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Truths and Falsehoods on Credit Scores – Debt Settlement

admin — Mon, 26 Oct 2009 22:59:39 +0000

As the economy continues its rough ride, the fallout from mortgage and credit card late payments and delinquencies has dropped the credit scores of consumers across the country. As credit scores take a higher profile from news reports to conversation at cocktail parties, more consumers are taking interest in their credit reports. The problem with all the information and chatter is that much of it doesn’t accurately reflect what is important regarding credit scores and what is not.Take this true/false test to see where you stand:

1) You should check your report on occasion whether your are applying for a loan or not2) Checking your own report can hurt your score3) Closing a credit card account you are not using can hurt your credit score4) All credit scores are not the same5) Paying off outstanding balances is a great way to boost your score immediately6) A credit score is the same as a credit report7) Comparing loans can hurt a credit score8) Debt relief options hurt more than they help…and the answers are:1) True – Reporting errors don’t happen every day but they do happen. Checking your report can save you from being surprised when you apply for a loan or a credit card. You can visit http://www.annualcreditreport.com/ for a free, no-obligation copy of your report.2) False – Checking your own reports does not damage your score. Employer and landlord checks will not damage a score either.3) True – One of the factors in calculating a credit score is the amount of unused but available credit, specifically on credit lines and credit cards. Closing these unused accounts can actually lower your credit by removing available credit from the report.4) True – Between the three reporting agencies (Equifax, Experian and TransUnion) the scores will most likely be similar but not identical as each agency receives and compiles data in different ways.5) False – Credit scores reflect an extended time frame so the sudden paying off of manageable balances won’t add much immediately. In fact, depleting cash balances to these pay off might hurt the overall review of you as a borrower.6) False – A credit report is a history of your debts, payments, available balances, and open/closed accounts. The credit score is based on a formula that takes all that information and calculates a number between 300 and 850.7) False (and true) – Hard loan inquiries for mortgages that come in over a span of about two weeks will not hurt a credit as agencies accept that loans might shopped generating multiple inquiries. Multiple credit card inquiries can hurt a score. 8) False – For consumers in trouble debt relief options can provide viable solutions to insurmountable debt. While these options will temporarily decrease credit scores, credit counseling, debt settlement and bankruptcy each have long term advantages for getting out of debt. Debt settlement is rapidly increasing in popularity due to the immediate reduction, usually around 50%, of monthly principle payments and the reduction in principle owed by 40 to 60%. Additionally, the timeline for getting out of debt is shorter than credit counseling and filing bankruptcy. Credit counseling can help to manage bills, and lower interest rates and monthly payments to creditors when debt issues are still manageable. Bankruptcy, an even more serious alternative, should be considered a last resort and discussed with a bankruptcy attorney.Credit scores are more important ever. Knowing what affects them and what doesn’t could make a huge difference in whether you get the loan you want or get it at all. Prior to doing anything that might hurt or help your score, be certain that your actions will help your financial picture.

Bankruptcy debt settlement / Debt settlement attorney / Debt negotiation services

Debt Settle, Inc. specializes in the process of settling debts for our clients. Debt settlement is a relatively new form of debt relief that goes far beyond what debt consolidation and credit counseling can offer on many different fronts. your payments on consumer debt have become an unworkable burden, it’s time to consider your options on how to get things back in line. Call us at (866) 985 7388 or visit debtsettleinc.com
Debt negotiation company / Debt Settlement company
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Fixing Your Debt Ratio with a Debt Negotiation

admin — Mon, 26 Oct 2009 16:59:02 +0000

One of the mysteries of home loan modifications is how each lender treats the debt ratios of the homeowner. While lenders do not make the information public, law firms in the course of executing hundreds modifications with lenders have become familiar with acceptable ranges at each one. The knowledge of what lenders are looking for in terms of these ratios prior to starting the process can make the difference between the relief of getting a home loan modification and the fear of facing foreclosure.

