In small justice of the peace courtrooms in Parker County west of Dallas, more than two dozen lawsuits have been filed against former hospital patients to collect the several thousand dollars they reportedly owed in unpaid medical bills. The lawsuits … Continue reading →
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A personal financial crisis can take different forms. Losing a job, having your work hours or income reduced, facing a huge medical expense, and having your identity stolen are just a few examples. Many times, these situations can lead to larger problems, especially mounting credit card debt. If you find yourself in a financial crisis, you should know that credit counseling is an available resource, and it could be the perfect solution to help you recover. Let’s take a closer look at exactly how credit counseling can help.
Talking to Someone
We know that financial stress can impact your mental health, and many people find comfort and relief by talking about their concerns with someone else. Credit counseling pairs you with someone who is willing to listen and ready to help you move toward your goals. No, a credit counselor isn’t a therapist, but credit counselors are known for providing comfort in difficult times. Your credit counselor will approach your situation with understanding and empathy, and give you space to voice your financial regrets, concerns, and goals.
Trusting an Expert
A credit counselor isn’t just confidant; he or she is an expert trained in helping consumers overcome financial difficulty and make a plan for their future. There is great peace of mind that comes with working alongside such an expert. When you are in “crisis mode,” you may not have the time or mental energy to get bogged down in the details or pull yourself by the bootstraps to achieve financial recovery. The great thing about credit counseling is that you don’t have to. You get to put your financial situation in the hands of an expert and educator who can guide you toward your desired outcome, help you create a structured plan, and teach you new financial strategies and behaviors along the way.
Reviewing Your Credit Report
Your credit report is an extremely important financial indicator, because the information it contains affects your credit score. Unfortunately, mistakes are far too common in credit reports and many go unnoticed. If you are going through a financial crisis, you will want to keep a close eye on your credit report to make sure it does not have errors holding back your score. You will also want to watch the data on the report over time as a sign of your progress paying down debt.
Walking through each line item of your credit report with a credit counselor can reveal errors, highlight areas to work on, and give you the opportunity to ask questions and learn more about how credit reports and scores work.
Exploring Numerous Solutions
Sometimes you have a general problem and aren’t sure what the best solution is. Money inherently works this way. For example, if you are having a hard time paying rent, credit card debt might actually be the bigger underlying problem. If you could free up some cash away from your credit card bills, rent would be easier to make. That’s just one example. The good news is that credit counseling helps identify the major issues and identify your best solutions.
For some, housing really is the main issue. In that case, a credit counselor can point you to a housing counselor to explore options for how to keep your home. Alternatively, maybe your credit card debt makes you a good candidate to consider a Debt Management Plan. Or, maybe your financial strain is best addressed by some minor tweaks to your monthly budget. Your counselor can explore all of these solutions with you and even connect you to local resources in your community in cases where doing so would be helpful.
Simplify Your Month-to-Month Routine
If you opt for a Debt Management Plan, you will receive numerous benefits. One benefit that is particularly helpful is that your month-to-month routine will become much simpler. By making one monthly payment to cover all of your credit card debt, you don’t have to worry about the hassle of keeping track of multiple bills. Simply make one payment to the credit counseling agency, and you’re covered for the month. Not only that, but the DMP will put an end to those pesky creditor and collection calls, which are the last thing you need when you are in an already stressful situation.
Getting Started is Easy
If you are in a crisis, you may not have much time and energy left in the tank. Thankfully, it is very easy to get started with credit counseling. Sessions can be held online or via telephone (or in-person if you prefer). All you need to do to prepare is gather your basic financial information, including a list of your expenses, recent paystubs, and your credit card statements. You can read more about what to expect, or get started here.
The post How Credit Counseling Can Help When You are in a Financial Crisis appeared first on NFCC.
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The Consumer Financial Protection Bureau’s (CFPB) Taskforce on Federal Consumer Financial Law should look closely at how the CFPB’s rules have impacted credit unions, CUNA wrote to the CFPB Monday. The CFPB is seeking information to assist with the taskforce, which … Continue reading →
Read more: creditandcollectionnews.com
Yolanda Carmenatty was working as a medical assistant at a North Shore family practice when she learned about a years-old debt through her boss. He was served in August with instructions to garnish her wages. Carmenatty said he submitted a … Continue reading →
Read more: creditandcollectionnews.com
At the beginning of the calendar year, credit information company TransUnion Cibil introduced a new method to score borrowers and card users. Rajesh Kumar, its MD and CEO, discusses the difference in the old and new way of assigning credit … Continue reading →
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A new survey illustrates the confusion, stress, and anxiety student loan borrowers are experiencing amid the coronavirus pandemic. The survey, shared exclusively with Yahoo Finance, analyzed responses from around 39,000 respondents from all 50 states. Advocacy organization Student Debt Crisis … Continue reading →
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Question: I fell behind on credit card payments four years ago and settled a couple accounts for less than the full amount a little over 3 years ago, which I know now was not the wisest decision. My financial situation is much different today than it was but my credit score is still hurting. Is there any way to rectify these accounts and remove them? If I call the credit card companies, will they allow me to pay the amount that they wrote off in the settlement and change the status or am I stuck for four more years waiting in credit score limbo?
Dear Reader,
I understand your frustration. While you can’t change the past, you can focus on “actively” working to improve your score today and in the future.
