Secured Debt Consolidation Explained

by William Blake - When people are faced with a lot of debt, whether from credit card, department store cards or some other form of consumer credit, the best solution for paying it off is often to consolidate all the balances with a single loan. In most cases, these consolidation loans are secured by some sort of collateral, such as a house or car.

There are a number of ways to find a consolidation loan. There are agencies and services in most larger cities, as well as on the internet, that deal specifically with debt consolidation.

At the early stage when you're researching options, the internet can provide a lot of value. There are plenty of websites out there where you'll get detailed information about debt consolidation and they make is easy to compare services when choosing an agency.

When you consolidate multiple debts into a single consolidation loan, it means you only need to make a single payment every month instead of one to each of the creditors. The interest is almost always lower on these loans as well, so over the time it takes to pay it off you can save a lot of money in interest costs.

When you start looking for a consolidation loan, your credit score is going to have a bearing on what you can get. A lower credit score generally means you'll have to put up collateral to secure the loan, plus you may wind up with a higher interest rate than someone with a better credit score.

Collateral will usually consist of some kind of personal property with a significant enough value that it could pay off the loan if you ever defaulted. It follows that if you require a secured loan, the amount of collateral you have will dictate how large a loan you will get.

Once your consolidation loan is in place, all your current credit cards and other creditors will be paid off, leaving you with a single payment to manage every month.

At this point the most important thing is to pay that off as quickly as possible, and not charge up more debt on your credit cards.

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How do you know if credit card consolidation is the right way to pay off your credit cards? Visit the Debtopedia website at http://www.debtopedia.com to learn more about it and how to determine if it's the right answer for you. You can get a unique content version of this article.

Credit Card Counseling - Getting Out Of Debt

by William Blake -

Does this sound familiar - something unexpected pops up and you have to charge it on your credit card because you just don't have the cash on hand? Or what about charging the latest toy or gadget because you absolutely have to have it now? These are common reasons for using a credit card, but unfortunately in the end the bill always has to be repaid.

If we let things get too far out of hand, the result can be a large amount of credit card debt and no means to pay it off. It ends up costing a ton of interest, in some cases for years after the purchase was actually made. If this is a problem for you, there are places you can turn.

The first step you should take is to call your credit card company and see if you can get them to give you a lower rate on your card. There are two ways to approach this. The first (and easiest) is to just call your credit card provider and ask them for a better rate.

They'll tell you within seconds if you qualify for a better rate or not, and you'll be surprised at how often you will get it simply by asking.

The second way is to apply for a second credit card with a lower interest rate. Once you have this card, transfer the outstanding balance from the higher rate card to the lower one. Incidentally, if you find a better rate on another card, that can be a leverage point when you ask your credit card company for a lower rate.

If you find it hard to stop spending on your credit cards, credit counseling might be the best option. There are lots of credit card counseling services that will help you deal with all of your creditors to get a better rate and/or a more reasonable schedule for repayment. Because these services deal with the credit card companies all the time, they'll sometimes be able to get a better deal where you couldn't yourself.

The cost for credit counseling varies. In some cases, it's a free service where you won't have to pay anything. You simply provide them with all your credit card information and any other creditors you owe money to.

They can take that information and work out the most effective payment schedule for your particular situation. If you're feeling overwhelmed by credit card debt, don't keep struggling to stay on top of it. Talk to a credit counseling service and start to get ahead again.

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Credit Rating Scores And How They Affect Credit Card Applications

by Courtney Jaden - Do are all those credit card companies intent on filling your mailbox with a bunch of credit card offers? There are so many companies who want to benefit from your spending that it has become somewhat easy to apply for a new card.

However, while they're quick to make the offer, getting approved is another ball game. Credit card companies may be liberal with their invitations, but their requirements are very strict. Good credit rating scores are one of the requirements you have to meet.

If you don't have good credit rating scores, you can still improve them; however, it won't happen immediately. Like anything else, you have to work at it if you really want to improve your scores. However, it's worth it: Once you have a good credit score built up, you'll find it easier to get approvals for your applications.

So how do you improve your own credit rating scores and become eligible for approval from the credit card companies? There are three things that you can do to get things moving along.

Pay your bills on time; that's the first thing you need to do. When you pay all of your bills on time and never get a late fee, you'll keep your credit rating scores stable, and you'll eventually be approved for a credit card.

But of course, things happen and maybe one day you'll make a late payment. One late payment isn't the end of the world, though. You can get your credit rating scores up again over the next several months, if you make a point to pay your bills on time.

