Why Do I have to Pay More Interest Just Because I am in Debt? Step #6

When I began putting my financial life back in order part of that descision included buying a home. I had given up my house to my ex-wife in my divorce and having to rent an apartment just killed. For me owning a home is much better than renting.

Although, my debt debt was bursting at the seems at $60,000 I was still maintaining a credit score of 680. I bought my self a small condo that was actually cheaper than the rent on my apartment. This had happened before the crazy loans that came out, but I was so releaved to be able to qualify for a normal conventional loan. But with today's strict loan requirements it may not be as easy.

Step #6

If have accumulated an excessive amount of debt you can very likely be denied a loan. Or you could be paying a higher interest rate. The deciding factor is you credit score. Your credit worthiness is based on your payment history, income, potential debt, and the number of years you have been employed. The best score is 850 and the lowest score you can have is 300. There are many ways you can obtain your credit score. When I first pulled my credit score for the first time I used myfico.com. It was easy to use and they give a detailed explanation of each item on credit report. There is small fee, but it's worth it if you are a novice at credit reports.

Why Do People Fail to Ever Get Out of Debt? Step #5

When I began my path of getting out of debt I decided to get my life in order. Not only getting my financial life together, but the physical, emotional, mental part of my life. People who stay in debt fail to get their finances and life in order.

Step #5

One of the things you need to get your financial life in order is a budget. The word "budget" often puts people in panic mode. Having to cut back or pull in the reins on their spending scares people to death. They would rather stress over debt than have to curtail their expenses. Many people don't want to start a budget because the don't want to face reality. They don't want to know exactly how bad off they are financially. Also, people are often raised by undisciplined parents who did not live a financially conscious lifestyle. They don't even know how to start a budget. It's scary for them. For many it delivers the harsh reality they just don't make enough money to make ends meat. Having a budget means they have to stop their overspending and that they can't have the things that they think they just can't live without. People who stay in debt are just not willing to cut back and would prefer to remain in debt for the rest of their lives. I chose to get out of debt and therefore I did. Start planning your budget now and start living a debt free life. You can do so at personalbudgeting.com.

Birds of Feather Flock Together When it Comes to Getting in to Debt and Getting Out of Debt. Step #4

When I got into all of my debt I knew it was wrong and really I didn't like getting in debt at all. I acually wanted to stop the financial bleeding, but personal reasons with my ex-wife were a main part of the problem. Then again was I addicted to the debt or was I addicted to the things money(or debt)allowed me to buy or do.

STEP #4

People who are in debt are addicted to something, whether it be overspending, material things, or the misery being in debt brings. The inappropriate use of credit cards is usually the main reason people have major debt problems. When your checkbook balance is low and your wallet is empty you just want to move on to the credit cards. Once you move over to the credit cards you can just start overspending. Why is this? The main reason is you usually don't even know what your spending or spent until you get your credit card statement. You know that you open that envelope and say, "Wow! I spent that much?", and of course you do it again next month. Don't you?

It requires constant planning and monitoring to maintain good credit management. Look at your current credit situation. Do you know how much you put on your credit cards each month? Do you know the total amount of payments you make to all of your creditors each month? Do you have enough income to pay all of your creditors each month? Your total debt should not exceed ten percent of your income. Do you have an emergency fund for financial emergencies like job loss or sudden illness? Eight months of income is recommended to have in your emergency savings account.

If your entire credit picture is not entirely laid out in your mind, it's time to start getting things straight in your head and figure out where you are going with your finances. Living beyond your means and overspending are a sign of lack of awareness, self control, and commitment. They only lead to excessive debt. Use the debt calculator at CNNMoney.com to see exactly when you will be debt free.

Do You Have a Serious Debt Problem? Step #3 to Get Out of Debt.

In Step #2 we have discerned between Good (Credit) and Bad (Debt). Why is debt bad? Well, it isn't always. Having a mortgage loan can be good. Normally, homes are an apreciating asset. Student loans can be good debt too. The more you know the more you make yourself an appreciating asset.

Step #3

Lets see if we can discern if you have a serious debt problem. Do you often panic about your debt? People with serious debt problems often panic and try to quickly solve a problem that has been with them for years. They will usually pay off the wrong kind of debt without taking a look at their complete financial picture. Most short time fixes won't make their debt problems disappear. To see if you have a serious debt problem look out the list below. If you can relate to at least three of these, you may have a serious debt problem.

1. You are always juggling payments or holding off paying one creditor to pay another.

2. You borrower or take cash advances to pay your creddit card debt.

3. You are consistently receiving past due notices on your accounts.

4. Charging more each month than you make in debt payments and have balances on several credit cards.

5. Always running out of money before payday and use your credit cards to tide you over.

6. Charging things like groceries or gas to survive.

7. Paying only the bare minimums on your credit cards or other debts.

8. You are not able to save anything for a rainy day.

9. Trying to find ways to get more credit because you are about to be maxed out on your other cards.
 
When I was in debt $60,000 eight years ago I could agree with each one of these statements. I knew I had a problem and immediatley after my divorce started working on stopping these toxic behavours. If you can answer yes to at leastthree of these it's time for you start working on your new life...your debt free life. 

What Is Debt, How Does it Affect My Credit, and How Do I Start Working Towards Being Debt Free? Step #2 to Get Out of Debt

In Step #1 we explained you would never be debt free until you admitted you had a problem with debt and that you realize what the cause of your problem was.

Back in 2000, I was in debt $60,000. Mainly do to me and my first wife's over spending and living beyond our means. This had partially lead to our ultimate divorce. After my divorce I had set down and began a plan to get out of the hole. During Step 1 I had decided, which I already knew, was we had spent more than we made. We went out to dinner every weekend and went on trips and vacations that really we couldn't afford without putting them on a credit card. Once my divorce was final and realizing the root of the problem, I had stopped going out dinner on a regular basis and no longer went on vacations I couldn't afford. Almost immediately charging things on my credit cards had stopped and I began to release myself from my financial prison and set a course for financial freedom.

