1st off, how do you get poor credit? It can be something from omitted payments to filing for insolvency. Noticeably a little methods (like insolvency) will bump your credit down more than other issuers. To add, various methods inhabit on your credit history longer than others. Let’s say, a bankruptcy might be on your history for a minimum of seven years.

Ok, so how are you going to get rid of bad credit? Simply put, you show the credit bureaus that you are sensible with capital. Start by taking out an extremely small private advance and repaying it back according to your terms within the advance. Something as simple as opening a fresh checking and financial savings account also goes a long way in the direction of rebuilding your credit score.

There isn’t a easy solution to erase bad credit, and anyone that tells you differently might be just attempting to sell you snake oil. Persistence and first-class money administration is the only real secret to get yourself back on financial track.

You can almost immediately start to collect offers from credit card organizations. Be careful! Most of the lenders constructing these offers demand you to pay for expenses and fees. They without a doubt won’t aid your credit a great deal nevertheless.

If you ever find yourself wanting to erase bad credit, do not forget- it really is possible at any time you take your time, pay expenses on time, and exercise good money administration.

There are a variety of selections that will either get rid of your debt entirely or modify the conditions of your payments to make it achievable that you can pay back your balances. Both has its individual distinctive reward and drawbacks. This informative article focuses on possibly a very extreme tactic, credit card bankruptcy.

Inside a bankruptcy, particularly a chapter 7 insolvency, all your unsecured credit card debt is deleted, permitting you to have a fresh start. But you’ll pay a price. A credit card bankruptcy will be on your financial record for a minimum of seven years. Therefore every time you wish to borrow money throughout that time, rest assured you’ll be paying higher interest charges. Furthermore, employers, landlords, and insurance companies to name a couple of, have a glance at your credit history to establish conclusions upon.

Contrary to reports, filing bankruptcy has not become difficult since laws and regulations have altered. You may be required to pass a means test. This analysis is solely a means for your court to determine if you are eligible to file for bankruptcy. The test is usually a comparison of your debts versus your revenue and investments.

When you file for credit card bankruptcy, you will be in a protected position, meaning your lenders can’t phone and harass you, and through that point they can’t bring any sort of suit against you in court. This encompasses your mortgage agency. Nevertheless, mortgage companies can head to court and possess this deferment lifted.

Because of the destruction to the credit, and also the social disgrace emotionally involved to filing bankruptcy, this will not be your best option at any time you can help it. But at any time you are trapped with no way out, credit card bankruptcy can be described as viable selection.

Inside a few conditions when you can’t pay credit cards, insolvency is likely really the only selection. Your credit score will definitely take a seven year hit; you will be paying higher rates of interest for loans and credit cards, and sadly may find it challenging to locate employment or apartment. More and more people who it would appear have no interest in your money are rapidly taking a look at your credit history.

Credit card bankruptcy permits you to wipe clean your fiscal slate and acquire a clean beginning. Nonetheless, be sure that you work out what happened in the past, and the way you got into the economic state of affairs you were in. You will want to remedy your feelings about money and funds and avoid diminishing into the same trap once more.

Debt resolution is another approach to dig yourself out of the “can’t pay credit cards trap”.
Debt clearing is the process of negotiating along with your lenders to pay back just a portion of the full amount balance due. Often, the creditor will forgive fees and overdue charges as well.

There are debt settlement organizations popping up all around the media offering their services. Problem is, they charge outrageous fees, frequently 15 percent of the full debt balance owed. Fortunately you possibly can negotiate with credit card agencies yourself, and conserve the 1000s of dollars it could amount to to possess a company take action for you.

Do it yourself credit card debt resolution is not the difficult procedure that a debt settlement businesses would make you suppose it is. Yes, you can find good procedures to pursue, but you can find several connect the dots courses that can let you know what to say to whom, and at what time.

By and large, credit card debt resolution could possibly will have you out of debt quite quickly, and save you thousands while in the progression. No more “can’t pay credit cards“!

Credit Card Debt Strategies
By John Phillips

Consumer credit debt is at an all time high. The want it now pay for it later mentality has caught up with many families. As a result, more and more people are trying to come up with a way to pay back monstrously high credit card balances.

There are 5 common strategies that are used by people to payoff, reduce or eliminate their debt. They are: debt roll up, debt consolidation, debt counseling, debt settlement, and bankruptcy. let’s take a look at each and their pros and cons.

Debt Roll up

This is a great strategy if you can stick to it. The premise is simple. You put together a list of all your debts. Credit cards, auto loans, and mortgage. Starting with the credit card with the smallest balance, you pay the minimum – but with an added twist. you add what is termed an accelerator amount. This amount is extra money you can afford to put towards your debt every month without fail. It is usually recommended that you put down at least 10% of your gross income. So, you pay the minimum plus the accelerator until that card is paid off. Then add that total payment onto the next lowest card balance until it’s paid off, and so on. People that can afford to do this and stick to it typically find that they can pay off all their debt plus their mortgage in about ten years.

