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Credit Card Debt Relief: Everything You Need to Know

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When you’re buried in credit card debt, it can be stressful to make payments every month and may still feel like you’re falling behind. In 2019, credit card debt in the United States totaled over $1 trillion, so you’re definitely not alone. Unexpected bills, high-interest rates or a layoff can make spiraling into debt unavoidable. 

Debt relief can help alleviate your financial burdens and make strides toward becoming financially stable. Credit card debt relief programs vary and are personalized to your situation. Some of them carry risks, so review your options and the fine print closely before proceeding. 

To determine if debt relief is right for you, take a close look at your financial situation. If debt relief can ease your financial stress and raise your credit in the long run, it can put you on the path to improved finances and overall well-being.

Table of Contents

  • What is Credit Card Debt Relief?
    • Credit Card Debt Relief vs. Credit Card Debt Forgiveness
  • How Do I Know If I Need Debt Relief?
  • Options for Relief
    • Credit Card Balance Transfer
    • Personal Loan
    • Debt Consolidation
    • Debt Reduction Plan
    • Bankruptcy
  • Tips to Successfully Manage Credit Card Debt Relief
  • What to Look Out For
  • How Does Credit Card Debt Relief Program Affect My Credit?

What Is Credit Card Debt Relief?

Credit card debt relief eases the burden of debt through a specific plan, and there are several options to choose from. While debt relief doesn’t erase debt, nor the potential consequences to credit, it can help with repaying your debt or adjusting the repayment terms.

Credit Card debt relief helps with repaying your debt Image

When budgeting and scaling back on expenses isn’t enough, a debt relief program can be beneficial. Ideally, you’ll work with a credit counselor to form a plan that works best for your situation. 

Some relief options include: working with your creditor to grant lower interest rates; a payment schedule that lowers your monthly payments; or debt consolidation.

Credit Card Debt Relief vs. Credit Card Debt Forgiveness

The terms ”credit card debt relief” and ”credit card debt forgiveness” mean two different things. 

Credit card debt relief involves taking steps to make debt and repayment manageable. 

Credit card debt forgiveness is when your creditor agrees to accept an amount that’s less than what you owe. Credit card debt forgiveness is not a silver bullet that eradicates all your debt, nor does it come free of potential risks. The two strategies can work together, though.

Example of Pursuing Both Relief and Forgiveness

Danielle owes $20,000 on her credit card, and she hasn’t made a payment in over five months. She reaches an agreement with her credit card company to pay $12,000 in installments if she pays a lump sum of $3,000 now. That means $5,000 of her debt has been forgiven.

By paying back the rest in installments, she’ll relieve her debt, and her credit score will improve over time. Not all creditors forgive or settle debts, and it could negatively affect your credit score (at least for a time). You may also have to pay taxes on the forgiven debt. Still, there are several options for credit card debt relief, and forgiveness is only one of them.

How Do I Know If I Need Credit Debt Relief?

To determine if you need credit card debt relief, you should evaluate your specific financial situation. Keep in mind that if your debt can be repaid by making small changes in the way you spend, that’s always the best route. But if you’re budgeting meticulously and barely staying afloat (or you’re sinking), you may need to seek help. 

Here’s how to know if you’re a candidate for debt relief assistance:

  • Your total unsecured debt is half or more of your gross annual income: If you add up your debt across your credit cards, personal loans and medical bills, and the total is more than half of your annual gross income, debt relief might help you get back on track. 
  • It’s a struggle to repay your unsecured debts, even when you budget like a champ: If you’ve cut your spending to the bone and still cannot make your debt repayments, continuing to struggle is often a slower, insufficient way to improve your finances and get back on your feet. 

Multiple creditors have sold your debt to collections agencies: Debt collectors can be ruthless and difficult to work with. Sometimes setbacks and unexpected bills happen and some of your debt may have reached a collections agency. If you’re at the point, getting help to negotiate with debt collectors can be a huge relief.

Three Steps to Finding the Best Debt Relief Plan Image

If you’re buried in debt, but don’t know where to go, take the following steps. You might be able to get relief sooner than you expect.