Step #2

So what is debt? Debt is the amount of money you owe, that needs to be repaid usually with interest and within a specific amount of time. It is money you spend today with the intent to pay with money you earn in the future. What is credit? Credit is the complete opposite of debt. It is the potential to borrow money to buy something like a car or even a home. When you use your credit, you create debt. When you pay of debt, you create credit. The main component of a healthy financial life is having balance between credit and debt.

To most debt is considered a bad thing while credit is considered good. But people do get confused about the two. I have known people who had every credit card they could get their hands on and couldn't wait to brag and show them off. Those same people though, at one time or another, had run their cards up to excessive amounts to end up in their own financial prison. The ultimately had a serious debt problem.

Why am I in Debt and Not Debt Free? Step # 1 to Get Out of Debt

Spending more than you make is most likely the cause. Excessive spending, keeping up with the Jones', being a spend thrift or whatever you want to call it is as addictive as alcohol or drugs. Just like a drug addiction, debt can interfere with every aspect of your life including: your job choices, interest rates you pay, your insurance rates and can damage relationships with those who are the closest to you. With the unemployment rate being the highest it has been in years Americans owe more now than ever before.

So, what do you do first?

Step #1

Assess your current financial situation. Take a look at your debt and your current spending habits. Do you have a budget that is written down and you follow every month? Do you know how much you are spending in each category (i.e utilities, food, shelter, clothing, transportation)? Just like Alcoholics Anonymous the first step is admitting you have a problem. You can't solve any of your debt problems until you understand how you got to be in debt in the first place. If you don't know how it happened to begin with history is destined to repeat itself.

Do you remember a time when you were able to live on only your salary without having to borrow money? When did your debt start to get out of hand. Did you lose your job? Did you buy that car you had to have, but couldn't afford? Did the credit card company double or triple your interest rate on your card? Did you go on a spending binge? Or maybe it was a little of each of those things. Whatever the reason was you need to start where it began before you can go forward to start your debt free life.

How Did This Economic Crisis Start? Will We Ever be Debt Free Again?

We have looked at how this current economic crisis began before and as we like to say, "All this has happened before and all this will happen again." We looked at the creation of the Federal Reserve and how it has caused economic havoc many times over.

By now most people have the knowledge that the current financial crisis began in 2007 because a large number of homeowners began to fall behind on mortgage payments that they couldn't afford. But, how did a relative small number of people not making their mortgage payments bring about a global economic meltdown?

My opinion, as well as others such as, Michael Moore's, as seen in his documentary "Capitalism: A Love Story", the answer is GREED. Way too many people were interested in how to make a quick buck than making good financial decisions. "If you choose the quick and easy path you will become an agent of evil", as Obi-wan Kenobi once warned Luke Skywalker. Mortgage lenders began to stop verifying if borrowers actually qualified to buy a home. Loan were virtually being given to anyone who applied. Wall Street bankers and hedge fund brokers juiced up lenders to give out loans so they in turn could make tons of money off them with a new round of creative investing schemes. While most borrowers were too confused or too clueless to understand the types of mortgages they were getting into, others knew exactly what they were doing and didn't care they were buying homes they couldn't afford. So there was so much good old fashioned greed to go around.

It wasn't always this way. And in a very short amount of time people quickly forgot how things once were. In the not so distance past when you wanted a mortgage you went to the bank with your last two years tax returns, your last two paystubs to verify your employment, and your last three months bank statements to verify that you had savings that would allow you to put 20% down as a down payment. The lender would than review your finances making sure you had enough income to cover your mortgage payment comfortably, including property tax and homeowners insurance, and you weren't overwhelmed with other debt. You had two choices for a mortgage: a fifteen year fixed or a thirty year fixed mortgage. You wouldn't have to worry what your payment was going to be five years down the road. There were adjustable rate mortgages, but in rare circumstances. You either had an FHA or conventional fixed rate loan. If you were approved for the mortgage both you and lender new what your payments were going to be and chances were, as long as you didn't become unemployed or something, you were going to be able to make the payments. If the lender didn't feel you were going to be able to make the payment for the next thirty years or until you sold the home you were denied the loan. It was as easy as that. This protected the bank and it protected the borrower from foreclosure.

Things began to change between bankers and borrowers in the 1980's when Fannie Mae and Freddie Mac came into the picture. Fannie Mac was created in 1938 and Freddie Mac followed many years later in 1970. Both were government sponsored enterprises, known as (GSEs), they were not full fledged government agencies, but they had the impression of being government backed. Both of the GSE's had the mandate to increase the amount of money available for mortgages. They would do this by buying mortgages from lenders so the lenders could lend out more money. Fannie and Freddie would package mortgages that they had in their portfolios, as well as they would guarantee mortgages that Wall Street could package and sell to investors. This process promoted homebuying by allowing the lenders to have more money to lend to homebuyers, which in turn allowed more people to buy homes.

As this went on it became more likely that the original lender would not hold the mortgage, but would instead sell the loan packaged all nice and neat to Fannie or Freddie, or their cousin Ginnie Mae, and Wall Street. Mortgage securities were new income products that were backed by solid mortgages. lenders were still careful to make loans only to qualifying borrowers. The problem with all this began when Wall Street and greedy lenders began cooking up a horrific scheme, almost like a giant pyramid scheme, which turned into a ticking time bomb that the Federal Reserve helped put in place.

Remember the Technology stock boom in the late 90's? Well, when the tech stock bubble burst in early 2000, than Federal Reserve chairman Alan Greenspan attempted to keep the economy from slipping into what could have been a recession of the type we are experiencing now, by slashing the Federal Funds Rate. From 2000 to 2004 the funds rate fell from 6% to 1%. Currently it is at 0%. With rates being so low, Wall Street began to introduce an investment that appeared to be safe and offered higher yields than normal bank CDs and money market accounts were offering at the time. The so called brilliant minds of the financial sector had set their sights on mortgage backed securities. Not only were they packaging loans from qualified borrowers they decided to take on mortgages from not so qualified borrowers. Loans known as subprime mortgages were made to borrowers with what I would consider to be bad credit.

