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CREDIT PROBLEMS FOR INDIVIDUALS.   Term Paper ID:19727 Click to get this paper

Essay Subject: Symptoms, overextension, credit history, creditors, credit cards. Credit repair agencies, counseling.... More...

9 Pages / 2025 Words 3 sources, 8 Citations, TURABIAN Format $36.00 Return to List of Papers

Paper Abstract: Symptoms, overextension, credit history, creditors, credit cards. Credit repair agencies, counseling. Paper Introduction: People respond to debt in one of two ways. Some are overwhelmed by it. Others are slightly uneasy and worry that they are in too deep. Most people, in fact over 40 million Americans, fall into these categories; and while credit offers wonderful opportunities to improve a person's material standard of living, unless used wisely, it is easy to fall into the nightmare of unpaid bills, overdue notices, collection agency letters, negative credit reports and even bankruptcy. However, it is possible to set up a credit repair system that allows an individual to get out of debt and manage money more wisely. The first step is to recognize there is a problem. There are a number of danger signals. Credit borrowing doesn't make much sense when installments are made on products that are quickly consumed such as food, gifts and entertainment. A person Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. This is absolutely essential especially if they agree not to reportthe late payment to the credit agency. [5]Ibid. The agencyalso has speakers available for presentations on budgeting, creditcollections, debts and related topics. These companies have hard nosed, experiencedstaff people who will negotiate with creditors to remove derogatoryinformation on a credit report. Advice and counseling is always available free of charge. The studentloan organizations are reasonable and usually approve all first timerequest. It is important to indicate towhom the debt is owed, the total amount, the monthly payment, the number ofmonths to go and the number of months behind,[2] to help you prioritizeyour debts. If the creditor will not remove the negative information at thistime, the credit repair agency will shift to direct negotiation. Credit repair agencies will also use trade-off tactics to get theinformation removed. Once you have your credit problems under control, it is important tostay on top of either your repayment plan or bankruptcy arrangements. You must fill out a request form and indicate in a fewsentences what the problem is. However, it is possible toset up a credit repair system that allows an individual to get out of debtand manage money more wisely. If you need someone to negotiate for you, it is better to go to a non-profit community service agency that helps people help themselves solvetheir financial problems. However, they do act as a liaison between creditorsand help you make regular payments administered by their office. [4]Kathy Kristof, "What to Consider Before Filing Bankruptcy," LosAngeles Times, 17 February 1991, D4. However, the rate of interest is usually higherthan the prevailing market rate. [3]Ibid., 321. The last resort is to declare bankruptcy. However, they do report factual credit repayment informationreported by stores and other lenders that may be negative. You must filethe paperwork and then meet with an appointed trustee. If the creditor balks atthis, the repair agency will suggest that they give you a letter indicatingthat you have "paid as agreed". You are toset up goals to work towards and a repayment plan that will help you payoff existing debt. A person should not have to borrow to meetregular expenses such as rent and utility bills. Some banks will allow you to have a credit lineas long as you use savings or certificates of deposit as collateral.These credit cards are easier to get since they have less applicationrestrictions on them. During the meetings you will hear stories of peoples problems andsolutions. This letter can be presented to lenders ata later date if you get turned down because of the negative information.If the creditor gives you a "paid as agreed" letter, the credit repairagency will try to use it as leverage later with the creditor to get thenegative information removed at a later date. However, it is critical that you get the name of the personwho okays the late payment. Others are slightly uneasy and worry that they are in too deep. The meetings offer encouragement, a feeling ofcommunity, a healthy perspective on distorted attitudes and perceptions anda sharing of ideas, information and techniques to stay out of debt.