Steps to Find the Best Debt Relief Strategy

Here are the following steps you should consider after evaluating your situation:

  • Speak to a credit counselor: Allow someone who is familiar with debt relief options to help guide you to an individualized plan. 

A reputable credit counseling organization will discuss your financial outlook with you. They’ll make recommendations on managing your debt and budgeting, plus share available resources. 

  • Research all your options based on the consultation: Ask the counselor for trustworthy educational resources, and take time to look into the options given by the credit counselor. Make yourself familiar with them and weigh the pros and cons. 

Be sure to know the concrete steps of each option and how they’ll impact your unique situation.

  • Select a route that works best for your situation: Once you’ve reviewed debt relief options—and perhaps had a follow-up credit counseling session—make a decision and move forward. 

Select the route you want to take, then formulate a concrete plan. This will help you make consistent progress in overcoming your debt. 

5 Options for Credit Card Debt Relief (and the Pros and Cons of Each)

There are several options when it comes to credit card relief. Remember that no matter which option you choose, credit card relief takes time. In general, it takes three to five years to see huge increases in your credit score through debt relief programs, but putting in the time and effort now can help with long-term gains. 

Here are common credit card relief options along with their pros and cons.

1. Credit Card Balance Transfer

If you have high-interest debt on a credit card, you can transfer the balance to a different card with a lower interest rate. By paying less in interest, more of your payments will go toward the principal balance, allowing you to pay off your debt faster.

When making a balance transfer, check to see if the new card offers a low introductory interest rate. An introductory interest rate, which could be as low as zero percent, usually lasts for a certain period of time, such as six to 18 months.

Ideal Balance Transfer Traits Image

Any late or insufficient payments can invalidate these lower interest rates. If you think you can pay off a good part of your debt within that time, a transfer might be a wise choice. A fee for transferring a balance is common—usually about three percent of the balance amount. If you have a good credit score, this fee might be waived.

Pros

  • Can provide a much lower interest rate, making your payments more manageable
  • Usually a convenient process
  • Simplifies many payments into one if you transfer multiple balances

Cons

  • Might require a good or excellent credit score
  • If you don’t have a good credit score, the fee to transfer might be expensive
  • Once introductory interest rates are over, the interest rates could be higher 
  • New purchases won’t be interest-free like the balance transfer
  • Can be complicated to put your payments toward your balance transfer vs. new purchases

2. Personal Loan

Personal loans give you access to funds that can be put toward your credit card debt. There are two types: Secured and unsecured personal loans. Secured loans require collateral, such as a vehicle. In case you don’t make repayments, they can seize your property. Unsecured loans only need a signature, but usually require a higher credit score than secured loans.

Personal loans can have high-interest rates but are often fixed for the life of the loan, meaning they won’t increase. A lender might give you months or years to pay off a personal loan depending on the contract you sign.

Pros

  • Quick access to funds (up to thousands of dollars)
  • Can be used to pay off credit card debt immediately
  • Can be easy to get even with a low credit score (especially secured personal loans)
  • Flexible repayment terms 

Cons

  • Often high-interest rates
  • Can get hit with fees
  • Could put your assets at risk (with a secured loan)
  • Could damage your credit if you don’t pay back the loan on time

3. Debt Consolidation

Combining debt from several credit cards into a consolidation loan can give you a fixed rate and a single monthly payment. Consolidation loans usually offer lower interest rates than credit cards, so you can pay off debt faster and pay less overall.

While the lower rates are helpful, certain loans can be viewed as a risk factor by lenders and credit scoring models like FICO®. But removing your debt from your credit cards results in a lower credit utilization, which can help increase your credit score. 

Pros

  • Can give you a lower interest rate
  • Many options and lenders available
  • Combines payments into one easy payment
  • Can give you mental relief from many payments
  • Doesn’t usually have a huge negative impact on your credit

Cons

  • May not help your credit significantly long-term
  • You may not be eligible if you have a low credit score
  • Secured consolidation loans put your assets at risk, like your home or car
Debt Consolidation Image

4. Debt Reduction Plan

A debt reduction plan helps you manage your debts, often through lower monthly payments. A debt relief counselor works to determine the exact method like a repayment plan or debt consolidation.