But this was only the first stage of their financial coup. Wall Street started churning out what is known as Credit Default Swaps or (CDS) tied mortgages. The CDS were insurance that promised investors who invested in mortgage backed securities that they would get paid even if your mortgage went into default. Wall Street was also able to take a huge gamble on mortgages using CDS.

But wait, the worst is yet to come. With their giant pyramid scheme in place, the only thing that Wall Street needed to get around was how to increase the amount of subprime borrowers. This is when the number of unconventional mortgages, like interest only, pay option ARM's, and 1 year ARM's with low initial payments increased. These loans were insane and had grown from 2% of the mortgage loans available in 2003 to 20% in 2005. When I was a loan officer back then, I remember thinking these borrowers should not be getting loans and we were going to have a big problem one day. The applicants qualified so there was nothing I could do. All these borrowers basically had to do to qualify was have a heartbeat. No tax returns or paystubs to prove your income. Even better, if you didn't have the money for a down payment it was no problem. We would just give you a loan for the down payment.

We pushed these loans left and right and the mortgage companies didn't care about these risky loans. Why? Because it wasn't their problem if the borrower didn't make their house payment. How can this be? The loans would be sold off to investors and the investors didn't care because the guaranteed they would be paid because of the Credit Default Swaps.

Lenders couldn't do the loans fast enough. We were doing some loans from start to finish in one day. Twenty-four little hours. Borrowers were also encouraged to take out the biggest loans possible. Everyone dived in to get a piece of the pie. Driving home values through the roof.

But in late 2006, cracks began to show in the foundations. Borrowers with Adjustable Rate Mortgages (ARMs) began to see their first rate increase and increased mortgage payments. Many were shocked to receive their new house payment that was beyond what they could afford to pay. Most people had thought if this happened that they would be able to refinance, but guess what. The Federal Reserve raised the Federal Funds Rate, which was 5% by mid 2006. What do you know? The good Old Federal Reserve as usual. New loans would now be higher than what they were now. Now to pour more salt on the wound, real estate prices began to stagnate and with no down payments on the homes borrowers had no equity. So, with no equity no matter what the interest was, borrowers didn't qualify for a refinance.

When 2007 arrived, there were even more people who couldn't afford their house payments. They couldn't refinance and they could not sell their homes since property values fell. This was the nail in the coffin as the bottom began to fall out from this giant financial scheme. A catch twenty-two that we are still suffering from. The foreclosure rate started to rise. With the increase in foreclosures came the increased drop in home values. This has continued on and on and continues to happen today.

So what actually happened? Lenders were making loans to borrowers who couldn't afford to pay them back. Wall Street egged on lenders and borrowers, telling them it was alright because the Credit Default Swaps were a golden parachute.

There is even more to all this, but this is it in a nut shell. Everybody drank the Kool-Aid. Wall Street pushed the lenders, the lenders and real estate agents pushed the borrowers, and borrowers egos were stuffed to the gills living in these huge homes they couldn't afford.

Others knew as I did, we had trouble brewing. I was often called the "judger" and I couldn't say who should by a home and who shouldn't, which is true. Lenders can't be discriminating. But it didn't take a rocket scientist to know what is wrong and what is right. And this whole thing wasn't right. But it may just take a rocket scientist to get us out. Or some good old common sense, which we lacked when we got into this mess in first place.

How Do I Develop a Spend-Less Plan to be Debt Free?

After you start looking at your expenses for the last three months and have begun to make the cut backs, do it again. Here are some additional cut back tips.

1. Identify what are necessary expenses and what are luxury expenses. What are your needs and what are your wants. You do need groceries, but does everyone in the family need a cell phone or do you need the expensive cable package?

2. After reviewing your bank and credit card statements, do you see any patterns in your spending? Review you miscellanous spending. There is always something you can cut back on.

3. Prioritize your budget. List your expenses from the most to least important. Then assess what you can cut back on.

How Do I Determine What I Can Cut Back on so I Can Be Debt Free?

Begin tracking your expenses for the last three months.

1. Go back and look at your bank statements.

2.If you primarily use your debit card, rather than cash, all your expenses (food, gas, entertainment, ext)should be fairly easy to figure out.

3.Go through your credit card statements too and check the charges you made. Don't forget the interest.

4. Review how much money you made.

So how much money did you make? Do you make enough to cover all of your expenses? Did you spend more than you made? If you spent less than you made, what did you do with the extra money? Doing this should help you determine where you can start cutting back if you are spending more than you make.

Now, what do you want to do? Do you want to start working towards a debt free life style? Things don't happen over night, but you need to start setting specific goals. When determining your goals be sure to have a completion date set for each one of them. So, if you are going to reduce your spending by $10 a day and start putting that money towards your credit cards so you can pay them off, what steps are you going to take to make that happen and how soon will you start. If you are living above your means you may have to take painful step in order to make things happen. You must start to figure out how to live within your means before you can get your finances under control and start living a debt free life style.

What Can I Do to Reduce My Expenses and in Turn be Debt Free?

For most, cutting expenses is much easier than raising their income to get out of debt. Think of any expense you have and most likely there is a way to reduce it. Everything from: cable, gas, or groceries. Here is list of ideas to help you get started reducing your expenses.

Housing and Utilities

-Choose higher deductibles on your homeowners or renters insurance.

-Turn your thermostat down in the winter and up in the summer. Electric companies suggest 78 degrees in the summer and 68 degrees in the winter.

-Drop premium channels from your television and telephone service.

Transportation

-Increase the deductibles on your auto insurance policy.

-Start carpooling to work and use public transportation.

Food
-Pack a lunch to work and eliminate eating at fast food restaurants.

