David Bakke writes about credit and debt on Money Crashers Personal Finance, a resource dedicated to helping people get out of debt and live within their means.

Your credit score could affect your credit card interest rates, insurance premiums and even your ability to get a job. Therefore, it is probably well worth your time to do what you can to improve it. Fortunately, small moves on your part could significantly improve your score and you probably wouldn’t have to wait forever to see the effects. And most of these ideas can be put into place without spending a lot of time.

1. Pay Bills on Time
Paying bills in a timely fashion accounts for roughly 35% of (more…)

Many people believe that it’s the low-income consumers who most struggle with debt. While it might be true that this segment of the population has a hard time paying back what they’ve borrowed, they’re not the only ones who seek help from debt relief companies. The number of middle-income consumers seeking debt relief is on the rise, at least with one debt relief agency.

According to the New York Times, CredAbility, an Atlanta-based credit counseling agency, saw a 26% increase in the average income of debtors seeking debt help from 2007 to 2011. However, there was only a 9% increase in the amount of credit card debt from those borrowers. In other words, people with higher incomes are looking for help with roughly the same amount of debt. This tells us that more money doesn’t necessarily mean it’s easier to pay back debt. (more…)

Your credit report is filled with information that could help or hurt you in debt settlement. You’re not the only one who can access your credit report. Creditors and debt collectors are also allowed to pull your credit report – and they will likely make decisions about your settlement offer based partially on your credit report.

Tool: Creating a Settlement List

As you probably know, your credit report contains a list of most (or possibly all) your credit card and loan accounts. Before you start your debt settlement efforts, you could use your credit report to help complete your list of accounts that you need to settle. For many of your accounts, you’ll probably have recent billing statements or balance due letters from creditors to let you know the account balance and other details. But, you may also have some old accounts that aren’t being actively collected. Your credit report could give (more…)

You could theoretically deal with debt collectors, and other companies involved in the debt process, on your own. But, there are certain circumstances that you might need to get help from a professional attorney. Certain legal matters should be handled delicately, so getting advice from an attorney could keep you from making a big mistake.

You’re considering bankruptcy.

If you’ve exhausted all your options and you’ve decided bankruptcy is the best option for you, it’s probably time to see a bankruptcy attorney. While you can file bankruptcy on your own, it’s likely easier to go through the process with someone who’s knowledgeable about bankruptcy law and experienced in the filing process. A bankruptcy attorney could look through your finances and help you decide which bankruptcy is right for you.

You could see a credit counseling agency before you visit the attorney if you’re not sure that bankruptcy is the final option. You should (more…)

If you only have just one or two accounts to settle, it probably won’t be that hard to keep up with what’s going on with the settlement: the balance, offers that have been made, etc. However, if you’re settling several accounts, keeping up with these details might get difficult. Here are some tips that might help you keep your settlements organized.

Organize all your documents and correspondence in a binder or file folders. If you use a binder, you should get tab dividers and make sure you have a hole punch so you can put holes in the documents for storing. Alternatively, you could purchase folders with holes in them and use those folders to store your documents including billing statements, offer letters, acceptance letters, and copies of the settlement payments. If you choose the file folder method, you should keep a file folder for each of your accounts. You might also have a folder for settlements you’re currently working on.

Keep a master list with all your accounts and these details: the balance before the account went past due, the outstanding balance, whether the account is with the original creditor or a collector, the estimated charge-off date, whether you’ve (more…)

The penalty APR, also called the default APR, is typically the highest APR charged on your credit cards. If you’re intending to pay off your credit card debt under your original credit card agreement, then avoiding the penalty rate is generally imperative. Once your credit card penalty rate is triggered, it could be hard to get it back down.

Penalty rates are typically 29.99% or higher. On a $10,000 credit card balance, the finance charge would then be almost $250 each month. It would probably take several years to pay the balance with minimum payments because they would barely cover the interest and leave only a little money to reduce the principle each month. Have this happen on several credit cards at one time and you’ll likely find yourself in a very difficult financial position.

What Triggers the Penalty Rate?