You may also create a personal budget for paying off debt. A counselor can help you figure out where you can scale back and how you might be able to make extra cash for payments. A debt relief counselor can also negotiate lower interest rates and give you guidance on how to repair your credit.

Pros

  • Can help you get out of debt with the least amount of stress
  • Can help you negotiate low-interest rates
  • Is personalized to you and your financial situation
  • Allows you to take control of your finances
  • Initial consultations are usually free

Cons

  • Difficult to do without a credit counselor
  • Can take time to reduce your debt
  • Might have an initial negative hit on your credit score

5. Bankruptcy

If you find yourself deep in debt, sometimes declaring bankruptcy may sometimes be the best option for you. While it can be detrimental to your credit in the short-term, filing a Chapter 7 or Chapter 13 bankruptcy might put you ahead in the long run.

However, you should consult with an attorney in detail to fully explore this option and understand how bankruptcy will affect you.

Chapter 7 Bankruptcy & Chapter 13 Bankruptcy Image

Bankruptcy is not something to take lightly, as declaring bankruptcy affects your credit report for up to 10 years. Here’s what to expect with both types mentioned.

Chapter 7 bankruptcies: Your debt is mostly wiped out by selling your assets, and it stays on your report for up to 10 years.

Chapter 13 bankruptcy: Recovering is typically easier since you pay back some or all of your debts, and it falls off your credit report after 7 years.

Pros

  • Gives you a fresh start 
  • Bankruptcy lawyers will guide you through the process 
  • Your lawyer handles the calls and letters from collections agencies
  • Your personal assets like your home and retirement savings are exempt from creditors
  • You can rebuild your credit after bankruptcy is off your record

Cons

  • Ruins your credit score for up to 10 years
  • Recovery is slow
  • A bankruptcy lawyer can be expensive
  • Not all debts may be eliminated (i.e., your student loan or alimony payments won’t go away)

Tips to Navigate Credit Card Debt Relief

Depending on how you’re handling your credit card debt relief, you’ll be making one or several monthly payments to creditors. If you miss a payment, paying off your debt will take longer and be more expensive. 

Here’s how to better manage your credit card debt while paying it back:

  1. Scrutinize your spending: Take a hard look at your lifestyle and how you’re spending your money. Once you’ve got a handle on where your money goes, decide where you can cut expenses and allocate your savings to your cards.
  2. Create a budget: Design a budget on a spreadsheet or in an app. Budgeting apps can send you payment reminders and alert you if you’re spending too much. Some apps even track your credit score.
  3. Reduce your debt as much as possible: Credit card debt can take a long time to pay off. To see a difference, repay some of the balance every month, not just a minimum payment (if possible).
  4. Lower your interest payments: If your credit score is solid, consider transferring your current credit card balances onto a new card with zero interest on balance transfers—and no transfer fee.
    It’ll be easier to start reducing your debt without the large interest payments.
  5. Consolidate your debt: An effective way of getting your debt under control is to combine it into one monthly amount. Shop around for a good deal, pay off your existing agreements, and you’ll be left with a single, more manageable sum. 
  6. Don’t borrow against your mortgage: It may be tempting to borrow against your house to settle your credit card debt, but this should be a last resort. Using your mortgage to pay credit card debt makes the debt last longer.
    For instance, you’ll be paying it back over 20 years instead of only a few years on something like an unsecured loan. In general, you’ll end up paying a lot more interest in the long run.
  7. Don’t skip secured loan payments: While paying back your credit card debt is important, you should prioritize any secured loans first so that you don’t risk losing your house, car or other assets. 
  8. Don’t use retirement money: It can be costly to pay off your credit cards with your retirement fund. Leaving the money where it is, allows it to accrue much more interest in the long-term than you’ll save by using it to pay off your credit cards. 
    You’ll also be liable for fees for withdrawing the money early, and, as the withdrawal will be considered income, you’ll be taxed as well.  
  9. Don’t feel pressured by creditors: Creditors and collection agencies can be persistent. Make sure you’re not pressured into paying more than you can afford. Remember that harassment is an offense and you can report it.
    If possible, negotiate with your creditors by letter or email rather than on the telephone.
  10. Bankruptcy should be a last resort: Declaring yourself bankrupt seriously impacts your creditworthiness in several ways. It will reduce your credit score by as much as 200 points, and a record of it will remain on your credit report for up to 10 years. You run the risk of losing assets, and you’ll find it hard to get credit in the future. 
  11. Keep your credit cards open: Once you’ve paid off your credit card debt, you should think carefully before closing your cards. If you have several kinds of credit, closing your cards increases your overall credit utilization. Plus, it shortens the length of your credit history. Both result in your credit score taking a hit.
Credit Card Debt Relief Don'ts Image