-Use weekly grocery add coupons and check to see what is on sale. Prepare a meal plan accordingly.

Clothing

Check out consignment and thrift stores for gently used items.

Don't buy onto the latest fashions. Stick to classic styles. Know what looks good on you and try combining outfits to expand your wardrobe.

Will My Standard of Living Prevent Me From Getting Out of Debt?

There two main reasons most people fail to get out of debt.

1. The don't have the personal commitment it takes to make it happen.

2. The don't get their excessive spending habits under control to fit a standard of living that they cannot afford.

People who stay in debt usually continue to write checks and make charges on their credit cards without any thought of how they are going to pay for it. They generally become obsessed with doing whatever it takes to maintain their perceived high standard of living with out the thought of the long term consequences of their actions. Most people would rather not think about the long term. Once you get used to your short-term standard of living, you will get caught up in a vicious circle. Your short-term debt gets bigger and bigger, and their long-term financial needs get farther and farther way.

If this sounds like you. You need to start looking at the long term.

Are Banks Full of Crap About Not Raising Credit Card Interest Rates?

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After reading this post you are probably thinking what the heck is that all about or we are full of crap. But really the banks are full of crap.

Last week Bank of America announced that it will not increase interest rates on consumer credit card accounts between now and the effective date of the CARD Act, unless a customer's account falls past due. Also, variable rate credit card accounts may experience rate changes based on changes in the prime rate. But is that exactly true?

Starting in February 2010 the Card Act will put a stop to:

- Charging consumers to pay by phone

- Sudden surges in interest rates

The bill also makes changes to:

- Applying payments made over the minimum due to balances with the highest interest rates first.

- Information in tiny print must be made clearer.

- Let consumers know how long it would take to payoff a balance if they only pay the minimum payment.

Credit card companies have been raising fees and interest rates. From November 2008 to February 2009, rates increased from an average of 12.02% to 13.08%. Because of this people have not been able to make their payments on their credit cards and are walking away from the debt.

As we expected, with the new law going into effect, banks would start raising interest rates even to account holders who pay their accounts on time.

Our post was based on a copy of a letter our $190,323.79 in debt couple, Lois and Clark received from Wells Fargo. They also have received a similar letter from Bank of America, but they have been late on their Bank of America cards. So it is understandable that the rates would be going up on those cards. But the cards that they pay on time are going up as well. Even though the letter they received says the changes are not a reflection of how you have managed your account or your credit score.

So here it is folks. Watch for more letters like this coming your way as banks and credit card companies stick to you as much as they can before the CARD Act goes into effect. Until February 2010, all you can do is accept it and pay the higher rate or close your account.

How Do I Get Credit Card Companies and Debt Collectors to Stop Harassing Me? Part 2

"How do I get credit card companies and debt collectors to stop harassing me?", is one of the most searched topics here at The Debt Free Advocate. The excessive calls are down rate embarrassing at work and at home. In Part 1 we covered the federal Fair Debt Collection Practices Act. Here's a quick recap of what we learned:

-No matter how friendly and understanding the person on the phone sounds, they are doing their job and they just want to get money from you.

-If you end up working out a settlement with the collection agency, get everything in writing before paying.

-Do not share your other phone numbers or other ways the collection agency can reach you. The call will just increase and you can be embarrassed even more if someone else gets the call.

-Treat the call as business call. Do not get emotional or caught up in the situation.

-Tell collection agents not to call you if you do not wish to receive these calls.

-If you take calls be sure to keep a journal of all conversations.

-Negotiate lower payments and interest rates first before discussing a settlement.

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) deals with credit reports and credit reporting agencies, such as Experian, Transunion, and Equifax. Consumers are entitled to receive a free copy of their credit report every year.

A credit report can also be requested within sixty days of the receipt of the denial of credit or unemployment. The FCRA also provides that if you find an error or incorrect information on your credit report, you can inform the reporting agency, and the agency must re investigate the matter at no charge to you. You must receive a response from the agency within thirty days. The information must be corrected or deleted if it is incorrect. (FCRA, Sec. 1681(i).)

Credit reporting agencies are required to include a record of all inquiries about received in the last six months on our credit report. They must also include a listing of all the people who have purchased your report within the last two years for employment purposes and within the last year for other reasons. (FCRA, Sec. 1681(g).)

Credit reporting agencies are not required to disclose your credit scores or credit risk rating. This is an internal evaluation the reporting agency makes about your creditworthiness. It is like a grade for your credit history, and is furnished to employers and creditors. many credit reporting agencies do release this information, but they are not required to do so by law. (FCRA, Sec. 1681(g).)

Check out the complete FCRA at http://ftc.gov/

How Do I Get Credit Card Companies and Debt Collectors to Stop Harassing Me? Part 1

This is one of the most asked questions at The Debt Free Advocate. There are things you can do if creditors and collectors are harassing you at work or at home.

Remember You Have Rights.

You have many rights provided by the federal government with regard to your debts and credit report. Different states provide for different rights as well. Check your state's laws at findlaw.com. Chapter 7 lists organizations that can help you understand and exercise your rights.

Two very important federal laws that you need to know about to protect yourself and exercise your rights--the federal Fair Debt Collection Practices Act and the federal Fair Credit Reporting Act.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act(FDCPA) lays out specifics of how a collection agency may behave towards consumers. The FDCPA applies not only to actual collection agencies, but to people acting as debt collectors as well.

Collectors Contacting You

Debt collectors may not contact you at unusual or inconvenient hours--which include before 8 a.m. and after 9 p.m.--or at work if you are not permitted to accept calls from creditors there. They cannot call you repeatedly or call you without identifying who they are. They cannot call you collect or cause you to be responsible for any of the costs associated with the phone calls. They cannot identify themselves as a law enforcement agency or as an attorney. They cannot harass, oppress, or abuse you. They cannot use or threaten to use violence or harm towards you or anyone else and they cannot threaten to damage your reputation. They cannot threaten to garnish your wages or sue you unless they actually intend to do so. They cannot threaten to have arrested or put you in jail. They need to speak with your attorney if you have one and do not need to speak to you directly unless you give them permission. (FDCPA,Secs. 1692(c) and 9d).)

