor and invoking a “universal default provision”.
Now, let’s look at some current credit card trends and see what you think will happen. Do you think most consumers will benefit financially from this or more banks/lenders will benefit financially from this? After all, if more people see a positive raise in their FICO scores, they should be able to get lower interest rates, refinance their sub-prime loans and capitalize on all those 0% credit card balance transfer offers that are flooding the market place right now.
1. Americans are approaching 1 Trillion dollars in credit card debt.
2. Consumers charged $68 Billion worth of purchases last year alone. A 7.8% increase and the largest increase in 7 years.
3. 60% of all consumers carry a balance on their credit cards.
4. According to the Department of Labor - for every $1,000 of disposable income, the average American spent $1,005.
5. In 2007, credit card debt hit an all time high of $943.5 Billion and has grown 22 percent in the past 5 years and more than doubled since 1996 - according to the Federal Reserve Board.
6. In the 1980’s the American consumer saved between 10 and 11% of their disposable income. Since 2005, according to the US Department of Commerce, Americans have saved less than 1%.
7. In 2006, credit card companies made $17 billion, just in penalty fees, according to U.S. PIRG (The Federation of State Public Interest Groups).
8. In 2006, consumers received nearly 8 billion direct mail credit card solicitations.
9. Some credit card contracts say in the fine print that the company may change terms, including interest rates, “at any time for any reason, including no reason”. This is a practice called a “universal default provision”. This means that if you are late on a payment, if you apply and are denied credit, even if you have made all of your payments on time but are carrying a high balance that triggers a lower FICO score showing that you are more of a credit risk… you could see a rate increase across most of your credit cards. For an example: If you had 5 credit cards. You made payments on time to 4 of them but were late on the 5th card, all 5 credit card companies could invoke (if they had this provision, most do) the universal default provision.
10. The average credit card rate of interest when enforcing this “universal default provision” is as high as 36%.
11. According to CardTrack.com - the percentage of people that are delinquent on their credit card payments is the highest it’s been in three years.
With the new FICO 08 model - anyone carrying a balance of over 50% of available credit (meaning if you have a credit card with a $5,000 credit line and you owe $2,501 or more) you will be penalized for it.
As always, to learn more about your financial options and managing your debt, visit www.credittrustgroup.com.
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