There are actually two debt ratios that figure in to the loan modification process. The first is the ratio of the mortgage payment which includes taxes, insurance, and HOA dues, if applicable, to the homeowner’s gross monthly income. Under the guidelines of the Obama administration’s Making Home Affordable, the ending target for the ratio is 31%. The standard of each lender, in terms of this ratio, will vary but will generally be close to that of the government program. The second ratio, which often determines whether a loan modification is approved or not, is overall expenses, including the mortgage payment, as a ratio to gross income. Lenders look very closely at this ratio to determine whether the homeowner will be at risk of slipping back into default even after the modification lowers the monthly payment. In fact, homeowners can be well under the guideline standard for the income to housing debt ratio but end up with a non-approval due to a high number for the income to total debt ratio. It should also be noted that a homeowner can get a non-approval for a loan modification if either ratio is too low due to the hardship requirement imposed by both the government and private lenders. If the total monthly debt payments of a homeowner include obligations toward unsecured debt, a debt settlement can play a significant role in bringing the ratio to a level that fits within a lender’s parameters. For the total debt to income ratio, acceptable ranges can vary widely but generally fall within 38 to 45%. The administration‘s guideline allows for this ratio to go as high as 52% but in any loan modification the lender always has the final say. While a debt settlement has a variety of benefits, the reduction of the monthly payments associated with all debts rolled in to the settlement can have a material effect on the success or failure of the loan modification process. Because the typical reduction in payments is approximately 50%, a homeowner that that may be carrying too much in the way of debt payments can bring that ratio back in line immediately by initiating a debt settlement.Here’s how it would work: * Homeowner’s gross income is $7,500 per month.* Mortgage payment is $2,450 for a housing to income ratio of 32.6%.* The homeowner is carrying about $50,000 in unsecured debt. The minimum monthly payment on all accounts is $1,450 leaving the total monthly payment on all debt at $3,900.* The ratio of total debt to income is 52%, much too high to get approval for a loan modification.* By initiating a debt settlement, the homeowner immediately cuts the payment on unsecured debt down to $725 per month.* The new ratio on total debt to income drops to 42.3%, within the acceptable range of approval for the lender. In this example, the homeowner would receive receive further relief with the approval of the loan modification which, combined with the debt settlement, would reduce payments by well over $1,000 per month. An experienced attorney can synchronize the debt settlement and the loan modification to provide other benefits as well including timing the payoff of settled accounts to provide additional cash flow and the re-building of credit scores.

Debt Settle Inc – Debt negotiation company / Debt negotiation services – for more information about Debt Settlement visit debtsettleinc.com.

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Is Debt Negotiation for You? – Debt Settlement Advice

admin — Mon, 26 Oct 2009 05:06:10 +0000

Debt negotiation is a relatively new form of debt relief that is gaining popularity for its results in reducing credit card and consumer debt and because the process can also help homeowners avoid foreclosure by making home loan modifications more likely to be approved. There are two schools of thought on the subject; one that focuses on broken settlements, credit scores and direct negotiations while the other centers on the short and long term benefits of the practice. First, the arguments against debt negotiations:

* Broken settlements – A settlement can be broken by either the party executing the negotiation or the customer. True, there have been instances were companies didn’t follow through on their promises to see the negotiation from beginning to end. The percentage of customers involved in those situations has been small and could have been prevented with some due diligence. Many companies have been drawn into the debt relief industry by the sheer numbers of borrowers and their escalating debt starting in the late 90’s. What had started as debt counseling run by a few non-profits mushroomed into an industry populated with thousands of new and inexperienced companies offering services far beyond the scope of the original mandate of assisting indebted customers with their debts Within those thousands of companies were those that didn’t deliver on debt negotiations, counseling, or consolidation. Customers can also break a settlement by not making enough payments to settle the negotiation. Whether by circumstance or intention, some will stop making payments during the 18 to 48 months of the settlement process.

* Credit scores – A debt negotiation will likely decrease the credit score of a borrower that enters a debt negotiation, but it depends on what that score is at the time the process starts. A vast majority of borrowers that start a debt negotiation are already behind on payments and are consequently taking hits on credit scores so the negotiation won’t have as much of an effect. The second issue on credit scores is that the negotiation stays on the report for up to seven years. While that can be true, doing nothing will leave charge-offs and open balances on the report indefinitely. Finalized, settled, and closed accounts are ultimately a much better reflection on a credit report than accounts that appear intended and/or neglected.

* Direct negotiation – Borrowers can initiate direct negotiations and, in fact, may be contacted by their lenders to do so. One problem with going direct is that there are normally several accounts to be negotiated, all of which will need to be done independently. A second issue is that the offers in direct negotiations are usually for lump sums or for payoffs within a few months of agreement. Those types of payments are often unworkable for the borrower, especially if there is more than one lump sum agreement at a time. The benefits of debt negotiations are as follows:

* Immediate relief – Upon initiation of the debt negotiation, the borrower will immediately experience an approximate reduction of 50% on payment obligations for all accounts involved in the negotiation. Reductions can vary, depending on the borrower’s ability to pay. By making payments in excess of the 50% reduction the borrower may be able to pay off the negotiated balances faster.* Debt balances cut by 40 to 60% – Depending on the creditor, balances can be negotiated down by 60% or more. For a negotiation covering multiple accounts the average reduction for the total is 50%. Once the negotiated balances have been settled the accounts are considered to be paid in full with no further obligation by the borrower to the lender.* A wide spectrum of accounts which can be negotiated – A debt negotiation can include credit cards, signature loans, department store debt, unpaid medical bills, unpaid utility bills, and more. This effectively gives the borrower a chance to wipe the slate clean without the disadvantages of filing bankruptcy.

* Paying off all debts within four years – As credit card balances have accumulated for consumers over time, making payments that materially reduce the principle balance has become difficult, if not impossible. For those that can only afford to make minimum payments, a full payoff could take twenty five years or more. Calculated out over that time a borrower would pay many times the actual balance in interest alone. Contrast that scenario with a full payoff of debts over four years or less at approximately half the balance amount and the merits of debt negotiation become very apparent.