The Risks Involved with Debt Relief

Debt relief takes several forms, but any method can be tricky. Whichever approach you choose, there are several ways you can be misled or scammed. Here’s what to watch for: 

  • Fake companies and scams: Fake companies ask for hefty fees upfront, then fail to contact your creditors or provide you with the loan you applied for. If you’re suspicious about a company, contact the Federal Trade Commission.
  • The deal doesn’t save you money: If the length of the loan is so extended that it costs more to pay it off than to keep original agreements in place, that’s a red flag. 
  • Hidden fees and costs:  Make sure you’re aware of all the fees and hidden costs before committing to any agreement.
  • Impacts on your credit score: Debt relief can seriously affect your credit history. 
  • Owing taxes: Debt relief is a double-edged sword. While there are a few exceptions to the rule, in general, forgiven or canceled debt is taxable. 
  • Ending up with more debt: Debt relief methods don’t address the behavior that led to the debt in the first place. If you take out a debt consolidation loan or credit card, you’re still accruing more debt, and it can be tempting to start using credit again.
Credit Card Debt Relief Risks Image

How Does Credit Card Debt Relief Program Affect My Credit?

Credit card debt relief programs affect your credit based on the type of debt relief you choose and how much debt you have. In general, you can expect a dip in your credit score at first, followed by a steady rise over time.

Expect an initial drop in your score Image

A turnaround on your credit score won’t happen overnight. It could take anywhere from a year to a few years, depending on the amount and type of debt you have. Some debt relief options might lower your score drastically to begin with, but a hit to your credit at first could be worth it in the long run. With each passing month, you’ll get more and more back on your feet.

Evaluate the type of debt relief you’re considering to understand how it might affect your credit. Declaring bankruptcy, for example, causes a major hit to your credit and requires significant time to improve it.

A Debt Relief Plan Can Get You Back On Track, But Proceed with Caution

If your financial situation could benefit from a debt relief program, you can make huge strides. Your score won’t skyrocket overnight, but with diligence, you can be freer and more stable over time. Be sure to review the terms and conditions beforehand, and understand how the plan might impact your credit score.

A credit repair consultation can help determine if other methods can improve your creditworthiness without having to sign up for debt relief. By taking the time to figure out a plan now, you’ll have relief sooner—giving you peace of mind and better financial stability.

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How minimum monthly credit card payments affect your credit

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Many people don’t hesitate to pay just the minimum payment on their credit card. This is especially true if the total balance is high or the cardholder is confused about the credit card lending terms and doesn’t understand the impact of paying the minimum balance. But, making just the minimum payment can have a greater impact on your credit score than most people realize.

Learn how lenders calculate the minimum payment, what it means for your debt and how making a minimum payment affects your credit.

What are credit card minimum payments?

Your credit card minimum payment is the least amount of money your lender will accept toward your credit card balance each month. You need to pay the minimum payment by its due date to avoid late penalties and other fees and to keep a consistent payment history. The minimum payment amount is displayed on your credit card bill and often ranges from one to three percent of your total credit card bill. 

