Debts, What Are They?

Debt is that which is owed. A person or company owing debt is called a debtor. An entity to whom debt is owed is called a creditor. Debt is used to borrow purchasing power from the future. Companies use debt as a part of their overall corporate finance strategy.

Some types of debt

There are unlimited types of debt obligations. They include but are not limited to mortgages, auto loans, student loans, credit cards and promissory notes. Most people borrow a large sum for major purchases, such as a mortgage or car loan, and they repay it with at an agreed upon interest rate over time or all at once at an agreed date (balloon payment). The total amount of money outstanding is normally called a debt. The debt will increase overtime due to interest accruing. In many systems of economics this effect is termed usury, in others, the term “usury” refers only to an excessive rate of interest, in excess to a reasonable profit for the risk accepted (think payday loans).

Big organizations can issue debt in the form of securities, known as bonds. Each bond entitles the holder to interest and principal repayments. Bonds are traded in the bond markets, and depending on the rating are relatively safe investments.

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Tags: credit score, credit report, credit report score

If you’ve had a little bit of trouble financially lately, you’re not alone. And of course, this little bit of trouble might have affected your credit rating. If so, not to worry.

People obtain bad credit ratings for many reasons, and in half of the cases, it’s not their fault. For example, you could get a bad credit score simply because someone in the credit bureau made an error in entering the data. Or someone with the same name as yours defaulted on a loan and then registered that default under your name. Or else you moved to a new house and last month’s credit card bill got lost during the shuffle and you forgot to pay it. An expensive mistake, for sure, but an honest one. Failing to make minimum payments on a credit card consistently is definitely bad news, but forgetting once or twice to make a payment does not merit condemnation.

If you have a bad credit rating, this does not mean that your reputation or access to financial services is damaged forever. Indeed, you can fix this situation almost immediately, but you have to do some work to do that. However, if you are consistently behind on financial payments, or have other financial struggles that are “permanent,” this is not a quick fix situation and credit counseling may be the best bet for you.

As evidence that bad credit is prevalent and common, the US Trustee Program of the Department of Justice has approved credit counseling agencies to help people with bad credit problems. You can go to their web site at: www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm. In the box where it says “approved agencies by state”, you enter the state or district you live in and click “go.” You get a list of credit counseling agencies that are available in your area.

Why Does Bad Credit Exist? In many cases, of course, the reasons you have bad credit are completely under your control. Among them are compulsive shopping, overspending, living beyond your means, et cetera. However, in many cases, you cannot control the reasons bad credit have happened to you, such as when personnel at the credit bureaus incorrectly enter your personal information. If you correct errors made in these types of situations, your credit rating will be restored quite easily and quickly.

Of course, other reasons you have bad credit include being laid off from your job, which is becoming increasingly common in today’s job environment. This in turn will affect how and when you can pay your bills, so if you’ve been responsible previously, suddenly having substantially reduced or no income can greatly affect just how responsible you can be with your bills.

A second reason this type of difficulty may occur is if you are facing foreclosure on your home. Even if you have a steady job, you can still face the situation. Many people bought overpriced homes in the previously inflated real estate market, and did so through lenders who were willing to cut corners to help them buy homes they really could not afford. Many of these homes also came with such substandard elements as adjustable-rate mortgages, which is where the rate starts out at a reasonable level that the homeowner can easily afford. However, then rates can suddenly spike with no warning, wherein the payment increases by several hundred to even a thousand or more dollars a month. In these cases, often foreclosure was the only way out of such a situation, which in turn affects the homeowner’s situation.

Yet another situation you might find yourself facing is divorce, which can also adversely affect your credit rating. In fact, many credit counselors say that this is a very common reason to suddenly have a bad credit rating when it’s previously been good. In divorces, of course, assets must be divided between former spouses. In addition, there are often alimony and/or child support payments to make as well. Therefore, income that previously was entirely adequate suddenly isn’t enough.

failing health can ruin a lot of credit ratings – people who fall ill unexpectedly or are suddenly suffering from a disability will not be able to continue working. We see here a domino effect: loss of health = loss of job = loss of earning potential = limited cash

Finally, over-stretching one’s credit limits can do the most damage- it amazes us how people’s wallets are overflowing with plastic. Instead of keeping one or two credit cards, they have 10! In addition to the usual cards like MasterCard, Visa, Diner’s and American Express, they also have credit cards from department stores, gas stations, and other retailers. When one card is maxed out, they simply use the next one.