* Increased odds of approval for home loan modifications – A debt settlement can enhance an application for a home loan modification by showing a reduction of consumer debt payments which allows for a greater availability of a homeowner’s income toward mortgage payments. In fact, a debt negotiation could be the difference between a successful loan modification and foreclosure.You will continue to hear pro and con arguments regarding debt negotiations. One thing to keep in mind is that credit counselors have been and still are backed by credit card issuers. When listening or hearing about debt negotiations, always consider the source. If you are contemplating a debt negotiation, be sure to conduct some due diligence before selecting a firm to act on your behalf. Visit the firm and ask enough questions to get comfortable with the partnership. Insist on a law firm experienced in debt negotiations and, if applicable, home loan modifications. Getting back on your feet will take partnering with the right firm and a commitment to seeing the process through to its completion. Take care of those issues, and you’re on your way to financial freedom.

USA Debt Settlement – Debt negotiation company / Debt negotiation companies – for more information about Debt Settlement visit usadebtsettlement.org

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Debt Settlement vs. Bankruptcy

admin — Sat, 17 Oct 2009 23:07:53 +0000

A recessed economy and bursting of the real estate bubble have pushed borrowers to the point where they can no longer keep up with payments on their credit cards and consumer debt. For those searching for solutions, the decision often comes down to choosing between a variety of debt relief options. The options include debt counseling, debt consolidation, bankruptcy, and debt settlement. Of the four, debt settlement and filing bankruptcy have become the most popular of the solutions due to their advantages relating to decreasing current payments and the reductions in outstanding balances of debt. For consumers, the two most common filings are chapters 7 and 13. Of the two, chapter 7 allows for much better outcomes for filers with steep reductions or outright dismissals of debt. Prior to the overhaul of the bankruptcy code in 2005 chapter 7’s were immensely popular for just that reason. Since the overhaul, the choice of which of the two chapters would be available to the consumer is decided by the court depending on the outcome of a means test which is the required first step in any bankruptcy filing. The means test is essentially an evaluation of the filer’s income and expenses which is then set against debt redemption standards as set by the IRS. Measured against the IRS standards, if the borrower falls short of income guidelines he can then file for bankruptcy under the auspices of chapter 7. The guidelines for qualifying for chapter 7, however, are stringent. If the means test reveals that a borrower can pay even one hundred dollars per month toward debt, the filing will automatically go toward a chapter 13 bankruptcy. In either situation, the borrowers are required to get credit counseling and budget analysis at their own expense. Chapter 13, while providing some relief on current payments, is not nearly as consumer friendly as chapter 7 and carries disadvantages that convince many borrowers that the option is just not for them. The biggest disadvantage is that once the terms of the filing are set, a borrower’s finances can be overseen by a trustee of the court. The invasiveness of having an outsider involved in day to day or monthly budgeting becomes an immediate deal killer and typically turns the borrower toward debt settlement. Debt settlement, also known as debt negotiation, is a relatively new and aggressive form of debt relief offering many advantages over counseling, consolidation, and bankruptcy. The first and most immediate advantage is an approximate reduction of 50% on payments related to each account rolled into the debt settlement. Accounts which can be rolled into the settlement include credit cards, department store debt, unpaid utilities, medical bills, and other unsecured debt. Other advantages include:* Being proactive in pursuing a debt settlement can prevent wage garnishments and attachments – Letting creditors know that you’re in a debt settlement process provides assurance they are going to be paid a least some of their money. Creditors are unlikely to initiate any legal action while a settlement is under way.* Debt elimination – Outstanding balances can be reduced by 40 to 70%, depending on the creditor. On average, the collective accounts in a settlement will be reduced by 50%.* Added security for secured assets – Reducing payments and eliminating a portion of unsecured debt relieves pressure on secured assets. Debt settlements, for example, are being combined with loan modifications to help homeowners reduce their total payments toward debt and improving the chances of getting approved for new mortgage terms.* Complete payoff of debt balances – After the debt reduction, payoff schedules are flexible but generally last no longer than 48 months. The same accounts maintained with minimum payments could take over twenty five years to pay off. * Faster improvement of credit scores – The settlement of accounts allows for borrowers to begin the process of re-building their credit scores faster than bankruptcy which can remain on a credit report for ten years and stay on the public record indefinitely. Debt settlement/negotiation is becoming increasing popular with struggling consumers because of its advantages over every other form of debt relief including bankruptcy. Consumers should still familiarize themselves with all forms of debt relief before making a decision. The best way to sort through the options is to work with an attorney with experience in all forms of debt relief to determine which will deliver the best outcome. Getting on the road to financial recovery is that simple.

Debt Settle Inc – Debt negotiation company / Debt negotiation companies – for more information about Debt Settlement visit debtsettleinc.com.

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