How is a minimum payment calculated?

Your lender calculates the minimum payment based on your total balance and any outstanding interest charges. 

Each credit card lender has a different method for calculating its minimum monthly payment. The two primary methods are formula and percentage.

Formula

Many of the major credit card lenders use a formula to calculate your minimum payment. The formula picks an amount and adds one to two percent of your monthly balance. For example, let’s say your lender picked $35 as the minimum payment amount, plus two percent interest, and you spent $500 in new charges for the month. In this scenario, your minimum payment would be $35 plus $10 ($500 x 2%) for a total of $45.

If your total balance is less than the minimum payment, then your whole balance is due. Following the previous example, if your lender charges $35 plus two percent interest but your credit card balance is $20, you will owe $20 for that month, plus any fees and interest from the previous month.

Percentage

Other lenders—typically credit unions and financial institutions—use a simpler, percentage formula to calculate the minimum monthly payment. This method is most common for high-risk borrowers with poor credit. The percentage can range from four to six percent.

For example, if you had a $1,000 credit card balance with a lender that charges six percent, you would owe a minimum payment of $60 plus any additional fees ($1,000 x 6%). 

Some lenders will include any past-due fees in the minimum payment. 

What happens if you make only the minimum payment on your credit card?

Making the minimum payment on your credit card is better than paying nothing at all. As long as you always make the minimum payment, you should not receive negative items on your credit report, as it relates to your payment history. 

However, making only the minimum payment means you may see greater charges for interest, resulting in you paying more over time.

Take a look at this example: Let’s say you have $5,000 in credit card debt and your lender offers an 18 percent interest rate with a minimum payment of two percent of the balance. In this scenario, your minimum payment is $100 per month, which can look very tempting. But, it will take you almost eight years to pay off your balance and you will pay a total of $4,311 in interest—almost doubling what you originally owed. 

Your minimum payment is generally a small portion of your total debt, and most of that payment goes to interest. As a result, you are slowly progressing toward paying off your principal amount, and you could end up paying minimum payments for many years.

Additionally, your credit card utilization may be high if you make only minimum payments. Credit utilization is the amount of credit extended to you by the lender versus the amount you owe. If you maintain a high credit card balance while only paying the minimum payment, you are at risk of having high credit utilization month after month. 

Several factors determine your credit score, but credit utilization accounts for 30 percent of your overall score. So, maintaining a high utilization ratio can negatively impact your credit score. 

Finally, when you maintain a high credit card balance and a routine of only paying the minimum payment, you may fall behind on payments. When you make late payments or miss the payment entirely, having a negative payment history can also lower your overall credit score. 

What should you do if you can’t afford to pay in full?

If you can’t pay your credit card in full, don’t panic. Approximately 47 percent of Americans have credit card debt, so it’s quite common—but that doesn’t mean you shouldn’t pay off credit card debt. Follow the steps below to tackle your debt efficiently and in a way that works for you. 

Pay as much as you can

As mentioned before, it’s essential to always make at least the minimum payment on time. This will help you avoid negative items on your credit report for late or missed payments. However, whenever possible, try to make more than the minimum payment. This will help you pay down your principal debt faster and pay less interest over time. 

Come up with a repayment strategy

If you have multiple credit cards with debt or various types of debt, it’s crucial to have a repayment strategy. 

There are two popular debt repayment strategies: the avalanche and the snowball. The snowball method recommends you pay off your debt from smallest to largest (like a growing snowball). This method is meant to give people positive reinforcement because they feel motivated as they knock out several of their small debts quickly before moving on to the larger debts. 

The avalanche method is a more systematic approach—you list all your debts and their interest rates and pay the one with the highest interest rate first. This method aims to save you money in the long run by getting of higher-interest debt first. 

Decide which approach fits your style. Both of these methods are highly effective in their own way. 

Budget

A budget is the first step to taking control of your financial health. Without a budget, you may not know where your money is going or where you can save. Often, a budget can highlight unnecessary spending. There are plenty of free apps, such as Mint, that allow you to have an automated look at all your spending and build a budget. 