You may be tempted, or have been tempted, to cancel old credit cards. That may seem like the logical thing to do, but it is really unwise. Any credit card in your credit history will contribute to your credit score. This tells lenders that you don't automatically run up any credit card that you get your hands on because you have available credit that is being unused.

So the second tip is to keep old credit cards, but don't use them, even if you are still paying on them. As your bills are paid, your score will increase, which will make it easier to apply for a new card.

Another thing to keep in mind is to never max out your credit card when you use it. Your credit score will more than likely plummet if you use up more than 50% of your limit.

There are two advantages to staying below 50%: First, you'll be able to stay on top of your bills, and secondly, you'll maintain a better credit score. Now that you know these tips and understand how they influence your credit rating scores, you're in a better position to apply for a new credit card. Good luck on boosting your credit score!

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What is Chexsystems ?

(by Steven J. Talrechi) If you've managed to open checking accounts so far without any trouble, chances are you have not heard of Chexsystems. However, if one day your bank refuses your application to open a checking account, then it's probably because of Chexsystems.

eFunds is a company that was created in 1999 as a tool of the financial lending services sector. It in turn produced Chexsystems . eFunds developed Chexsystems to detect any fraudulent activity and to assist financial institutions with risk management analysis, in particular for individual customers.

Chexsystems monitors and reports on your banking activities much as credit bureaus do with regard to how reliable you are in paying your bills and managing your credit, Chexsystems looks for suspicious banking transactions, overdrafts, insufficient funds' check cashing, or the inability to meet minimum account balances.

Chexsystems therefore serves two functions: as a verifier of checking activity and as a consumer credit reporting agency just like Equifax or TransUnion. And just as you're entitled to one free credit report annually, you too can ask for a Chexsystems report once a year, free of charge. When it assumed its second function in 1999, it came under the Fair Credit Reporting Act.

This means that consumers can question any information contained in the report, dispute entries in it and can request evidence for reported activity. Majority of banks and credit unions in the US use Chexsystems and if there is anything negative regarding a prospective applicant, that applicant could have difficulties opening a checking account. Chexsystems: is it fair? Critics have voiced their objections about Chexsystems' reporting practices claiming that the system is characterized by unfair reporting. Unlike credit bureaus that issue reports containing both positive and negative information, critics insist that Chexsystems only reports on the negative, hence jeopardising the credit reputation of individuals who are otherwise qualified to open checking accounts.

Given the mounting criticism, several banks met in 2000 and they agreed that they would re-consider their policy in approving checking account applications based on Chexsystems reports. Reforms were introduced, some of which include ignoring entries that are more than three years old as long as they are not related to fraudulent activity, disregarding Chexsystems entries that are one year old provided the consumer has settled the debt, and extending the time in which a consumer can repay the debt.

What's in a Chexsystems report? As an example, a sample report shows just how thorough this type of report is. The person's name and address appear at the top of his or her report, along with Social Security and ID numbers. If you should ever need to write Chexsystems about anything that appears in your report, you should include your Social Security number and ID number in your correspondence.

The first thing you read on the document is that Chexsystems will look into any information or entry that you believe is incorrect or inaccurate. You can send your inquiry to fax number 602-659-2197.

The next box is "reported information." This reported information originates from mostly financial institutions and is kept by Chexsystems for a period of five years. If there is more than one reported information or transaction, these are individually itemized. It lists the source of the reported information, the individual being reported on (including his social security number and driver's licence), and the type of report (e.g. non-sufficient funds).

Following "reported information" is another box that reads "Inquiries Initiated by Consumer Action." This means transactions initiated by you, the consumer, and shows all your applications for a credit card or any application you made at a financial instituion or bank. This information is kept for up to three years.

The third section or box reports on "Inquiries not Initiated by Consumer Action". What this means simply is that other people have asked about you. These people could be your present creditors, pre-approval creditors or potential investors who are trying to assess you as a risk.

Finally, there's one more box that says "retail Information," which includes checks issued to stores and other retailers that have been returned. When a store receives a check that they can't cash because there are non-sufficient funds, for example, this information is shared with the company called "Shared Check Authorization Network" or SCAN for short. It keeps a database of fraudulent activity and checks that have been returned. In order to obtain information for check authorization and verification, retailers must be SCAN members. This information is used by Chexsystems, but Chexsystems does not become involved in collecting returned checks.

In addition, if you've ordered checks, the report also provides this information. It also gives a detailed history of your check orders. Next, the two boxes after this are validation activities for your driver's license and Social Security number. Your driver's license is processed in two ways, both with validation and then with verification. Chexsystems matches your driver's license by matching your license format with your state's approved format, thereby validating it. It also verifies your place of birth and name, which is the verification aspect of this process.

