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Mistakes to Avoid When Dealing with Debt Collectors (A Helpful Guide)

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Dealing with Debt Collectors: What to Avoid DoingA past due or delinquent account can quickly be turned over to a collections department or agency that will then become responsible for collecting the debt. Debt collectors can be intimidating to consumers, especially when their attempts to collect a debt lead to daily calls, emails, letters, and text messages.

The idea of facing off with debt collectors can be overwhelming, but knowing what mistakes to avoid when dealing with debt collectors can be beneficial to consumers.

Ignoring Phone Calls & Letters

Debt collectors will make constant attempts to contact people when a debt is owed. Unfortunately, ignoring these communication attempts will not make the debt disappear. And it is likely that the debt collectors will continue to reach out until contact is made. However, if the debtor provides a written request to no longer be contacted, the debt collector will have no choice but to cease contact, unless it is to notify the debtor of legal action that has or will be taken against them.

Not Knowing Your Rights

Many consumers don’t know their rights when it comes to debt collectors. As a result, their debt collector can get away with certain things that are technically considered illegal.

The Fair Debt Collection Practices Act actually protects consumers against debt collectors by deeming certain actions illegal, including:

  • Contacting the debtor before 8 a.m. or after 9 p.m.
  • Contacting the debtor at work when they have been advised not to do so.
  • Contacting the debtors after a request to cease contact has been submitted.
  • Threatening to harm the debtor.
  • Providing false information about the debt, their identity or consequences of not paying the debt.

Not Confirming Ownership of the Debt

When people are first contacted about a debt, they may not think twice about whether or not they are the owner of the account. As far as they are concerned, someone wants money from them, so they will pay the debt or ignore it.

If someone is unsure about the validity of the debt, they should avoid making any payments without looking into the account. Consumers can confirm if a debt is theirs by requesting details about the debt from the creditor, such as the amount owed and the name listed on the account.  Of course, if the debtor does confirm that they are the actual owner of the account, they will be able to obtain additional information and make arrangements for the payment of the balance due.

Not Negotiating a Settlement Agreement

Not everyone is able to pay their debts in full, but that doesn’t mean arrangements can’t be made. Debtors should always consider resolving their accounts for less than the balance due by negotiating with debt collectors. In some cases, debt collectors will accept a certain portion or percentage of the balance due and consider the account paid in full.

For example, say a person’s account has a balance due of $1,455. The creditor can decide that the account will be considered paid in full if they pay the agreed-upon amount of $1,200 by a certain date. The debtor will have saved $255 and finally settled the debt.

Not Understanding the Impact on Your Credit Score

Collections accounts are listed on credit reports, and they negatively impact the consumer’s credit score. This type of account is showing that there is a debt owed, so it is considered derogatory information that is harmful. When someone continues to ignore their debt, it will continue to be reported as unpaid, causing a drop in score. And a low score can make lenders see a consumer as a risk and question their ability to manage their finances.

People have different ways of dealing with debt collectors. Valid debt or not, certain mistakes that are made when dealing with debt collectors can be costly to consumers and can have a significant negative impact on their lives.

 

 

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Managing Your Finances When Living Paycheck to Paycheck (Tips)

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Managing Personal FinancesIt is never ideal for a person to live paycheck to paycheck. And if the idea of living paycheck to paycheck sounds stressful, imagine actually living life this way. Many people who don’t have a high-paying job have to find a way to live comfortably, and learning to manage your finances is a great start.

Managing your finances may seem like a difficult task when you live paycheck to paycheck, but there are things you can do to ensure your success.

Create a budget

When you have a limited income and live paycheck to paycheck, it is important for you to create a budget. The reason being you can successfully manage your finances when you keep a close eye on your income and expenses. Additionally, you can cut out unnecessary expenses and have some extra cash.

Use the half method

The half method requires you to pay bills in two separate payments rather than one lump sum. For example, if your cell-phone bill is $100, rather than pay the full balance on the due date, you can pay $50 with one paycheck before the due date, and the last $50 with another paycheck on or around the due date. With each check, you will then have $50 to save or spend.