[8]The goal is to go one day at a time without getting into debt. Problems can occur whencredit cards are charged to the limit and checks designed to make thepayments keep bouncing. If there is an error on the credit report you need to notify thereporting agency. You are to give up all use of creditcards so that you do not generate additional unsecured debt. Often the credit repair agency will try to get the creditor to admitthat a "mistake" was made. Inspirational messages are given at themeeting to help people recognize that overspending is a habit that can bebroken. This is never a good idea. As a result,your report will indicate the number of times and to who, you have had 3 ,6 , 9 and 12 day late payments. Although they have a strong track record, it takes alot of time for a process that you can do yourself. In reality it is worth challenging every negative overdue indicator.Often a creditor such as Sears or Penney's does not have the time torespond to the inquiry in the given time period. They will send a letter in your name denyingall the of the negative information. The intent is to get you inmore control of you finances.[7] The plan is a guideline to help youdetermine how you are going to spend your money every month. Once you have acknowledged the problem, you are to fill out a dailyjournal or spending record for every item and every time you spend money.This journal acts as a tool for you to see exactly what your spendinghabits are. You can keep exemptassets such as clothing and personal belongings as well as a limited amountof equity in your home or car.[5] Chapter 13 is more complex and requiresthat you make out a repayment plan to your creditors. Once your initial credit problems are solved, it is possible to get asecured line of credit. If you start to receive harassing notices in the mail you can talkto the creditor directly and ask for an extension. They will then approach thecreditor with a deal. [6]Mundis, 1. This budget will be used to setup a repaymentplan for creditors. "What to Consider Before Filing Bankruptcy." Los Angeles Times, 17 February 1991, D4.Leonard, Robin. They do not change or repair creditbureau information. A nominalfee of no more than $2 dollars is assessed. The concept of problem debting andcompulsive debting will be explained to you. Some creditors will even allow you to make extended payments beyondthe normal time period. The spending record is then used to develop a spending plan. You must makethe payments to the agency who in turn will make the payments directly tothe creditors. These agencies do not make actual comments to yourfiles. You will pay off the complete balance of the accountif the creditor removes the negative information. The first step in the program is to acknowledge that you have aproblem. It is possible to get extended payment plans from credit cardcompanies such as VISA and retailers such as Sears and Penney's. Thistool is designed to match your income to your needs, exercise clear optionsand make informed choices about your money. The price for credit repair activities though is steep -- $15 perderogatory remark. Anyone denied credit is entitled to a free credit report. The agency is also a HUD certifiedhousing counseling center and provides counseling to homeowners who are indanger of losing their home. Therefore it is necessary to get a copy of your creditreport and see exactly what has been indicated on it. How to Get Out of Debt, Stay Out of Debt and Live Prosperously. [8]Ibid, 155.----------------------- 11 The trustee willarrange to sell or distribute non-exempt assets. It is not cheap even for "no-frills, do it yourself" bankruptcy.[4]However if you are about to lose your house, it may be your only recourse.Chapter 7 will allow you to discharge your debt all at once. To make life easier theywill just remove the negative comment. This will help you to categorize your expenses and toidentify your spending blind spots. The first step is to recognize there is a problem. People respond to debt in one of two ways. For an extra fee, they will alsoinform you of any time someone requests history or makes a change toexisting information. The reason must bespecific and credible such as death, medical and emotional illness, andmarital problems. A company such as the Consumer Credit CounselingService of Los Angeles provides free budget and debt counseling. The next step is to determine how large a problem exists by listingall outstanding debts you have every month. The meetings provide a support group so that you do not feel outof control and isolated. The agency will negotiate with the creditors so thatyou can make smaller payments over a longer period of time. If you can send documented proof of these problems, theyare more flexible. Often the negative information is removed because the creditor doesnot want to take the time to go through a major investigation. These agencies are especiallyhelpful if you are having major problems and can only afford to payessential items like your mortgage. Debts which canusually be put off until later are debts such as credit and charge cards,department store and gas charges and student loans. Otherwise,the agency will send the report to you for a nominal fee ranging from $8-$15. The agency will send a letter to the creditor requestingan investigation. Once points and fees are tacked on the annualinterest rate comes to 33%, the loan is an interest only loan for only ayear, and after the year is over you must make a balloon payment of thefull amount. Any of the above factors can have a negative impact on a person'scredit history. The credit repair people will presentthemselves as "quasi" legal representatives that have been retained by youto help straighten out your financial problems.