It may do you well to think of Chexsystems before you write out your next check. You should be sure there's enough money in the bank to cover your check and that the money is truly yours and not someone else's. Of course, you can always pay for merchandise with a credit card or with cash.

About the Author:

Steven J. Talrechi has been publishing advice on second chance checking for more than a decade now. Before you sign up for a second chance checking account, please visit us for all the most up to date advice. Get your own completely unique content version of this article.

What will a Collection Company do?

by JR Rooney -

What is a collection company?

There are a few possibilities.

Some creditors will attempt to fool a debtor by using a separate company name, address, and phone number for their internal collection departments, in order to give the impression of an "outside" agency. This strategy is should only be used when the debt is recent (under six months past due.)

However, most collections activity is performed by a third-party collection company, which are separate from the original creditors, and "work" debts on behalf of various lenders. They may also buy bad debts which have been designated as charge-offs by the original creditor.

This information focuses on 3rd party collection companies.

How do they make money?

3rd party collection companies often work on a contingency bases, where they receive a percentage of the amount that they collect. Individual collectors are often paid a low base salary plus bonus based on their personal goals.

Some agencies also purchase large groups of charged-off bad debts for a small percentage of the face value (amount owed.) After a debt is sold, the debtor now owes the full amount to the purchaser. Since the chances of recovery decrease substantially with time, an agency might only pay 1% - 5% of face value. The agencies' profits come from the difference between the purchase price and the amounts that are eventually collected.

How does the collection process work?

The primary tools of a collection company are letters and telephone calls.

What are the letters like?

The dunning letters are usually computer-generated. They are often in a standardized series which starts with a simple, "reminder" tone, and may buildup to a final demand. The letters are pre-written and sent to many debtors; they are not personal.

The initial demand letter must state that the recipient has the right to dispute the validity of the debt (in writing), and the agency must send some confirmation after verifying it with the original creditor. Demand letters must also contain the statement that they come from a debt collector, and that any information gathered will be used for the purpose of collecting the debt. Collectors are not legally allowed to print anything on the outside of the envelope which indicates or suggests the nature of the communication. The return address must also be discreet, so many companies will just use their company's initials, or some other nondescript name.

The debtor's reaction to the notice will affect which additional notices the company will select from its library. Cooperation (e.g. making payment arrangements and/or partial payments) may result in letters with a gentler tone. Shifty or unfavorable reactions from the debtor may result in a more threatening tone.

Collectors try to create a sense of urgency, in order to collect within the shortest amount of time, and to encourage the debtor to prioritize that particular obligation. Deadlines may be set, such as, Pay this amount within ten days. There may also be threats, such as, ...Or we will proceed to further collection action. But most of the time, if a debtor fails to meet the deadline, all that will happen is that yet another form letter will arrive, making the same basic demand. The & further collection action usually just means more form letters.

Collection letters will always encourage the debtor to call the collection company on the phone. If the debtor doesn't call, then a collector will often call the debtor.

What are the phone calls like?

Individual phone collectors may be assigned a portfolio of accounts, and spend the majority of the workday, every day, collecting them. The collectors motivation is fueled by constant performance evaluations and personal commission payments. The size of a collector's own paycheck is dependent upon how much money s/he collects from debtors. Between that factor, and the relentless confrontations, this is a very high-stress job, with high employee turnover.

If a collector calls and reaches someone other than the debtor (e.g. a roommate), s/he is legally prohibited from disclosing the reason for the call. Depending on the state, this may or may not include the debtor's spouse. If the collector reaches an answering machine or voice mail, s/he will often leave a message, but is prohibited from explaining the reason for the call, since someone besides the debtor might hear it. The standard message goes something like, "I am calling for John Smith. It is very important that you call me back. My name is Joe Schmo, and my number is 1-631-776-8109." S/he will typically sound rather bored and stilted, with other voices chattering in the background. Collection companies might be required to provide a phone number which is free for the debtor to call. They also may attach their (800) numbers to equipment which instantly identifies and logs the phone number which a debtor is calling from, in order to call the debtor at that number later.

When collecting from a debtor, many collectors (especially those with very little experience) will use an approved collection script. The script will keep the collector within the guidelines of the law. The script will contain a pre-written introduction, demands for payment, and basic responses to debtor stall tactics. If a particular debtor is wasting too much time, without agreeing to pay, the collector will move on to other accounts that want to pay.