Talk to your credit card issuer

You can reach out to your credit card issuer if you’re going through financial hardship to see what they can do for you. Some credit lenders will offer to lower your interest rates, which will help you tackle your principal debt much faster. Some financial hardships can include the loss of a job, an injury or a medical incident. Ultimately it will be your lender that decides if your situation merits help. 

Consider a balance transfer

There are a lot of credit card options out there. If your credit card has a high-interest rate, you may consider a balance transfer. Some credit card lenders offer a low-interest promotional rate when you transfer a credit balance to them. During this time, you can make a significant dent in your debt. However, you should know that some balance transfers come with a one-time fee, so make sure to consider this as well. 

Care for your credit

Your credit is your door to many financial opportunities. A healthy credit score can help your chances for approval for auto leases, mortgages, personal loans and more. It can also help you get a much lower interest rate and better borrowing terms when you receive financial products.

Improving your credit takes work. While focusing on your credit card’s impact on your credit score, make sure your overall credit profile is accurate. Errors and inaccuracies can greatly hurt your credit score and put a dent in your debt-relief goals. Professional credit repair companies can help you navigate the challenges of credit reporting inaccuracies.

The first step toward establishing a healthy credit history is making sure all items are listed fairly and accurately—professional credit repair is an easy, effective way to get your credit score back on track.


Reviewed by Shana Dawson Fish, Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Shana Dawson Fish is an Arizona native whose family migrated from Guyana. Shana graduated from Arizona State University in 2008 with her Bachelor’s Degree in Criminal Justice & Criminology, and in 2012 she graduated from Arizona Summit Law School earning her Juris Doctor. During law school, Shana was a Judicial Intern at the United States District Court for the District of Arizona and the Maricopa County Superior Court. In 2016, Shana was awarded a legal defense contract and represented clients as a Trial Attorney in juvenile proceedings. Shana has experience in litigating numerous trials and diligently pursuing the rights of her clients. As a Trial Attorney, Shana identified the needs of her clients and also represented debtors in bankruptcy proceedings. Shana is licensed to practice in Arizona and is an Associate Attorney in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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What is an escalated information request?

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escalated information request

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

When you discover an error on one of your credit reports, such as an inaccurate address or a record of a late payment that you know you paid on time, you can begin the credit dispute process to hopefully correct the error. This is one of your rights as a consumer, according to the Fair Credit Reporting Act (FCRA).

But what happens if your credit dispute or challenge fails? If you are like many consumers, the process may not initially yield favorable results. This is where an escalated information request comes in. Read on to learn what your options are following a dispute rejection.

What are the steps involved in the credit dispute process?

There are four main steps in the credit dispute process.

First, you send your dispute letter to whichever of the three credit bureaus—Equifax, Experian and TransUnion—shows the error on your credit report. In your letter, identify the information that you want to dispute, explain why you’re disputing it and provide any relevant evidence that supports your case. Ask that they remove or correct the information in question. (You can use this sample letter from the FTC if you’re not sure where to start.)

Second, you may reach out to the data furnisher that provided the inaccurate information to the credit bureaus, such as a creditor or another financial institution.  Data furnishers should conduct a reasonable investigation to verify the accuracy of the information they’re reporting to the bureaus if someone submits a dispute, and this could help you as well.

Third, wait for the credit bureaus and data furnishers to respond to your dispute. They typically have 30 to 60 days to investigate your claim. However, there is the possibility that they might deem it “frivolous,” which might happen if your dispute is inaccurate or if you repeat the same claims without adding new evidence.

Once you get a response, review the results of the investigation. If your dispute is accepted and the information is confirmed to be inaccurate, your report should be updated accordingly. If your dispute is rejected because it’s considered frivolous or the information on your report is seemingly verified, you have a couple of options—you can either let the issue drop, or attempt to escalate your dispute.

What do I do if my dispute is rejected?