[3] The credit repair agencies know that each item on a record must beproven if it is to remain. Money Troubles: Legal Strategies to Cope With Your Debt. Using one credit card to pay off another is a sign of trouble. Also if there has been only oneoverdue payment on the given account, as a courtesy they will remove it.There is no reason for you to tell them about the other creditors. The funds used as collateral are alsofrozen, which prevents you from using them in case there is an emergency. They will have you pay regular monthly payments toget you reestablished as a "good account". Credit borrowing doesn't make much sense wheninstallments are made on products that are quickly consumed such as food,gifts and entertainment. This letter will state that theinformation is incorrect or that you don't recall making a late paymentetc. Rememberto get the person's name in case there is a problem later. This organization is aself help organization designed along the lines of Alcoholics Anonymous.[6] You must attend weekly sessions where you will encounter many people whohave similar problems. There is also a problemif an individual can barely make the minimum required payment on bills, butcontinues to charge. They donot lend money or repair credit. Mostpeople, in fact over 4 million Americans, fall into these categories;[1]and while credit offers wonderful opportunities to improve a person'smaterial standard of living, unless used wisely, it is easy to fall intothe nightmare of unpaid bills, overdue notices, collection agency letters,negative credit reports and even bankruptcy. Howeveryou usually have to come up with a strong reason. Berkeley, CA: Nolo Press, 1991.Mundis, Jerrold. The importance of the exercise is to see what you actuallyspend your money on. Some are overwhelmed byit. If you are considering buying a home, theagency will also provide pre-purchase and budget counseling. BibliographyKristof, Kathy. There are anumber of danger signals. They point out that operators can make errorsand suggest that this is what happened. New York: Bantam Books, 1988.----------------------- [1]Jerrold Mundis, How to Get Out of Debt, Stay Out of Debt and LiveProsperously (New York: Bantam Books, 1988), 1. [7]Ibid, 125. This deferral period can be renewed if necessary. Upon approval they will give a 6 monthdeferral. They can also arrangeconsolidation loans to help you pay off all your bills, the upside beingyou only have to pay one monthly payment, the downside being that theseloans are hard money. Student loan companies such as SALLIE MAE havedeferral problems. The spending plan is to help you stabilize so that yourexpenses do not outweigh your income. Debtor's Anonymous also helps you deal with the psychological burdensthat accompany overspending. Usually debts which have to be paid first are utility billssuch as gas, electricity, heating, oil, water or telephone, secured debtslinked to specific items of property, and unpaid taxes. Anunacceptable level of debt is using 25% or more of your take home income topay credit card bills and other personal loans. The creditor has a legal time limit of 3 days torespond to the inquiry. The counselors will review all this information and thendevelop a budget for you. However if you are persistent enough and keep askingfor a supervisor, you can often accomplish this over the phone. They can beaccommodating. If you do not like making these calls yourself, it is possible to goto a credit repair agency. There are threemajor credit reporting agencies on a national level. You will be asked a number of questions that identify thewarning signs of serious debt. Some creditors will not respond toreverification and through default the negative information is removed. TRWcredential service will give you unlimited access to your credit report.This will allow you to note corrections. These include TRW,CBI and Trans Union. You need to bring all your bills, payment recordsand pay receipts. Organizations such as Debtors Anonymous will also help you design arealistic and painless payback schedule as well as provide emotionalsupport to help you manage your finances better. This company will set up a series of free counseling sessions at oneof their business sites. They willestablish a working relationship with the company and try to work out adeal. The situation becomes completely out of controlwhen a person is so far behind that collection agencies start houndingthem. If there is inaccurate information, the creditorby law has to notify the reporting agency to remove the derogatory. [2]Robin Leonard, Money Troubles: Legal Strategies to Cope With YourDebt (Berkeley, CA: Nolo Press, 1991), 7. Write down the date and time when you talk tothem. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.