Obscene language is not permitted. They cannot publish your name on a deadbeat list. If a debt collector contacts you, you can instruct them not to call you any more. Debt collectors have to abide by this request and can only contact you by mail of the status of your account, such as when it is being forwarded to an attorney for a lawsuit. (FDCPA, Secs. 1692(c) through (f).)

Whenever you talk to a debt collector be sure to their name, the name of the agency they work for, address, and phone number. Document all contact, including the dates, times, and the basis of the conversations. If you think you are being treated in a way that violates the law or if your requests for no contact are being ignored, write to the agency and complain. Keep a copy of the letter and send it certified. Contact your state attorney general about the problem.

Collectors are not allowed to lie about the money you owe nor can they threaten to take action against you that they are not intending to take. Unfair or outrageous attempts to collect the money are not permitted. They cannot add interest or fees that are not part of the original debt, ask for a postdated check by threatening you with criminal action, or accepting a check that is more than five days postdated unless they notify you three to ten days before cashing it. They may not deposit a postdated check before the date on it. (FDCPA, Sec. 1692(f).)

Collectors Corresponding with You

Correspondence you receive from a debt collector cannot resemble court documents or correspondence from a government agency. It cannot appear as if it has come from an attorney. The correspondence must come in a plain envelope and it cannot indicate that it is from a collection agency or that it is in reference to collection of debt. (FDCPA, Sec. 1692(e).)

Collectors Contacting Others

Debt collectors have to give their names and who they work for when contacting other people and state that they are calling to confirm your address or employment information. They cannot discuss that they are trying to collect on a debt and they cannot call more than once unless they received incorrect or incomplete information the first time. (FDCPA, Sec. 1692(b).)

Remedies for Improper Attempts to Settle a Debt

You can take action against any creditor that violates any provisions of the law. Be sure you keep detailed records and keep all evidence of the violation. If possible have a witness verify the violation. Someone who may have heard or saw the improper act. However, remember that in some states you can record phone conversations without permission, but in many states you have to have permission from the person you are recording.

Send a letter detailing the violation to the original creditor and your state's attorney general. Also, send a letter to the Federal Trade Commission at your regional office listed online at ftc.gov. You may be able to get the entire debt canceled because of this. If you are being harassed you can possibly have a small claims case for damages for your pain and suffering as well as punitive damages of up to $1,000 to punish the collection agency for its actions. (FDCPA, SEc 1692(k).)

How to Deal with Collection Agencies

Collection agencies are in business to earn money by collection of debts. Your debt ends up in collection by one of two ways. 1) the creditor transfers your debt to the collection agency and agrees to pay the agency a percentage of the amount they collect, or 2) the creditor will sell the right to collect on your debt to the agency and the agency gets to keep whatever it collects from you. Collection agents that work for the agency usually do so for a commission. They get paid a percentage of what they collect from you, so they are highly motivated to get you to pay. Often collect on agencies have a bad reputation and people see them as sharks that bother people at home and work to collect money any way they can. As we have discussed, the laws are quite clear about what collection agencies can and cannot do. The individuals who work for the collection agencies are not out to get you--they are trying to do their jobs and earn a living. It can be rough job, but somebody has to it. You can disagree with their tactics and with their line of work of course.

When you finally do talk to a collection agency, you need to remember that you are dealing with a professional debt collector. Be sure you do not get talked into paying more than you are able to. Be sure to figure out how much you can pay monthly before you talk to the agency. The agent may seem to act friendly and seem as if they are on your side and willing to help you. Never believe this. Collections especially these days is big money and you are the only one who can safeguard your financial situation. The agents are well trained in talking people into paying as much as possible. The more they collect, the more they get paid. They are persistent and persuasive. If you are not able to pay anything at the time or the deal they are offering is not sufficient always remember you can tell them to stop calling.

How to Deal with Emotions and Debt.

Most likely if you are having financial problems or you are having a credit meltdown you are experiencing a lot of stress. You are probably worrying on how you will get caught up or how you are able to clean up your credit history. Stress can even be brought on by getting turned down for loans, credit cards, or even mortgages. First off don't panic. It is hard to act rationally when you are in panic mode. Take a deep breath and concentrate on the facts of your situation and not your natural emotional reaction to it. Tell yourself that you will get through this and you will resolve this situation. There are resolutions to your financial problems. When you take action you will begin to feel better about your situation.

The most common reaction to credit and debt problems is avoidance. People tend to avoid understanding or don't want to even think about their situation. The reasoning behind this is if you don't think about it it's not that bad, but if you ignore your problems they will not go away. Looking away will just make things worse because even though you are ignoring it your debt still continues to mount.You need to start right now. Get a handle on your credit and debt problems today.

The sooner you start the process of facing your money problems, the sooner they will be resolved. Most people will avoid dealing with their situation out of pure embarrassment. They feel embarrassed to contact their creditor, to make payment arrangements, or to ask a family member for financial assistance. Remember that creditors are dealing with this on a regular basis these days. You are not alone. If you need to ask family for assistance, remember that is what family is for.

You need to put your feelings aside and deal with your financial problem as if you were handling someone else's problem for them. Again look at the facts and focus on what you can do to correct the situation. Do not get caught up in your emotions. Take a problem solving approach.

Stress can make you feel hopeless. If you are feeling that the stress of your financial situation is too much for you to handle on your own, talk to a friend, clergy member, or a mental health professional.

I Need to Raise My Credit Score...and Fast!

If you need to improve your credit score quickly, there is no time like the present to get started. Here are some great strategies you can start right away to give your FICO the boost it needs.