Your credit report is a record of your monthly financial activity. So, you have the power to influence your score each month. To see your score improve, you will need a strategy, discipline, and patience because it takes time to see the results. The first step is to see what’s on your credit report to determine what you need to work on. Instead of relying on data from a simulation software, get copies of your actual reports. You can get free copies from each of the leading credit bureaus–Equifax, Experian, and TransUnion–from annualcreditreport.com every 12 months. If you want to know your score, you can purchase it directly from the credit bureaus, FICO, or get them free of charge from a reliable third party.
When you get your reports, review them carefully, and correct any mistakes if you find any. From what you tell me, it looks like your settled debts may be keeping your score down. Unfortunately, removing those accounts before they are scheduled to drop off is very difficult. In some cases, collectors offer to delete the collections or report settled debts as paid in full when they are trying to collect payment. Yet, the rules of credit reporting don’t always make it possible for those arrangements to succeed. Legally, credit bureaus have to report this information for up to seven years after the first delinquency was reported. Otherwise, collection accounts would be deleted regularly, resulting in inaccurate credit histories for many people.
In your situation, try asking creditors for a goodwill deletion. You can send them a letter appealing to their good nature instead of offering to pay the amount they already forgave. When you settled your accounts, your creditors agreed to consider that debt satisfied. Additional payments won’t improve your score; if anything, bringing old collections current may reset the clock on those accounts.
Assuming that you have positive credit activity every month on your credit report, the negative effect of your collections should be diminishing with time. Your credit reports prioritize current information over the old, so it’s critical you manage your credit effectively. If you haven’t, it’s time to do so. In general, having a good credit report includes maintaining a mix of credit cards and loans, paying on time, using 30% or less of your available credit in each card, and asking for new credit sparingly.
Without details about what’s on your credit report, it’s difficult to give you specific recommendations. You can always talk to an NFCC certified financial counselor to get personalized guidance. Your counselor will review your credit report and overall financial situation to help you find the right strategy to improve your score and get you mortgage-ready. You are already on the right track. Good luck!
Sincerely,
Bruce McClary, Vice President of Communications
Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.
The post Ask an Expert: Is there anything I can do to fix accounts I settled in the past to help my credit so I can buy a house? appeared first on NFCC.
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American Express Co. is shifting “hundreds and hundreds” of employees in its sales units to handle collections and other credit work, and plans to set aside more for loan losses this quarter. As the coronavirus pandemic sent unemployment rates soaring, … Continue reading →
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Texas hospitals are suing patients for unpaid medical bills, a practice that has continued even as the coronavirus pandemic sends unemployment skyrocketing and spurred the state Supreme Court to pause debt collections and eviction proceedings earlier this year. Hundreds of … Continue reading →
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Q. I just paid off a closed account with a $2160 balance this month. Will this have a positive affect on my credit score? The account has been closed for years. This was my last debt (other than student loans). I have no other loans, no collections, all other debts were paid in full, and I am an authorized user on a card and I’ve kept utilization for that card under 30%. My vantage scores 3.0 are in the 600s, My FICO 8 and 9 scores range from 550-low 600s. I really want to be able to rent an apartment, will this help?
Dear Reader,
Congratulations on paying your last debt. It’s certainly an accomplishment and one of the main steps you needed to take to continue rebuilding your credit. The FICO and VantageScore scoring models look at the same primary factors to calculate your score; they just consider them differently. That’s why your scores vary with each scoring model. You’ll find that your VantageScore is typically higher than your FICO score. So, focusing on boosting one score will help you with the other. I suggest you focus first on increasing your FICO score since it’s the score most widely used by lenders.
The most important factor influencing your score is your account history, which includes your record of payments. Even after you pay your collections, you will still be dealing with their negative effects for a while. The good news is that their negative impact lessens over time, making it crucial that you continue to make timely payments on your credit card and student loans. Another important factor is your credit utilization ratio, which you already know to keep below 30%. Then, you have to look at how long you’ve had credit, your credit mix (how many different types of credit you have), and how often you ask for new credit. Too many new credit inquiries in a short time will lower your score. Yet, I suggest you get another credit card or credit building loan to add more positive activity to your credit report. You have to be strategic and only apply for credit cards you are likely to get. You can get a secured credit card or a credit card from the same bank that issued your current credit card, even if you are only an authorized user. Before you apply, review the creditor’s requirements to be sure you meet their criteria. Once you get your new card, continue to pay on time, and keep the utilization ratio low.
A quick way to boost your score is to work with rent/utility reporting services. For a monthly fee, these companies report your rent and utility payments to the credit bureaus. A free alternative is Experian Boost, which works similarly, but only reports your data to Experian and does not influence all credit score versions. Another often overlooked method to boost credit scores is to make sure the credit reports are error-free. Get a copy of your reports at www.annualcreditreport.com and review them carefully. If you find any mistakes, dispute them directly with each credit bureau online.
Now, if your primary concern is to improve your score to rent an apartment, you may have other options to do so with your current score. Offering several months up-front, working with a private lender instead of an association, submitting recommendation letters, and signing your lease with a co-signer are some strategies that could help you rent an apartment without stellar credit. You just need to show the landlord you are a reliable tenant.
The road to rebuilding credit is not the same for everybody. So, if you want a personalized strategy to boost your score and get rent-ready, feel free to reach out to an NFCC certified financial counselor. They can review your overall financial situation and credit reports to help you meet your goals. Good luck!
Sincerely,
Bruce McClary, Vice President of Communications
Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.
The post Ask an Expert: Will paying off a closed account help my credit score enough to rent an apartment? appeared first on NFCC.
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