How Does a Debt Management Company Work?
A common misconception regarding the problems associated with overextending ones finances is that it’s the result of easy credit. I want to smash that idea here and now because it’s not easy credit that’s the problem but more specifically it’s a behavior or lack of discipline problem. Sure, the convenience of having credit and being able to buy now and worry about how you’ll pay for it later is a temptation but it’s still no excuse.
That being said, if you do find yourself knee deep in financial do-do as a result of over spending or perhaps your situation has been caused by an illness or even an unexpected drop in income. Regardless of the reason, you find yourself in this stressful and unenviable position the sooner you address it -- the sooner you can put it behind you.
Financial problems are becoming an ever common issue and you when you start to look at the issue a little closer it’s surprising at how many Americans are currently living under the weight of high credit card debt. The average American has about $7,000 in credit card debt and it’s growing every year.
However, what may be even more surprising is that the majority of these people never seek debt management services to help them take control of their financial lives. Rather, they opt to forget all about their credit card debt until it finally balloons into the financial war zone called bankruptcy.
On the other hand, in order to take the necessary steps in finding an appropriate debt management service you must first, take a step back and admit that this chunk of accumulated credit card debt is real and that tomorrow when you wake up it’s not going away. On the contraire my friend, you need to wake up in the middle of the night sweating bullets because you realize just the opposite. That the longer you wait the deeper hole you dig. It truly is of utmost importance that you realize the weight of your problem and that you must take it by the horns and wrestle it the ground because if you don’t its going come up from behind and stick you in back.
Ok, I’m know this is dangerous but I’m assuming if you’ve read this far you’re serious about tackling this problem, that you’ve got your mind around it and that you are willing to take the necessary steps. People need to realize that financial abuse is no different than drug or alcohol abuse. You can’t overcome the problem until you admit you’ve got a problem in the first place.
Debt management services will cater to whatever your specific financial need is. However, always keep in mind that debt management services do not, in any way, payoff your debts for you. They are there to help you manage your finances, sort out your debts and give you a road map so that in the long run you’ll be able to maintain a debt free life.
My next point is simple common sense, but for some reason few people follow it. Don’t wait until your credit card bills are out of control before seeking help. Keep in mind, that the sooner you get debt management services working for you the better chance they have of helping you to avoid getting thrown out the street.
Debt management company - well, they come in all shapes, sizes and debt reduction plans; from the ever popular debt consolidation, (where you combine all of your accumulated debt into one big chunk) to debt settlement (where the credit card companies agree to receive a percentage of what you owe them) to many others. It’s up to you on which kind of debt reduction plan would you like to take for yourself. Of course, whatever company you choose to work with will explain your many options.
Financial experts will help you sort out your finances and help you find ways of reducing (and eventually eliminating) your debt, by carefully reviewing and assessing your current financial situation. Debt management experts will also come up with a debt reduction plan will be tailored to your unique situation. Just remember, that by setting a realistic debt payment timeframe, debt management services experts can guide you through a balanced and well thought out debt reduction plan which not only aims to have you debt eventually settled but they will also help to educate you in money management so that you never find yourself in financial straits again.
I would also like to stress that any debt management expert worth his or her salt will frankly; be upfront and brutally honest with you when it comes to your financial woes. If there not, then get up and walk out the door because they are not looking out for your best interest.
The fees that debt management companies charge vary but many offer some services at no charge and virtually all will give you some type of guarantee like: If you follow their advice they will be able to help you reduce your debt by up to 80% and that eventually you’ll be debt free.
How the Credit Rating System Operates
If you owe money, your credit rating is extremely important because it can offer a way for you to get out of debt. If your credit rating is good, you’ll find it easier to refinance your debt at a lower rate of interest. This will reduce the size of your monthly debt repayments, leaving you more money to pay of your debts in a shorter period of time.
But many people don’t fully understand how the credit rating system operates. And the number of credit myths that exist make it even harder to know what does and does not affect your credit rating. So here’s a selection of the biggest credit myths, the truth behind them and the steps that you can take to improve your credit rating.
Credit Myth 1: People Living At Your Address Can Harm Your Credit Rating
This is more of a misunderstanding than a myth. In the past, lenders routinely checked the credit reports of other people living at your address. Their findings were often taken into account when deciding whether to accept a loan application.
In many countries, that practice has now ended. However, credit reports still contain details of your financial associates (for example, people that you share a joint mortgage or bank account with).
This info is used by lenders to check out the creditworthiness of your financial partners. This may or may not be people who live at your address. And if they have a poor credit record it may harm your chances of being granted a loan despite the quality of your credit record.
If you want to avoid any potential problems, check the list of financial associates on your own credit record. Check that the information is current and correct. Dispute any inaccuracies. And make sure that your financial associates check their records and correct any mistakes before you submit your credit application.
Credit Myth 2: Previous Debts Don’t Matter
Oh yes they do. The aim of a credit report is to provide lenders with a detailed picture of your financial history over recent years. So if you’ve defaulted on various debts and had court judgements entered against your name, your credit record will be poor and most lenders will turn you away. And this applies even if your financial history has improved greatly over recent years.
As a general rule, missed loan repayments will remain on your credit report for three years. Court judgements will last for six years and the evidence of bankruptcy can last for anything up to 15 years. Of course these limits will vary from country to country, but as a general rule, the worst your financial history, the longer it will take to escape from the effects of it.
However, even if your credit record is poor, there are various steps that you can take to improve the situation. In most cases it’s possible to add a note of explanation to your credit report. This will allow you to make potential lenders aware of the circumstances surrounding your previous credit problems. For example, if you missed a couple of mortgage repayments due to illness or redundancy, many lenders will take this into account when assessing a loan application.
Apart from that, the best way to improve your credit record is to pay off any old debts and continue to service your current debts making each monthly repayment in full and on time.
Credit Myth 3: One Person Can Only Have One Credit Rating
This rather subtle credit myth is perfectly understandable. And to an extent it is true. In general, one person can only have one credit report (unless you consider the credit rating that a person’s business can have, but let’s not complicate things), but it can be interpreted in a range of ways by different lenders depending upon your circumstances at the time.
For a start every lender has their own credit score formula that they use to interpret the details in your credit report. Lender will also used different criteria for determining your eligibility for different types of loan, for example, mortgages, personal loans, store cards and credit cards. So while a couple of missed mortgage repayments may dent your credit score with most mortgage lenders, it may not have such a dramatic effect on your application for a store card.