Create Some Balance: While paying down installment debt (car, student, mortgage, etc.) will definitely boost your credit score, paying down or paying off revolving debt, such as credit cards, can cause a quick jump in your credit score. The trick is to get and keep your balances below your credit limit on each card. For faster results, attack those cards with balances closer to their respective credit limits first, as opposed to those cards with simply the highest debt. Remember, if you pay off any credit cards completely, do not close your accounts. Cancelling those cards may inadvertently undo all of your hard work.

Know Your Limits: Make sure your credit issuers are reporting the correct limits on all of your accounts to the three major credit bureaus. Without an available limit, your card will appear to be maxed out at its highest reported balance each month. This could cost you up to 80 points in certain circumstances. Some creditors such as American Express and certain cards issued by Capital One, actually have a policy of not reporting available credit. However, most companies will report your credit limits if you ask them in writing.

Take Some Credit: If you have a credit card account in very good standing, make sure that all three credit bureaus know about it. Just like your credit limits, some creditors don't report your information to all three credit companies - this is why credit scores vary between bureaus. If this is the case, give them a call to find out why. Correcting this oversight could provide a significant boost to your score. Also, if you are in good standing, ask your creditor for a lower rate or a higher credit limit. This will increase the gap in the debt you owe versus the credit you have available. Sometimes hinting about closing an account can suddenly bring out the generous spirit of certain card issuers. Give it a try. The worst they can say is no.

Protect your interests: Your credit is calculated based solely on the information available to your creditors. If you have a HELOC, make sure it is listed as a mortgage or an installment account on your credit reports and not as revolving debt. If you had a bankruptcy, be sure items associated with bankruptcy are being reported correctly, that is with a zero balance. This action should increase your score by 50-100 points. Because simple mistakes like these can wreak havoc on your credit score, it's important to monitor your credit every four to six months.

Even the score: If you find information on your credit report that you believe is inaccurate or incomplete, then you have the right to dispute it free of charge. For the fastest results, visit the appropriate credit bureaus Website and file a complaint on line. If supporting documents are necessary, you have to file your dispute by mail.

For filing disputes use our sample dispute letter. Don't delay. Get that credit score cleaned up pronto.

Got Debt? Get Smart About Debt. Get Debt Wise.

With credit card defaults on the rise more and more consumers need every tool they can get there hands to help pay off their debt. Equifax, one of the major credit bureaus, released Debt Wise a couple of months ago. I hadn't heard of it until this weekend, when I happened to see this commercial.

Using your social security number Debt Wise compiles all of your debts on to one list. Then after you enter the interest rates you are paying on all your debts, Debt Wise calculates the amounts you should pay and which debts to pay first. This is called the "fast pay plan". These calculations will save you months of payments, as well as tons of interest.

Reviews I have read about the product have said that consumers will pay off their debt faster and will save thousands of dollars in interest, but they could not afford the payments Debt Wise suggests to pay.

I also gather that Debt Wise offers the same advice that we continuously offer here. To payoff the highest interest rate debt you have first. And doing things like using you spare change to pay extra towards that debt and pay it off sooner. After paying off the first debt take the payment you were making on that and add it to the next debt you were paying and so on.

Debt Wise runs $14.95 a month. Is it worth though? I guess it would be if it ends up saving you money. It doesn't hurt to try it and you can always cancel it. You could also get your plan together and then cancel and if you aren't to lazy you can calculate the payments and continue the plan yourself.

If you feel you need the structure of having everything done for you (other than making the payments yourself), then go for it. Debt Wise does have some other benefits such as: access to your FICO score, and four copies of your credit report, automatic tracking of your payment progress, and $25,000 in identity theft insurance.

The program probably wouldn't serve people with no debt other than their mortgage, but if you have credit card debt, student loans, or auto loans it might be good for you. It looks like it's a good way to start you on a debt free path and a great way to keep on eye on credit report and you can track how your credit score is improving.

If you have a lot of debt $14.95 isn't going to kill you. Give it try. If any one has used or is using Debt Wise let us know how it is working for you.

Bank of America Puts a Stop to Credit Card Interest Rate Hikes

With the passing of the Card Act, the smackdown on credit card companies, I thought for sure banks would start socking it to consumers before the bill went into full effect in February 2010. But with one bank that's not the case.

Bank of America announced that it will not increase interest rates on consumer credit card accounts between now and the effective date of the CARD Act, unless a customer's account falls past due. Also, variable rate credit card accounts may experience rate changes based on changes in the prime rate.

Christopher Dodd, chairman of the Senate Banking Committee, released a letter, dated October 5, and called on other companies to follow Bank of America's lead.

"In light of the concerns expressed to us by our customers, Bank of America will not implement any change in terms (risk or economic based) re-pricing of consumer credit card accounts between now and the effective date of CARD Act," the letter said.

The CARD Act was intended to limit credit cards issuers from raising fees and interest beginning in February 2010. Although Bank of America has announced they were nor raising rates many companies have been increasing charges and rates recently ahead of the law going into effect.

Last month U.S. Representatives Carolyn Maloney and barney Frank introduced new legislation to speed up the implementation of the new credit card rules to December.

Many credit card issuers will be affected by the new law including: Citigroup, Bank of America, JP Morgan Chase & Co, American Express Co, Capital One Financial Corp, and Discover Financial Services.

Here is what Bank of America said the reasons for interest rates hikes happen to begin with back in April 2009:

With credit card horror stories every where and legislation trying to get passed against interest rate hikes and excessive fees, Bank of America gives us the reason why banks do all that.

With the overhaul of credit card issuers announcing rate changes, the credit card industry has been the main topics discussed around office water coolers as well as in public sector. The changes in the credit card industry were recently discussed during Bank of America's Global Town Hall on April 20th. The following is a discussion with Bank of America Global Card Services President Ric Struthers on Bank of America's credit card pricing and what the company is doing to help struggling consumers.

Today, you and several other credit card execs along with the American Bankers Association are going to a meeting at the White House to discuss the current state of the credit card industry. What do you expect?