Pay the minimum balance

If you have credit cards, consider paying at least the minimum balance when the bill comes due. It may be tempting to just not pay it, but ignoring your credit card payment will only result in you owing more money and damaging your credit score. Between the additional amount you could pay in interest and late fees, it makes sense to just pay the minimum balance and keep your account in good standing. Of course, if you can comfortably pay the full balance, that is always an option.

Renegotiate your bills

Renegotiating your bills doesn’t mean you have to eliminate the expense but find a more affordable option for you. For example, you may be able to reduce your auto insurance payment by a few dollars if you change coverage or inquire about discounts. If you have both internet and cable, perhaps you could change the plan or discuss the possibility of a more reasonable price for your budget with your provider. Maybe even dropping cable and using online streaming services is an appealing option.

Put your savings on auto

Just because you live paycheck to paycheck, doesn’t mean you can’t save. Even if it is a small amount that you are putting away every payday, over time it will add up. Whether you are building an emergency fund in preparation for the unexpected or just saving for life, you can put your savings on auto and select an amount to automatically be withdrawn from your checking and deposited into your savings.

Why managing your finances is necessary

So, why is managing your finances necessary? Poor management of your finances will do more harm than good. In fact, if you don’t properly manage your finances, you could end up spending more money than necessary and even damage your credit score. And when your credit score is poor, you will have a difficult time getting approved for credit cards, loans, and even an apartment.

When you think about the issues that can arise when you don’t have a handle on your finances, you may think twice about your situation and what you can do to change it. When you are living paycheck to paycheck, you may feel helpless, but you have options. And with all of the financial troubles you could face leading to more stress, it could easily be avoided if you take the time to manage your finances.

Made poor financial decisions in the past that negatively impacted your credit? We can help! Contact Credit Absolute today for a free consultation. 

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Tips to Help Manage & Maintain a Good Credit Utilization Rate

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Managing Credit UtilizationWhen you think of your credit score, you may not consider how this number is calculated or how your actions play a role. Simply put, every credit score is made up of certain criteria, and each criteria can cause an increase or decrease in credit score. With credit utilization being one of the things that can impact your score, it may be time to learn how to manage your credit utilization.

In order to successfully manage your credit utilization rate, you’ll need to understand what it is and how it can negatively or positively impact your life. 

What is credit utilization rate and how is it calculated?

Credit utilization rate is a number used to compare the amount of debt you owe to the amount of credit you have available. By dividing the amount of credit that you use by the amount of credit available, you can determine your credit utilization rate. The more of your available credit you use the higher your credit utilization rate.

For example, if you have several credit cards, one with a credit limit of $500, one with a credit limit of $200, and another with a credit limit of $300, your total available revolving credit amount is $1,000. If you use $400 of the $1,000 of available credit, your credit utilization rate will be 40%. Whereas if you were to use $100 of your available credit, your credit utilization rate would be 10%.

Why does your credit utilization rate matter?

Credit utilization is one of the many factors that can affect your credit score. It actually makes up 30% of your FICO credit score, which means it is one of the most important factors that influence your credit score. Depending on the number, creditors and lenders may or may not approve your application. This is because your credit utilization rate is another way for creditors and lenders to measure your ability to manage your finances.

If you have $2,000 of revolving credit available to you between one or multiple credit cards, in order to keep your credit utilization at or below 30%, you’ll want to use no more than $600 if you don’t want to see your credit score drop significantly.

Managing your credit utilization

Since your credit utilization rate accounts for 30% of your credit score, you want to pay close attention to this number to ensure it doesn’t start to negatively impact your score. This is especially true when you want to improve your score to increase your chances of being approved for things that require good credit such as applying for a home loan or apartment.

You can successfully manage your credit utilization rate by:

  • Increasing your credit card limit
  • Paying your credit balance in full instead of just the minimum balance
  • Keeping credit accounts open even when there is little to no use
  • Pay down debts
  • Actively monitor your credit usage

Keep in mind that the goal of managing your credit utilization rate is to keep it at 30% or less. This doesn’t mean that you have to completely stop accessing your revolving credit, but you want to do so responsibly if you don’t want to see your credit score suffer.

For credit repair assistance and financial advice, contact Credit Absolute today for a free consultation!

 

 

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Financial Literacy for Kids: How Kids Should Spend Their Money

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Source: BusyKid.com

The post Financial Literacy for Kids: How Kids Should Spend Their Money appeared first on Credit Absolute.

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