Card Counseling Credit Debt Debt

I am thinking about consolidating a lot of unsecured debt using a debt/credit card counseling service. How will use of that sort of service affect my credit rating long-term?

Please do not consolidate. It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. Or they negotiate your debt down after telling you not to pay for awhile adding another hit to your credit score. There is a better way.

A. Have a garage sale and sell anything that you no longer need or want.

B.Get a temporary part time job, if you have one, get another.


Here is a plan that can help you. If you work the plan, the plan will work for you:
1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut your spending and live on less than you make.

2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.

3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

To start :
Debt #1 (highest interest): minimum payment+ extra payment
Debt #2 (middle interest): minimum payment
Debt #3(lowest interest): minimum payment

Debt #1: paid off
Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
Debt #3: minimum payment

Debt #1: paid off
Debt #2: paid off
Debt #3:Minimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.

5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.

You can do it and it isn't as hard as you think. Just follow the plan

2009-04-17 09:08:06 by jimthephilosopher

I helped some clients with Credit Card Counseling. Explaining the Good Things and Bad Things about Debt Settlement and Credit Card Counseling!

Are there better routes to go when in credit card debt rather than debt services?

"Debt negotiators," posing as non-profit organizations, can ruin your credit even further, advising you not to pay your credit card bills at all. They also charge upfront fees, maintenance fees, and monthly fees, all of which are supposed to be placed in a "trust" account. Then, after many months have passed, debt negotiators finally convince creditors to settle for less money than was owed, making yours an "uncollectible account."

That tactic not only ruins your credit, due to the many "over 90 days late" remarks and collections notations, but all the money you supposedly saved -- which was actually money you owed -- will be considered as income by the IRS! In other words, if you owed $20,000 and settled for $12,000, you'd be required to list the $8,000 difference as income!

Credit repair companies promise to help clear up your credit problems. They write letters to credit bureaus, stating that various listed information is false, so the agencies will remove that information while they investigate your account. During that time, the credit repair company sends you a clean credit report, thereby giving you the false impression that you now have good credit. But after you've paid off the credit repair company, you'll discover that all the negative items will soon reappear on your report. get more information from: http://www.card-gallery.com/

2007-02-06 11:59:56 by Linda Lee

Price: $1.99

I am a 20-yr old student, halfway through college. When I began college, I recieved all of those "college" credit card offers mailed to my house. I made the mistake of not cutting up the cards and just threw them away and now someone in my family has used the cards to rack up between $15,000-$20,000 of debt in my name. I do not wish to press charges on them since they are in my family, and my creditors have told me that is the only way I can claim "fraud" on the accounts.

Now I have 4 credit cards in my name that are 6 months or more overdue in payments and I only work part-time at a daycare since I am in school. My parents/relatives will not loan me the money, nor can I drop out of school to work full-time. Creditors are calling me day and night and I just do not have the money to pay off this huge debt. What is my best option? Credit counseling? Debt Management? Bancruptcy? I know there is no "ideal" option but what can I do that would cause the least harm to my credit & future?
I can only afford to pay my creditors about $400 a month total. I would like to avoid bancruptcy at all costs because my fiance and I would like to get married and have kids in the next 7 years and even though he has good credit, mine will prevent that if I declare bancruptcy.
The family member who accumulated the debt will be paying me back eventually but this might not happen for awhile.

Also, I have already spoken with my creditors, they cannot come to an affordable agreement with me.

Credit counseling and debt management courses are really only of use if you've got real income. You don't. So you're going to need to try something else.

Dropping out of school to work full-time is not a realistic option. If you really do have $15,000-$20,000 in credit card debt then you're in pretty big trouble. At an average credit card interest rate, even just paying the minimum would take about $300 a month for 20 years and cost north of $70,000 dollars by the time you've paid it all off. As any job you're likely to be able to get without a college degree isn't going to pay much more than $20,000 a year, you'd wind up having to spend $3600 a year just on debt management, and you'd have to do that for 20 years. You can't afford that. No one can.

Bankruptcy might be an option, but not a particularly attractive one should you want to keep going to school. I assume that you've got student loans and will need more to stay in school. Lenders will be extremely reluctant to loan money to anyone who as declared bankruptcy, especially someone as young as you are. So while that could conceivably eliminate a lot of your debt, it would almost certainly permenantly damage your credit.

It's also not a given that you could even declare bankruptcty. The rules for doing so were recently tightened by Congress. I don't know the exact details of your situation or if you'd be affected, but it's harder than it used to be.

As unpleasant as it sounds, I believe that declaring fraudulant use of your cards may be your best and, in fact, only option. You yourself did not run up the charges on the cards. Your family used the cards without your knowledge, knowing they were screwing you over, and are now unwilling to help you get out of the mess they put you in. Any loyalty to the person who did this to you is entirely misplaced. While it's true that you don't generally want to level fraud charges against your family, it's also true that you don't generally want to defraud your family.

You need to get in touch with your credit card companies and tell them that your cards have been used fraudulently. If you can tell them who did it, they'll go after the fraudster themselves, more than likely. You may need to get in touch with a lawyer to prove that it really wasn't you who ran up these debts. Either way, this sounds like the only way that you're going to ever be able to get out of this mess.

2006-08-16 05:00:05 by allielivez

I have about $15,000 worth of credit card debt(on more than 1 card). I don't use the cards anymore. I'm paying what I can but feel like I'm just going around in cirlces. I haven't defaulted on any of them and I'm not behind in payments. What's the best thing to do?

The best thing to do is to pay off your cards with the highest interest first.
Your other option (depending on your credit) is to transfer the balance to a credit card that has a low introductory rate.
If your credit is good enough, you may be able to qualify for 0% for 1 yr.
In the meantime, if possible, cut up your credit cards so you dont use them.
Do not close them once they are paid off. Having that open line of credit looks good on your credit report.

2008-01-17 10:11:38 by Mike G

Just had a major surgery and racked up some major credit card debt while being out of work. Just looking to see where I could start now that I am going back to work.

If you are able, take out a home equity loan. Pay off the credit card bills with the proceeds. Then pay off the home equity loan as quickly as possible. This is a win-win situation. You get the credit card bills paid off, plus the interest on the home equity loan is a tax deduction.

Or, you could line up the credit card bills by 1)interest rate, 2)highest amount owed to lowest amount owed, or 3)lowest amount owed to highest amount owed. Whatever way you line them up, start paying them off.
I preferred the lowest amount owed to the highest amount owed. I paid the most money to the lowest balance, then paid the remaining bills just above the minimum required. As the lowest bill was paid off, I then applied that same amount plus the minimum to the next highest bill. As that bill was paid off, I then applied that amount plus the minimum to the next bill, etc.
Now Susie Orman would disagree with this method, but I found great satisfaction in seeing the bills disappear more quickly than if I had paid off the highest interest rate bill (regardless of balance) or the highest balance bill first. Plus, I think when you have big bills hanging over your head, you need to see progress as quickly as possible. It really gives you a boost to see those bills drop off the face of the earth.

Good luck!

2007-05-05 12:40:50 by metro7