Any information that the debtor gives about his/her financial situation (e.g. income or current employment, etc.) will be noted on the file's record and used to estimate the probability of a recovery, the advantage of legal action, and so forth.

Can the collection company actually do anything?

If they are working the debt 100% commission, they can send some more demand letters and make some more scripted phone calls.

They can also mark the item as negative with the credit bureaus. If they are working on contingency, they can recommend filing suit, or if they own the account, they can file suit. However, the actual chances or intentions of this are often significantly less than they try to suggest to the debtor.

Collection companies can not legally seize a debtor's assets, bank accounts, or garnish wages unless there has already been a successful lawsuit with a judgment awarded to them.

Collection companies can not legally make any kind of public announcements or disclosures concerning the debt, except to the credit bureaus.

Collection companies can not legally get a debtor fired from his/her job.

Collection companies can not legally act in any type of physical violence or threats.

Why would a debtor pay?

Often, the reasons include anxiety, guilty conscience, persuasion, and a lack of education of the legal situation. Plus it is the right thing to do.

The debtor may feel guilty and ashamed of being a "deadbeat," and may perceive a judgment of his/her value as a person.

The debtor may have greatly exaggerated ideas about what collectors are (legally) capable of doing, and may have outdated stereotypes in mind.

The debtor may be overwhelmed by the aggressive and relentless demands, from companies that may seem so powerful. S/he may take it personally, and assume that great individual attention is being given to this particular collection file.

Consumers being contacted by collection companies are typically in serious financial difficulty, and under emotional stress about the general situation, so they may be confused and vulnerable.

Many debtors aren't aware of their legal rights, and feel powerless.

There are two basic things that a collection company can actually do that a debtor should be concerned about. These involve negative info being reported to the credit bureaus, and the unlikely possibility of a lawsuit.

What about credit reports?

3rd party collection companies have the ability to report a debt to one or more of the credit bureaus, as a "Collection Account," including the amount, and whether it was paid or Refused to pay. Paying off a collection account will not result in the item being removed from the consumer's credit reports - it will simply be marked "Paid in full." Collection companies can report debts that they have purchased as well as debts that they are working on contingency.

Also, a collection company could request a debtor's credit information, in order to get an idea of his/her general financial situation, and to get an updated address and phone number.

How long do collection accounts last?

Collection accounts are subject to the normal 7 year time limit for appearing on a credit report. As specified in Section 605 of the Fair Credit Reporting Act, this time limit is based on the date of the original delinquency.

What is the probability that the collection company will file suit?

If the debt was placed on contingency, the 3rd party collection company cannot file a lawsuit. If the balance is large enough and the debtor is being resistant and if there are indications that the debtor has vulnerable assets, the agency may send the account back to the creditor with a recommendation to file suit. Every creditor has its own criteria for the final decision; for example, the amount must be substantial (often $1500 or more, at the very least.)

Collection companies tend to avoid sending too many accounts back, since it suggests that they aren't very good at collecting. Also, letters and phone calls are much less expensive than going to court.

If an agency has bought a debt, then they have the ability to sue, but by that time, the debt is likely to be rather old, and the agency doesn't have much invested in it.

Fear and intimidation are a collectors biggest assets, since those things can work much more quickly, cheaply, and efficiently than filing suit.

Lawsuits certainly are brought against plenty of debtors, but not nearly as often as debtors fear. There is a big difference between, "Pay up or we will continue with collection action," compared to an actual Summons And Complaint.

If the debt is substantial and recent, and the debtor appears to be a good target (e.g. reasonable assets or income), a lawsuit is a real possibility. If you are served with legal documents specifying a particular court, hearing date, etc., you should see a qualified attorney immediately. That area is beyond the scope of this FAQ.

How are collection companies regulated?

The most important law is the Fair Debt Collection Practices Act (FDCPA), which places many restrictions on collection activities. The FDCPA only covers 3rd party collection companies, not original creditors.

Each state may also have applicable laws regarding such things as telephone harassment.

Who enforces the FDCPA?

The Federal Trade Commission oversees the collections industry, and has the authority to impose fines or other penalties for violations. However, the FTC does not get involved with individual consumers' cases. They accept a large number of complaints, and look for patterns of violations which could then lead to action against a particular collection company.

What if a collection company ownes the debt?

The collection company then becomes the creditor for most purposes. The debtor will not be able to make any payments to the original creditor. The agency might be technically able to file a lawsuit against the debtor, (although this is not likely.)

However, the Federal Trade Commission has issued a Staff Opinion Letter which indicates that, even if a collection company has purchased a debt, it is still covered under the Fair Debt Collection Practices Act as a "third-party debt collector."