Denial isn’t the end of the line. When a credit dispute is rejected, it is up to you to continue your efforts to ensure you have a fair and accurate report. Before resigning yourself to defeat, you may follow the steps below to escalate your information request.

1. Send additional letters

Draft another set of letters to the credit bureaus and a new one for the creditor in question. Outline the following:

  • Your disappointment with the initial credit dispute decision
  • Information about the account and the nature of your dispute
  • Detailed information about the dispute (include supporting documents)
  • And, for the bureaus, a list of the incorrect items on your credit report and how they should be corrected

At the end of your letters, you may document your intention to escalate your claim to the appropriate authorities if needed. Then you may mail your letters and supporting documents to the credit bureaus and relevant creditors with a return receipt requested.

2. Wait for responses

It may take up to 60 days to receive responses. Keep copies of your letters, emails and any phone calls between yourself and the credit bureaus and creditors. Be sure to write down dates, times, names of representatives and a summary of your discussions. In the case that you need this documentation, you will be very glad you kept a record of the events.

3. Review the final decision

If, upon reviewing the final decision you are still not satisfied with the outcome, you may send copies of your escalated information requests and supporting documents to the appropriate authorities, such as the Federal Trade Commission and your state’s Attorney General.

However, you should strongly consider speaking with an attorney to discuss your situation to determine what are your best options. In each of these endeavors, make sure you have enough evidence to prove your case and discredit your claim’s denial.

Protect your rights

Facilitating escalated information requests can be a long and arduous process, especially following an initial credit dispute. However, you have a right to fair and accurate credit reports, and the long-term benefits of accurate credit can make the dispute process worth your time and effort.

Make sure to regularly review your credit reports for errors, and if you find any, take action as soon as you can. You can initiate the credit dispute process yourself, but if you don’t have the time to dedicate to it or if you would rather work with a professional, there are credit repair companies who can help. Contact Lexington Law today to learn more about how we can help you as consumer advocates.

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The COVID-19 real estate paradox: Time to buy or sell?

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

According to a September 2020 study by Yelp, the U.S. has witnessed small businesses closing at a rate of 800 per day. The U.S. has seen some of the highest unemployment rates since the Great Depression. And yet the real estate market is booming.

Home sales continue to rise as the new work-from-home economy makes moving to the big city or tiny village of your dreams more feasible than ever. Mortgage applications jumped 26 percent in 2020. How can that be, you might ask, and how does that affect me as a homebuyer, home seller or homeowner?

Let’s take a look at some of the forces at work in the real estate market right now and find out.

Money is cheap for homebuyers

If you listen to the radio or have a friend in the real estate business, you’ve probably heard by now that it’s a great time to buy a house because mortgage interest rates have dipped to record lows. The second part of that statement is objectively true. In the early 1980s, the average interest rate on a 30-year fixed mortgage topped 18 percent. Compare that to June of 2020, when Freddie Mac reported an average rate of just 3.61 percent.

And that’s just the average. Borrowers with excellent credit were able to secure even better mortgage rates. If you’re thinking of buying a home, bear in mind that even a quarter-point drop in interest can save you many thousands of dollars over the lifetime of your loan. That means, among other things, that you may be able to afford more home now than you could last year.

But not so fast.

The second side of the story

As interest rates have plummeted, the demand for homes has climbed sharply. In many parts of the country, there’s a shortage of houses on the market. And that has sent home prices soaring, too. Comparing December 2020 to December 2019, home prices jumped nationally by over 10 percent.

The trend is most pronounced where you might not expect it to be: in small- to medium-sized Midwestern cities. Historically, the price of real estate in large cities drives national averages up. While predictions of a COVID-driven mass exodus from urban centers were never born out, in a few cities, including San Francisco and New York City, more people are seeking to move out than to move in.

Home prices are declining. If you’ve been hankering for a high-rise on the Hudson, now might be a good time to make a move.

But as recent experience confirms, real estate markets are fluid. What comes up might come down. The point is, no matter where you’re moving, your living expenses will ultimately be influenced by multiple factors. And it’s important not to get swept up in the moment. Keep your long-term income outlook and your personal goals in mind as you consider buying a home.

