you in a position of being unable to meet your obligations. If so, you’re not alone.
Thousands of others are in the boat with you.
Even if you’ve always paid your bills on time, the current economic situation may have
Unfortunately, when you fall behind on credit card bills, debt collectors will begin to call.
The calls from your actual creditor will probably be fairly friendly. They’ll offer to help you set up a repayment plan, and may even offer to settle the debt for a lesser amount if you can pay it off in a lump sum.
You have to wonder how they think you can come up with a lump sum if you couldn’t manage a monthly payment, but it’s their job to ask.
Most of the time your original creditor won’t take legal action against you. They’ll either sell your account to a third party, or turn it over to a collection agency or an attorney. And this is the group that’s likely to become abusive.
They’ll begin with phone calls and threats of legal action – and could proceed to get a judgment against you. Depending upon your State laws they can garnish your wages, drain your bank accounts, or place a lien on your property.
Note that they are not allowed to touch a bank account if all the funds in the account come from Social Security Retirement or Disability, or Veteran’s Disability.
Although there are strict regulations, such as rules preventing them from calling you at work, talking to your neighbors about your situation, or calling you between the hours of 9 p.m. and 8 a.m., some of them will do it.
Some have been known to threaten bodily harm, jail time, deportation, or loss of child custody. These threats are false and illegal, as is the use of profanity.
If you are subjected to such calls, you can and should take action against them by reporting them to the Federal Trade Commission or the State Attorney General. Act quickly to get their names and contact information, because fraud and harassment are criminal offenses.
Even worse is when these practices are employed by bogus debt collectors. They use them to try to extract money that you don’t even owe. These could be debts that were discharged in bankruptcy or debts that have passed the statute of limitations in your state. But they search public records to find them, in hopes that they can scare you into paying.
Some debt collectors will even attempt to collect monies owed by deceased relatives – either by preying on your sense of loyalty to the deceased or by falsely claiming that you “inherited” the debt.
Do report them.
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Everyone likes to give advice, but some of it will do you more harm than good. And, some advice is good or bad depending upon whether you are trying to eliminate debt or build your credit scores.
Consolidating your debt:
Some advisors will tell you to move all your credit card debt to a card that has a low interest rate “Until paid in full.”
That’s good advice, but only if you can move all your debt to that card without exceeding 50% of the card’s credit limit. Otherwise, its’ bad advice because it will harm your credit scores.
This is true even if it leaves you with a few other credit cards with zero balances. I know, that doesn’t make sense… you still have the same amount of credit available and still owe the same amount, but that’s the way scores are calculated. No one card should have over 50% of it’s limit in use – and staying under 30% is better.
However, if you know you won’t be needing new credit in the near future and moving your debt to a low interest credit card will allow you to get rid of your debt faster, then it’s good advice.
Closing accounts:
Another advisor might tell you to close accounts that you aren’t using, or close accounts with high interest. But that’s bad advice, unless you lack self-control and would feel that you had to use that available credit to put yourself farther in debt.
When it comes to building high credit scores, the more credit you have that is available but unused the better. And the older your accounts, the better. Your history of credit use is a large portion of your score. So keep those old cards and use them just often enough to prevent the card issuer from closing them for non-use. Pay the bill in full when it arrives and the high interest rate won’t be a factor.
Paying down balances:
If your debt is spread among many cards, most advisors will tell you to pay down the high interest balances first. But that’s only true if you’ve used about the same amount of your available credit on each card. If you’re working for better credit scores, pay down the highest balances first.
Checking your credit report:
When you’re shopping for a car or furniture, any credit advisor will tell you to wait until you’ve made a firm buying decision before allowing the merchant to check your credit. And don’t just tell them not to check – refuse to give them the opportunity by refusing to disclose your Social Security number until you’re ready.
This is because multiple inquiries on your credit report will lower your scores.
But there are 2 exceptions: Mortgage loans and checking your own credit.
When you shop for a mortgage loan the lender needs to know your scores in order to determine the mortgage interest rate they’ll offer you. And, since different loan companies offer different products, shopping for that loan is a smart move.
Those who compile credit scores realize this fact, so as long as your inquiries are grouped within a short period of time, multiple inquiries will count as only one.
Finally, checking your own scores not only does not damage your scores, it’s the smartest way to manage your credit.
By checking often you’ll be better equipped to make necessary changes, and you’ll be alerted quickly to errors on your report and/or signs of identity theft.