How Can You Avoid Bad Credit? Before you make any major purchases, make sure you visit the site annualcreditreport.com. This site is government-regulated and allows consumers one free credit report from each major reporting bureau annually. If you are someone who needs to keep track of your credit report more often than once year, it may be a good idea to sign up with one of the monitoring services that offer “free” credit reports along with a myriad of other services, usually for a monthly fee. If you find any inaccuracies in your report, make sure you report them to the bureau in question in writing. They must respond to your challenge and either verify the information or remove it if it is inaccurate. Be aware that unfortunately, the information may reappear again later, so be prepared to do this one or more times before it is fully cleared from your report.

If you want to repair your bad credit and restore and then maintain your healthy credit rating, you should:

Carefully track income and expenses. If you do this over the course of a month, you’ll find many places, doubtless, where you overspend and can very easily cut back. For example, if you buy your coffee on the way to work, make it at home and take it with you. If you eat out, take your lunch. These two simple steps can easily save you as much as $100 a week or even more. To determine just how much you should be spending, make a budget. First, determine what all of your basic necessary expenses are. These include mortgage or rent payments, car payments, student loan payments, food, basic utility and fuel expenses, insurance, and the like. These expenses should comprise no more than 60 or 70% of your total take-home income. Your mortgage and home expenses should cost you about 30 to 35%, or about half of your basic “must have” expenses. Of the 30% or so remaining income, you should be saving 10 to 15% in retirement and investments if under the age of 35, or 20% if over 35.

Try to only spend less than 10% on “frivolous” expenses. Those things that you simply “want”, but don’t really “need”!

When you pay off debt, pay off the highest interest rate cards first. To do this, make the minimum payments on all of your other cards, then take the highest interest rate card and put all of your available “debt” cash toward that payment. Do this until you have paid off your highest interest rate card, then go on to the next. Make minimum payments on all of the lower interest rate cards, then take your highest interest rate card that still has a balance on it, and pay as much toward that as you can. You’ll soon see that you can be debt free very quickly, as long as you practice discipline and diligence.

Finally, pay all bills on time – this applies to your mortgage, utilities, taxes and other bills. If you miss making punctual payments too frequently, this oversight on your part will be reflected in your credit report. Bad credit is no reason to panic. Be vigilant over your credit report, be prudent in your spending and be disciplined in respecting your budget.

Tags: credit rating, bad credit, business credit

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.

Consolidating multiple debts into a single loan means you only need to worry about one payment every months instead of several. Plus, the interest is almost always lower so you’ll save money in the long run.

When you start searching for a consolidation loan, you’ll find your credit score has a bearing on how easily you’ll qualify. A poor credit score is usually going to mean you’ll need to secure your loan with some type of collateral, plus you may pay a higher interest rate than someone who has a better credit rating.

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 you have your consolidation loan in place, all your current debts will be paid off, leaving you with just the single loan payment to make every month.

The critical thing to remember at this point is that you must not run your credit card balances back up or you’ll be in an even worse situation than you were before.

Tags: credit card, credit check, credit rating

Free credit checks make reviewing your credit worthiness easier than ever. Consumers who regularly check their credit report online find it much easier to catch and fix any mistaken info listed in their credit history. Free credit checks also help consumers ensure identity theft prevention.

Your credit scores is calculated based on the data in your credit reports and this number will change regularly, sometimes every day. Credit scores allow lenders to quickly make credit decisions based on the three-digit number that is shown on your credit report. Credit scores sum up all the information in your credit report and represent your over-all credit worthiness.

By monitoring your credit report, you can stay on top of your credit. Other than getting your credit report each day, free credit checks are the best way to know what is happening within your credit report. Under Federal law, you have the right to receive a free copy of your credit report once every twelve months from each of the three leading consumer reporting companies. Just remember, all free credit checks are not the same.

None of the three credit reporting agencies do not display your credit the same. Checking all three of your credit reports ensures that you can make sure you are maintaining a healthy credit profile without errors. Credit reports can be requested online, by phone, and via mail. Credit reports requested online are available for your viewing immediately upon authentication of your identity.

