How to Settle Debts On Your Own.

If you want to settle your debts, but you don’t want to hire a debt settlement company, you have an alternative – you can settle debts on your own. Debt settlement companies don’t have special privileges that make them the only people who can settle debts. You also have the right to make this negotiation on your own.

Take Inventory of Your Debts

Settling your own debts means you’ll be responsible for saving up the settlement funds and negotiating with the creditors and debt collectors who handle your account. To get started, you should make a list of all your debts, the amount you owe, and how past due the account is. All your accounts may be current. Or, you may have some that are 30, 60, or 90 days past due. Other accounts may be in collection. It’s important to know where the accounts are in the collection process. Update the past due status of each account as it progresses.

Saving Up for Settlement

When you negotiate a settlement, you generally have to be able to pay the settlement in full within a few days. So, you need to have your settlement funds ready to access when you start making negotiations. For most people, this means setting aside several hundred dollars each month until enough money has accumulated to settle an account. The amount you save up each month really depends on what you can afford. The more you can save up, the faster you can settle your accounts.

Downside of Settlement

The downside of debt settlement is that you have to stop paying your accounts to make a settlement. That’s because creditors don’t have a reason to settle an account that’s current on all the payments. When you stop paying your account, you’ll begin getting phone calls and letters from your creditors demanding payment. This is a normal part of the process.

Making a Settlement Offer

When your accounts get 90 days past due, you can mention settlement to your creditor to see if they’re willing to negotiate. Some creditors automatically send out settlement offers once the accounts reach a certain past due status. The good part about these automatic settlement letters is that you won’t have to convince the creditor to settle, you’ll just have to negotiate the amount.

Accounts that are already charged-off or have already been sent to a collection agency can typically be settled right away. You don’t have to wait for these accounts to get any older. But, if you have the chance to settle a past due account that hasn’t been charged-off, settle that account before you settle an account that’s already a charge-off. That way, you avoid having an additional charge-off on your credit report.

Get your settlement offer in writing on company letterhead before you pay the settlement. This helps ensure that you’re making a settlement agreement with someone in the company who’s authorized to take a settlement from you. Then, once you have the settlement agreement in hand with the settlement amount, date of the settlement, and a note saying payment will satisfy the account in full, then you can make payment.

What Happens After Settlement

When your account is settled, your credit report will be updated to show the settled status. Check your credit reports by visiting AnnualCreditReport.com to confirm that the settlement status has been updated. Once you’ve settled all your accounts, you can work on improving your credit score.

Settled accounts will stay on your credit report for seven years from the date you went delinquent. Adding new accounts and positive payment history will increase your credit score over time. If your negative credit history keeps you from being approved for a credit card, try a secured credit card that requires you to make a security deposit against the credit limit.

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• Which is Larger: Your Credit Card Debt or Your Savings Account?

What kind of Spender Are You?

This is America Saves Week and I believe that before you can be a successful saver, you need to know what kind of spender you are so that you can get your spending habits in line with your saving habits. Perhaps the best way to discover your inner spending self is through a bit of self reflection.

One way to kick start your thinking about money and your approach to spending it is through the use of this spending Quiz from Kiplinger magazine.

Here are some of the questions they ask and what you should consider about your spending…

What motivates your shopping?

Do you typically buy stuff when you’re in a funk and feeling down? Do you use shopping as a tool to lift your mood or do you buy stuff you need when you need it? Or do you shop whenever you pay your credit card balance down to a point you feel comfortable with?

How do you shop?

When shopping for your stuff, do you look for the best deal or go to your favorite stores?

What do you buy?

Do you typically shop for big ticket items, like big screen tv’s or spend most of your money on a lot of little stuff? Are you a name brand shopper or will you buy generic and store brands?

Do you comparison shop?

Do you compare products, or do you compare yourself to others? Do you judge quality by price and think the most expensive must be the best?

Do you save to buy?

… or do you charge it and pay it off over time?

How do you rationalize debt?

Do you figure that you just pay it off later, or that you’ll make more after your next raise so it’s not a problem? Better yet – you may ask yourself, “what debt?” Paying off your credit card balance off every month is the best way of using a credit card, other than “not at all”

Views on saving.

Do you find that you never seem to have enough left over to save and that you’ll start saving next month? Or do you pay yourself first and spend from what’s left after you save?

Possible out comes.

At the end of the quiz, you’ll get your spending profile and a description with some helpful tips about getting your spending self in line with your saving self.

Here are some of the possible outcomes:

• Shopping Addict
• Overconfident Consumer
• Status Seeker
• Smart Spender

The most popular was “Smart Spender”, but I would have thought that most Americans would fall into the “Shopping Addict” category, based on articles I see in the media. Then again, it is a personal finance magazine so maybe the people taking this quiz are more savers than spenders anyway…

Related Posts:

• Is Tracking Cash Flow Really Easier When You Buy With Cash?
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• Heads Up – Your Credit Score May Suffer Even If You Pay Off Your Card Every Month!
• Using Secured Credit Cards To Rebuild Credit.
• How to Shield Yourself From Lifestyle Creep.