And if you’re thinking of selling your home to take advantage of rising home prices in your neighborhood, remember that you’re going to have to move somewhere.

The chapter everyone has to read

Sure, some of us are lucky enough to be able to pay cash when buying a home. But many of us need a mortgage to purchase a home. And that’s why having a strong credit profile is essential.

Keeping track of your credit score is an important habit to get into. If you’ve never paid much attention to it before, you’re not alone. It’s not something most parents teach their kids to do—many parents don’t talk to their kids about money at all.

A recent survey found that more than 35 percent of U.S. adults don’t know what their credit score is. And at least as many people don’t know how high a score they’ll need before lenders will give them a mortgage or car loan, for example.

Are you on top of your credit score? Before you even begin hunting for a house, it’s time to get a clear picture of where you stand. You can start by downloading a free copy of your credit report from each of the three major credit reporting bureaus: Transunion, Equifax and Experian. Your credit score is the highlight, of course. But it’s important not to fixate on a single number. When it comes to credit, the devil is in the details.

How credit scores are determined

The single most important factor credit bureaus consider when assigning you a score is your payment history. Missed credit card or loan payments take the biggest bite out of your score, and if there’s one piece of advice you remember after reading this article, let it be this: keep on top of your bill due dates and make them on time—religiously.

If you want to improve your credit score before you apply for a mortgage, one of the best things you can do is bring all your accounts up to date. But guess what? Creditors make mistakes. If you discover late payment notations on your credit report, be sure to reconcile them with your own payment records. Having credit reporting mistakes corrected can bring your score up considerably.

Next, review all of the accounts listed on your report. Having too many open accounts can drag your score down. Just make sure you’re considering how closing a particular account will affect your overall credit age and total available credit—you don’t want to close cards that are actually helping you.

Credit bureaus also take your credit utilization ratio into account when determining your credit score: that is, how much of the credit available to you are you actually using? Experts say that 30 percent is the absolute high-water mark and you’ll do much better in the credit market if yours is much lower.

One way to reduce your credit utilization ratio is simply to request an increase in your credit limit on one or more of the credit cards you have in your wallet. Pick one with a low or zero balance to increase your chances of getting approved for a higher limit. Then avoid using the card. You don’t want more debt, just more available credit.

Is it time to call in the experts?

It’s easy to get into credit trouble and, sadly, during the economic crisis precipitated by COVID-19, more and more Americans did. But getting out of trouble is more difficult. It takes time and patience, and there’s a fair amount of drudgery involved.

Some people who are struggling with bad credit enlist the services of a credit repair professional. Many credit repair companies use a combination of human expertise and artificial intelligence to develop and execute a comprehensive credit repair plan for their clients.

They’re trained to detect errors, as well as credit card fraud, which is on the rise and can be devastating to your credit. Some companies offer ongoing credit monitoring along with credit repair. Remember how we said monitoring your credit is a good habit to get into? You can also farm out the job.

Increase the odds of getting a great mortgage rate

While technically not a factor in your credit score, mortgage lenders will take your debt-to-income ratio into account when deciding whether to offer you a loan and at what rate. Most lenders require a DTI ratio of 36 percent or lower. Your credit report will list all your debts, and you already know your income.

You can use a DTI calculator to crunch the numbers. If your ratio is higher than 36 percent, you may want to take some time to pay off your existing debt before applying for a mortgage. With mortgage rates so low right now, why wait? Because buying a home is a life-altering decision on many accounts. Your home may be the single largest purchase you ever make. And at the outset, your mortgage may be your greatest financial liability.

But over time, your home may become your greatest financial asset—if you make well-considered decisions, like securing the best mortgage deal you possibly can. Getting your financial affairs in order before you buy a homeis an investment in time that’s likely to pay off in real dollars down the road.


This article was contributed by Money.com, an online editorial that provides up-to-date news, educational resources, and tools to help everyday people create meaningful investments and lasting returns.

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