What about the relevant time limits?

The debt does not become some kind of "new" debt just because it was sold. For example, the 7 year credit reporting time limit is still based on the original delinquency date with the original creditor. The statute of limitations for filing lawsuits is also based on that same date. These limits can not be legitimately "reset" by a collection company that has bought the debt.

However, the statute of limitations may possibly be reset if the debtor makes a specific promise to pay, or a partial payment.

Can the collection company do anything after the time limits are up?

Yes. The statute of limitations only covers the filing of lawsuits, and the credit reporting time limit only covers bureau listings. There is no time limit on letters and phone calls.

A collection company that has purchased a bundle of "out-of-statute" debts (where the SOL has already expired, or "run") is hoping that, either the debtors will feel guilty, or that they won't be aware of that "out-of-statute" status. But if a particular debtor makes it clear that s/he understands the legal situation, then the collectors are likely to give up and move on to easier targets.

Can collectors call the debtor's place of employment?

Yes, but there are limitations. For example, they can not legally tell your employer about the debt, or try to have you fired.

Is there any way to make them stop calling?

Yes. According to section 805 of the Fair Debt Collection Practices Act:

"(c) CEASING COMMUNICATION. If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except --

(1) to advise the consumer that the debt collector's further efforts are being terminated;

(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or

(3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.

If such notice from the consumer is made by mail, notification shall be complete upon receipt."

So the consumer can just send a 3rd party collection company a written notice (preferably citing the FDCPA), ordering them to stop the collection letters and calls, and the company is legally obligated to comply. The only permissible contact thereafter is to notify the debtor of specific "remedies," like legal action, but usually the collectors won't even bother.

If the creditor hasn't yet made a decision on whether or not to file a lawsuit, then that decision may be made at this point, rather than being delayed.

After a "cease and desist" notice from the consumer, the debt may then be returned to the original creditor, passed on to another third-party agency, or simply filed away, depending on the circumstances. The agency may still report the account to the credit bureaus.

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Getting The Most Out Of Corporate Credit Cards

(by Robert Bain) The corporate credit cards you use need to offer you plenty of benefits in addition to accessing the credit line on them. Since you will likely use them for various types of business expenses, you need to be sure you are getting the most from each one of them. One of the key issues is to address how much accessing that corporate credit is going to cost you.

In order for your business to make as much profit as possible, you are going to have to do what you can to reduce your expenses. Throwing away money on high corporate credit card interest rates just isn't going to work well for any type of business. If you don't know how much you are spending on corporate credit card interest, then you need to take the time to find out. With so many terrific offers out there as well, you don't have to accept those that charge you an annual fee either.

You want your corporate credit cards to be issued by a reputable company. Take some time to find out what other consumers have to say about a given company. If they have a history of meeting the needs of business owners then you may want to find out more about them. If they appear to be difficult to work with and others are continually having to work out problems you don't want to get involved.

The choice of corporate credit card company may be dependent upon what your needs are. Many of these agencies that can offer credit cards for your business understand you may need many cards to meet the needs of the business. They certainly understand that you don't want a separate account for each individual. For your top employees that travel to confirm business deals, they will need to have a corporate credit card they can carry with them.

Look for corporate credit cards that offer you great perks. Since so many companies offer them, you will find that they are really good. Each corporate credit card company wants to out shine the next so that they can get you interested in them. Frequent flier miles are important if you often use the corporate credit card account for travel. You can get enough miles to earn free flights which will save you money in the long run.

Many corporate credit cards also give you cash back rewards. The amount is based on the actual use of the credit card. This can add up to a nice chunk of cash at the end of the year for your business. Any time that you can get something like that back from a credit card company it is worth looking in to. You want to make sure you aren't paying a high interest rate to get those rewards though. If that is the case, you may find you end up paying more in the end.

You definitely want to work with a corporate credit card company that offers excellent customer service. There is no need for you to struggle with the account at any time. You want transactions to be well documented, questions to be answered, and accounts to be monitored. For many business owners, the customer service they get regarding their corporate credit cards is more important than most of the other perks.

Since all corporate credit card offers are different, you are going to have to review each of them individually. You need to know how much it is really going to cost you to use that corporate credit card. The bottom line is that corporate credit cards are very useful and often a necessity. However, you want to be able to benefit from them while paying as little as possible for that option.

About the Author:

Robert Bain writes all about small business. Discover the difference between small business credit and true small business credit that the banks are hoping you don't discover. This and other unique content 'corporate credit program' articles are available with free reprint rights.