First Premier Bank Credit Card Offer Features A 79.9% APR, a Bad Deal – For The Bank!

I blogged about First Premier Bank Credit Card offer exploiting a credit card loophole in the 2009 CARD act a while ago. I just couldn’t believe that a bank would not only charge customers 79.9% interest but they actually advertised the card to new customers! To be fair, it was targeting people with lousy credit histories, but it turns out that it may have been a bad business move for the bank.

First Premier Bank credit card offer with 79.9% APR is a hit.

According to this article, the initial offering of 79.9% proved popular with customers! What’s this you say? People actually wanted a card with such insane rates? Yes.

It turns out that so many people with poor credit saw it as an opportunity to rack up hundreds to thousands in free charges – and defaulted!

Muhahhaha…

Serves First Premier right!

Miles Beacom, the CEO said:

“A lot of the people ran up the card, defaulted and went directly to charge off.”

As a result, they dropped the rate to 59.9%. “We also tested it at 23%, 33%, 45%, but 59.9% is the one that shows the best performance and where the organization can market the product,”

I’m actually surprised the bank is still offering the card, since the CARD Act capped fees at a max of 25%, and the bank has said they were previously relying on even higher rates to offset the default risk of the customers.

Despite the $135 in annual fees and sky-high interest rates, the company claims to service about 3 million people, with 200,000-300,000 applications each month!

Strange days indeed.

Related Posts:

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NPSL Credit Cards and the Case of the Unknown Credit Limit.

NPSL Credit Cards, or No Preset Spending Limit cards, sound great. Who doesn’t like the sound of no limits? It turns out that this great sounding deal may be bad for your credit score.

Lenders, creditors and credit scoring institutions like FICO—the company that creates the most-widely used credit score in the United States—consider a broad variety of information when evaluating consumers. In order to be regarded as a responsible credit card or charge card user you must, for example, pay your bill on time each month, refrain racking up debt and avoid going over your credit limit. This goes for NPSL credit cards too.

These are the main tenets to proper spending and most people are aware of their importance. However, many consumers don’t realize the importance of factors like credit utilization, and their credit scores suffer because of it.

Credit utilization

Credit utilization is a balance-to-available credit ratio that organizations like FICO include prominently in their credit scores. It basically measures how much of your available credit you are using—the lower the better—which is important because responsible credit users, the thinking goes, use only the credit they need, not all that is given to them, and leave themselves a significant buffer in case of emergency.

High credit utilization is typically simple to avoid, especially for people with excellent credit. Just make sure that your spending is about 30%-40% of your credit limit each month. But what if your credit card company does not inform you of your credit limit and/or you think your card has unlimited spending? How can you keep your utilization low then?

NPSL Credit Cards.

Credit card companies often don’t provide their customers with concrete spending limits because of a feature known as No Preset Spending Limit (NPSL). Credit cards with this feature—like the charge cards from Chase and American Express, World MasterCard credit cards, and Visa Signature credit cards—have limits that change on a month-to-month basis reflecting various factors such as spending patterns, payment history, and economic trends.

Both this secrecy and the fact that the feature’s name contains the words “no” and “limit” lead many consumers to buy into the myth of the limitless credit card. Still, whether you initially misunderstood the meaning of NPSL or not, you never know what your spending limit is with an NPSL credit card, which makes it difficult to effectively budget and increases the chances that your card will get declined when you try to make a big ticket purchase.

As you might expect, the lack of uniform spending limits for NPSL cards also affects how credit utilization is calculated. According to an NPSL Credit Card Study conducted by CardHub.com in Nov. 2010, credit card companies report proxy limits to the major credit bureaus in place of their cards’ true spending caps or they just report nothing at all. As a result, FICO could consider you to have used more of your available credit than is truly the case or to simply have less available credit overall. Either way, credit damage is possible. The study also discovered that credit card companies use various types of faux limits and that some of the largest issuers—namely HSBC, Chase, and U.S. Bank—refuse to publicly reveal which they report. Thus, an NPSL card’s effect on your credit standing might be both unpredictable and impossible to compensate for.

Recognizing the importance of credit utilization is ultimately very important to garnering the best credit score possible. You must therefore find out what your credit limit is and make sure to keep your spending well below this amount. If your issuer cannot provide you with a definitive limit because your card has NPSL, then you should close your account and get a card without this feature. NPSL is not a reward, it’s a burden, bringing uncertainty and the possibility of credit score damage. Given the fact that NPSL cards are for people with excellent credit, a traditional rewards credit card would be an excellent replacement.

Related Posts:

• How to Repair Your Credit, One Tradeline at a Time.
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• Using Secured Credit Cards To Rebuild Credit.
• Avoid These 5 Credit Card Rookie Mistakes!