Struthers: I'm looking forward to a meaningful dialogue about the current economic environment, credit card lending and the impact that the credit card regulations recently issued by the Federal Reserve will have on the industry and consumers.

There have been a number of headlines about credit card issuers increasing interest rates on credit cards. What is Bank of America doing?

Struthers: In the beginning of April, we notified a small portion of our customers that we are increasing rates on their accounts. Some accounts were repriced because their interest rate is currently 10% or lower, a rate significantly less that our cost to do business in the current market. Another group of accounts were repriced due to our business-as-usual process of adjusting account pricing based on periodic review of account risk. It's important to not that these two changes affected fewer than 10% of our total portfolio. Incidentally, there's a third business-as-usual strategy that we use to reprice accounts that we refer to as "trigger", which happens when an account falls past due or goes over limit more then two times in 12 months. We understand that in the current economic environment increased in credit card rates can be an emotional issue for many of our customers, including our family and friends. As Bank of America associates, it's important to keep in mind that in a given year, the vast majority of our customers experience no rate increase. For example, in 2008 more than 90% of our customers had the same or a lower rate at the end of the year than they did at the beginning of the year. In fact, during the first quarter alone, we brought down prices on 400,000 customer accounts.

It's also important to be aware that when we do need to make a pricing change, we make every effort to be as transparent and as clear as possible in our communications, making sure our customers are fully aware of the increase and the choices they have- one of which is choosing to reject the rate increase. If they choose to opt out of the increase, we have several processes that make it as convenient as possible for them to do so, including opting out by phone.

Why did you increase the pricing on accounts with rates less than 10%?

Struthers: It was a difficult decision for us. Our customers are our top priority, and we understand that many of them are under financial strain in this difficult economy. However, the credit card industry is also operating under difficult conditions that are resulting in significant increases in our costs of doing business. And, unfortunately, low credit card interest rates that were set in a better economic environment, such as rates lower than 10%, are just not sufficient to cover these rising costs. Therefore, on this small group of accounts, we increased the rate to 13-14% on average.

At the end of the day, it is our responsibility to do all we can to operate profitably so that we can help ensure the strength and stability of Bank of America, continue to lend in support of the economy, and provide the level of value and service that our customers need and expect.

Why are your costs rising?

Struthers: The credit card industry is facing a number of challenges that are leading to increased operating costs.

As you might expect, as the economy has worsened, losses have risen to historically high levels as customers have been unable to make payments on their loans. In Global Card Services, we saw $5.3 billion in losses during the first quarter of this year. That is on top of losses of $4.5 billion in the fourth quarter of 2008. Banks also are required to set aside reserves to guard against future losses. As you can imagine, that's continuing to grow into a pretty big number.

At the same time, we are preparing for significant changed in the way we do business because of the new federal regulations that will become effective in July 2010.

What are you doing to help customers in this environment?

Struthers: We are doing all we can to help as many customers as we can. In the first quarter, we modified more than 375,000 accounts across all our businesses. We expect to modify 1.5 million to 2 million accounts in 2009, compared to fewer than 1 million in 2008. We have many programs that can help customers even before they fall behind.

Unfortunately, there are some circumstances where we cannot modify an account. We make every effort to be as flexible as we can; however credit card workout programs are closely regulated by the Office of the Comptroller of the Currency, with strict rules and guidelines around how much we can modify accounts. We are constantly working with our regulators to improve and create new programs to better meet our customers' needs. In fact, we are working closely with the National Foundation for Credit Counseling in support of increased flexibility in workout programs across the industry. In addition, we provide financial support on an actual basis of more than $30 million to nonprofit credit counseling agencies that help people work their way out of financial distress.

The commitment to help out customers is consistent in our businesses around the globe. For instance, in the U.K. we recently partnered with the government and our industry to introduce a 60-day "breathing space" principle for customers who are working with a not-for-profit money advice organization. And in Canada, we regularly work with the nonprofit Canada Credit Counseling Services agencies across the country to help consumers who are experiencing financial difficulties.

Can you share your thoughts on the future of credit card business?

Struthers: Over the next few years the credit card business will undergo considerable change. The cumulative effect of regulatory by the Federal Reserve, pending legislation in both houses of Congress, shifting consumer behaviors and a deteriorating economy will alter the way banks think about consumer credit. While we are still working out all the details of how our operations will be transformed, we have some initial thoughts about what the new credit card environment will look like:

- As we are beginning to see today, banks are spending much more time assessing the risk of people they lend to and, in turn, consumers, are more thoughtful about their spending and borrowing habits.

-Credit card terms and conditions, including the costs of using credit cards, will be communicated in ways intended to make them clearer and easier to understand.

- Restrictions on our ability to change interest rates will likely result in a normalisation of credit card rates, we'll see fewer customers at very low or very high interest rates and a greater concentration of customers somewhere in the middle. In general, this likely will mean consumers will have a higher rate than they do today.

What won't change is the value of the credit card product to consumers around the world. And, at Bank of America, we are- and we plan to lead the way in- ensuring the delivery of exceptional products and services. No other financial product is a safer and more flexible payment tool, enabling customers to make a purchase today and pay it back over time as they choose.

Would a Second Bill of Rights Prevented Us From Having the Economic Crisis We Have Today?

I saw Michale Moore's new documentary Capitalism: A Love Story over the weekend and found it to be not only thought provoking, but educational.

On topic I found not only intriguing, but also had now idea of such a proposal ever existed. The proposal of a Second Bill of Rights.