The penalty rate can be triggered by a few actions. You could probably avoid the penalty rate by avoiding (more…)

You may not actually owe every debt a creditor or debt collector actually says you owe.  There are some methods you could use to get rid of debts that aren’t even yours.

Debt Validation With Debt Collectors

Within the first 30 days of being contacted by a collector, you could send a debt validation letter. The letter asks the collector to send you proof that you owe the debt. If the debt collector can’t get proof, then they’re not allowed to contact you about that debt anymore. They’re not even allowed to list the debt on your credit report. So once you’ve sent the debt validation letter, you could dispute with the credit bureau if the debt is shown on your credit report citing the debt collector hasn’t provided proof of the debt.

If the collector does provide “proof”, but the “proof” doesn’t satisfy you, you could send your validation again stating why their proof isn’t sufficient.

Dispute Credit Card Charges With the Creditor

The Fair Credit Billing Act gives you the right to dispute inaccurate and fraudulent credit card charges. You can typically dispute charges over the phone, but it’s probably a good idea to follow up in writing so there’s a paper trail to confirm the timing of your request. The credit card company will likely do an investigation with the merchant and determine whether to remove the charges from your billing statement.

Credit Report Dispute

If there’s a debt on your credit report that doesn’t belong to you, you could dispute it with the credit bureau. They’re required to do an investigation and update your credit report if they learn that the charge isn’t yours. But, sometimes the information in the applicable business’s computer system is inaccurate and then the credit bureau confirms the debt. In that case, you should contact the business that reported the debt. They too are required to investigate your debt and have it removed from your credit report if it’s not accurate.

When you dispute debts with the credit bureau or the creditor/business, you should send them copies of any proof you have that the debt doesn’t belong to you. This will likely help with the investigation.

While there are many form dispute letters available for free on the internet, it’s typically better to send a letter in your own words. You should use the templates and samples to get an idea of what to say, then craft your letter. You should send any dispute letter via certified mail and request a return receipt so that you have proof of when the letter was sent.

There are two main types of bankruptcy for individual consumers. You may qualify for both of them or you may be limited to the type of bankruptcy that does not discharge your debt. Explore both options to decide which bankruptcy, if any, you could file.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is commonly known as discharge bankruptcy. At the end of Chapter 7 bankruptcy, the court may discharge most or all your debt.

You might wonder why everyone doesn’t file Chapter 7 bankruptcy if it means you might not have to pay your debts. Well, before your debts can be discharged in Chapter 7 bankruptcy, the court evaluates all your assets and decides if any of them can be sold to satisfy your debts. Assets might include a (more…)

What you can do about your debt could depend, in part, on how current (or how past due) your payments are. There could be a few options available to you when you’re up to date on all your payments. But, at least one debt relief option is only available when you’re past due.

When you’re current on all your payments, you may have more debt relief options. You could decide to pay off on your own – that’s if you have enough money to make it happen. You might be able to enroll in credit counseling. Or, if you qualify for a loan, you could consolidate your debt. However, being current on your payments likely puts debt settlement out of the question, unless you’re willing to fall behind.

When you’re delinquent on your accounts, your options are probably limited. They usually become even more limited the further behind you fall. For example, you may be able to pay off your (more…)

The biggest part of debt settlement is probably negotiation. You want to pay the smallest amount possible to satisfy your debt (or nothing at all!) and the creditor would prefer if you paid the full balance of the account. Somewhere in the middle there’s an amount that could work well for both of you. Sometimes you could be the one making the initial offer and your creditor will respond with an acceptance or a counteroffer. But, there may be times when you’re on the receiving end of the initial offer and you’re faced with a choice to accept or reject the offer.

Some creditors and debt collectors automatically send out settlement offers on accounts. Creditors may do this when the account reaches 90 days past due. Collection agencies may make the offer as soon as they assume responsibility for collecting on the debt. A letter including the offer may not specifically use the word settlement, but there could be some language to indicate that you can pay a lump-sum amount that’s less than the full balance due and the creditor will (more…)