Free credit checks are a simple and safe way to get your credit report. These reports are easy to interpret and use colors and graphics to assist you. Be sure to check each of your credit reports very carefully for errors and always be sure your personal information is listed correctly. Credit reports are far from perfect and have been known to contain mistakes.

Free credit checks allow you to see what future lenders will see. Being proactive and viewing your credit report allows you to take action about your credit score if you think there are issues. Did you know that Experian has reported that it takes consumers, on average, a whole year to discover they have been a victim of identity theft? By regularly viewing your credit report, you can help deter identity theft. All the more reason to request a free credit check.

Simply monitoring your credit report is the most effective way to protecting your credit against errors and fraud. Watch activity on your credit report for inquiries or the opening of new accounts in your name. Consider a credit monitoring service to help you watch over your credit report.

Consumers can get their credit check for free, but this report will not include your score. You must pay for a report that includes your credit score. Mistakes found within your online credit check can also be disputed online, which makes these credit reports quite convenient for many consumers. The internet makes it very efficient to get your credit report these days. In turn, this makes it easier for consumers to protect their financial future.

Tags: credit rating, bad credit loan, credit card

Having poor or bad credit can certainly limit your options the next time you want to buy something that you want, need, or desire. Often, it is the lack of proper credit standing that forces you to forgo such things in life. However, these problems can be resolved by tackling your bad credit repair issues.

Without a doubt, poor credit can limit your purchase options to be sure. It may also contribute to many sleepless nights, which almost always lends itself to a stressful lifestyle. It is not uncommon for friends and relatives to offer you their opinion or advice on how to eliminate your bad credit standing; regardless of their good intentions, more often than not your best bet is to resolve your own credit issues yourself.

Jump Start Your Credit Repair

Bad credit repair can be tackled in a variety of ways, and once you grasp and understand these ways, you can proceed to do it yourself. The first step in repairing your credit is to obtain a free copy of your credit report from all of the credit reporting companies, which includes TransUnion, Experian and Equfax. It is very important to obtain a copy of your credit report from all three credit bureaus, which means you really have a total of three credit reports. Once you have received all three reports, set aside some time to review them carefully and jot down any incorrect, duplicate or erroneous entries that you see.

The next step in the “do it yourself credit repair process” is to pay a visit the Federal Trade Commission website to understand what consumer rights protect you and how you can use them in your favor.

Once you understand your rights as a credit consumer you will find that even getting inaccurate or incomplete entries removed from all of your credit reports will go along way in repairing your credit woes. The fact is, it is the responsibility, legally and morally, of the credit bureaus themselves to ensure that your credit report is true and accurate. Otherwise, these credit reporting agencies can face penalty fees if they don’t comply.

Setting the Record Straight

The next step may sound like a pain, but it really does not take as much time as you think. Anyway, your next task is to evaluate your credit reports extremely thoroughly. Write down any inaccurate, false, or duplicate entries that you see on any of your credit reports. Once you have your disputes well documented, write a letter to the credit bureaus that you have an issue with. This action on your part will go a long way in resolving your bad credit repair issues. In addition, make sure that you monitor or keep track of the progress of your disputes to help ensure that your credit does indeed get repaired.

When it comes to updating or fixing credit reports, it may take a month or longer before the errors are verified by the creditors. Then, once your claims are verified, then the credit errors will need to be resolved by the credit bureaus in question, which will improve your credit standing and credit score in the long run.

So, with a little elbow grease and determination you can resolve your own bad credit repair issues. And with the appropriate solutions and advice on how to proceed, within a relatively short span of time you should see your credit scores improving. All in all, this process only costs you a little investment of your time, but not your money. But remember; keep a close eye on your creditors and the credit reporting bureaus, to ensure they all get the job done. Your credit will depend on it.

In closing, here is something you should always remember; to ensure you don’t shoot yourself in the foot, make sure that you don’t request a copy of your credit report too often. You see, each time you or someone else inquires about your credit an inquiry is registered with the credit bureaus. Unfortunately, the credit bureaus themselves will count these inquiries against you and reduce your credit score. So, be careful and make sure no more than two inquires are generate within the span of a single year.

Tags: credit check, business credit, credit score