In Mr. Moore's movie it is revealed that during his State of the Union address on January 11, 1944,President Franklin D. Roosevelt suggested a Second Bill of Rights. He stated that the "political rights" guaranteed by the Constitution and the Bill of Rights had "proved inadequate to assure us equality in the pursuit of happiness." Roosevelt's proposed second bill of rights would have guaranteed:

A job with a living wage

Freedom from unfair competition and monopolies

A home

Medical Care

Education

Recreation

Here is a portion of Roosevelt's message to congress on the State of Union address:

It is our duty now to begin to lay the plans and determine the strategy for the winning of a lasting peace and the establishment of an American standard of living higher than ever before known. We cannot be content, not matter how high that general standard of living may be, if some fraction of our people--whether it be one-third or one-fifth or one-tenth--is ill-fed, ill clothed, ill-housed and insecure.

This Republic had it's beginning, and grew to its present strength, under the protection of certain inalienable political rights--among them the right of free speech,free press, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty.

As our nation has grown in size and stature, however--as our industrial economy expanded--these political rights proved inadequate to assure us equality in the pursuit of happiness.

We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. "Necessitous men are not free men." People who are hungry and out of a job are the stuff of which dictatorships are made.

In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all--regardless of station, race, or creed.

Among these are:

The right to a useful remunerative job in the industries or shops or farms or mines of the nation;

The right to earn enough to provide adequate food and clothing and recreation;

The right to every farmer to raise and sell his products at a return which will give him and his family a decent living;

The right to every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

The right of every family to a decent home;

The right to adequate medical care and the opportunity to achieve and enjoy good health;

The right adequate protection from the economic fears of old age, sickness, accident, and unemployment;

The right to a good education;

All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well being.

America's own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for our citizens.


It's interesting to think "what if". What would our world be like now had this Second Bill of Rights become a reality? Do think we should propose another Bill of Rights? What would it do to the economy if we enforced these rights? Let's hear from you.

Can't Get the Interest Rate on Your Credit Cards Reduced? Start a Debtors Revolt.

Stories of people getting their interest rates jacked up by credit card companies are literally going viral. Tales of credit card holders, some with good credit and those who have fallen behind, are telling their stories any way they can.

Lois and Clark, our couple with $190,323.79 of debt, have begun calling their credit card companies to see if they can get their rates reduced. So far they have had no luck. The first call resulted in a big, "We don't see the Hardship", from their creditor. Another call resulted in the creditor asking, "Have you contacted your other creditors yet? See if they can help you and then give us a call back." It just seems like creditors are passing the buck and not offering any help at all.

But Ann Mich, who says Bank of America jacked up her interest rate to a whopping 30% APR, wasn't taking her interest hike lying down. After posting a video about her experience on YouTube, Bank of America dropped her rate from 30% to 12.99%.

In the video, titled "Debtors Revolt Now!," Minch explains that she had never been late on her cards or over her limit and the bank raised her rate anyway. Ann was a Bank of America client for fourteen years, but the bank wasn't willing to negotiate any deals.

Minch is rightly upset and her video shows she has no love for Bank of America. She calls the bank evil thieving bastards, she adds "I could get a better rate from a loan shark." She continues saying "You have reaped ungodly profits in your behemoth casino scams, then lost, only to turn around and usurp the wealth of this great nation by the outright rape and pillage of middle class Americans whose sweat and toil built it.

She was willing to let her credit score go in order to fight for what is right and has asked others to join her in her revolt.


I have always believed if you charge it, you pay it, but I have been developing sympathy for those experiencing financial hardship. My Change in opinion has come from the bailouts that corporate America has been receiving and Americans receiving none. Is it fair that companies get saved from bankruptcy, but the American people do not? That the banks who received mercy do not give that same mercy back to their clients.

Minch did do a follow up video explaining her experience with Bank of America and how they came to an agreement and lowered her interest rate.


But Minch isn't done yet. She is launching a Web site called DebtorsRevoltNow.com, and her next project is tax revolt.

I think Ann should continue her revolt against credit card debt rather than against taxes, but maybe we'll just continue what Ann has started. Because being in debt costs too much and with interest rates at 30% no one will ever be debt free.

How Come I Don't Have a $ 53 Million Pension Like Ken Lewis?

Unlike Bank of America's shareholders, Ken Lewis is getting out of the economic downturn and laughing all the way to the bank, no pun intended. Ken Lewis doesn't have a golden parachute, but he will be making a safe landing.

Yesterday Ken Lewis announced his plans to retire at the end of this year. Based on the company's latest proxy statement, he will have $53 million in pension benefits waiting for him when he leaves.

With that he will receive approximately $3.5 million a year in pension payouts for the rest of his life--at a time when people bought the stock when he took the reins in 2001 are underwater on their investments.

After twenty years of service in banking my pension at this point and time amounts to a whopping $13 a month. A far cry for Lewis' $53 million.

I have always been all for capitalism, but lately I feel like things are getting way out of whack. How does one bank employee end up with a measly $156 a year and another get $3.5 million? When one is the President of the company and one of the financial elite and the other a subordinate. But how does the president of the company get a big payday when the company still owes TARP money and the company stock is less than half it's year ago price and remains below its level when Lewis took over in April 2001?

In Lewis' announcement letter to his fellow associates he addressed that some would suggest that he was leaving under pressure or because of questions regarding the Merrill deal. He said simply that it was his decision, and his alone.

All this reminds me of when Alan Greenspan retired from the Federal Reserve just before the economic crisis began. When Greenspan was later asked what happen to the economy he responded with a playing dumb, "I don't know." Of course he knew. I knew. Anyone in banking should have known. Greenspan just simply got out when the getting was good.

Is Lewis doing the same thing? Lewis' says he is doing this on his own, but is he too getting out when the getting is good? In his announcement letter he also said, "The next two quarters will be difficult".

What does difficult mean? Bank of America stock was down .71 cents today. Is it heading all the way down to it's low of $2.53.

I have a feeling that just like Countrywide's former leader Angelo Mozilo, Ken Lewis will be doing the same disappearing act after he leaves.

Even with companies getting rid of golden parachutes are big pension plans the way to go? But is it fair for company executives to get this kind of payoff? Sorry, I mean payout, when a company is still wounded. Let us hear what you think.