Debt Consolidation

This strategy involves taking out a loan with a smaller interest rate to pay off all your credit cards. Usually this loan is in the form of a home equity loan. Good things? Lower interest rate, usually tax deductible. Bad thing? Suddenly you have empty credit cards again. Many people find the temptation just too great, and before they know it, they have a ton of new credit card debt on top of their home equity loan.

Debt Counseling

In this scenario, you hire a third party to collect money from you to pay to your creditors. These counselors can arrange to have your creditors lower your interest rates and get penalty fees removed. Many people that start one of these programs don’t finish. They find the payments too inflexible, and if say a medical problem crops up, they are in financial trouble again. Also, these services are actually funded by the credit card companies.

Debt Settlement

In this strategy, you simply stop paying your payments. Not to avoid paying, but to save that money to pay off in a lump sum. See, once you start getting to 90 days or more late, the credit card companies will offer to settle with you for a reduced balance. There are services that will handle all this for you, but they often charge exorbitant fees to do so. You can do it yourself, but be prepared for a barrage of annoying collection tactics like non-stop phone calls and letters. Your credit score will take a hit, but you can repair it a lot faster than if you declare…

Bankruptcy

The last resort. Depending on your situation, you may be able to wipe the slate clean. Otherwise, you will still end up paying everything back but will have protection of your assets – such as your house. Your credit score will take a huge hit, and a bankruptcy is on the public record for 10 years. You will find it very difficult if not impossible to borrow any money for things like cars and houses, and if you can find a loan, expect to pay very high interest rates.

Which strategy is right for you? That will vary depending on your circumstances and your resources.

John G Phillips owns and operates http://www.ccdebtinfo.com
Consumer Debt Solutions

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Perhaps you’ve seen ads for “total debt elimination” and wondered what it is. Well, never forget the old saw: “If it sounds too good to be true, it probably is.” That’s certainly the case here – the kind of debt elimination where slick sales copy or a fast-talking salesman contends you don’t really owe your credit card debts is quite simply a scam designed to part unwary, gullible consumers from their hard-earned cash.

Credit card debt is paralyzing millions of Americans today and sadly, thousands fall prey annually to scammers promising they possess a “secret legal loophole” that forces creditors to forgive their debts without repayment. The so-called secret is special wording used in letters that consumers send to their credit card banks disputing their bills. Of course, the price of these “secret words” is often quite steep, with fees up to $5,000 or more.

Before you trust anyone but a bankruptcy lawyer to help you erase your debts, please do a little research. You will find this “no money lent” method not only doesn’t work, it backfires badly. Creditors have all seen these letters before and react swiftly and harshly to this ridiculous tactic. Think about it for a moment – the economy would collapse if this “secret” were legitimate!

So instead of using what little money you had to pay off your debts, you’ve thrown away hundreds or thousands of dollars to learn a bogus “secret,” and now all of your creditors are suing you. You’ve only made a very bad situation worse, requiring legal representation for repeated court appearances with your various creditors’ attorneys. This translates into potential wage garnishment, repossession of vehicles, foreclosure, i.e., a laundry list of financial disasters for the desperate debtor. Great results, right? Then why do so many people fall prey to this scam?

Probably one of the main reasons is a popular method used to promote it – MLM, or multi-level marketing. Often a friend, neighbor or relative will approach you with a sensational-sounding “amazing discovery of a foolproof method of totally eliminating their debts” and want to share it with you before the price goes up/the Feds crack down/etc., etc. The only amazing aspect of this is how many normally intelligent people fall for the outrageous hype.

Here’s the plain truth. Legitimate debt elimination involves payment in full (on your own or via credit counseling and debt consolidation programs), bankruptcy (increasingly difficult since new bankruptcy legislation was passed in October 2005), or haggling with your creditors to reduce the balances due by 50% or more (debt settlement). Which option is best for you depends on your financial situation. In other words, true debt elimination IS possible. You just have to use the right approach. Don’t be fooled by the scams and be sure to thoroughly research any company you do business with before signing a contract or paying any fees.

Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former senior executive with one of the nation’s largest debt settlement firms, he is the author of the Debt Elimination Success Seminar™, a five-hour audio-CD course that teaches consumers how to choose between debt program options based on their financial situation. The course focuses on comprehensive instruction in do-it-yourself debt negotiation & settlement designed to save $1,000s. Personal coaching and follow-up support is included. Achieves the same results as professional firms for a tiny fraction of the cost. Visit http://www.zipdebt.com/debt-settlement-coaching.php for more information.

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Debt Elimination Scams — A Growing Problem for Consumers
By Charles Phelan

Consumers seeking debt assistance are faced with a bewildering assortment of debt companies, services, programs, books, ebooks, and websites. How to tell the scams from the legitimate options? The purpose of this article is to help consumers easily spot and steer clear of one particular scam that is growing through network or multi-level marketing schemes. It goes under different names, such as debt elimination, debt termination, or debt reduction. Such names can certainly apply to legitimate programs as well, and the scammers purposely name their bogus programs with the intention of deceiving consumers and stealing them away from legitimate companies. For the purpose of this article, I’ll refer to it as the debt elimination scam, but be aware that it may be called something different.

So how can you tell this scam from legitimate debt elimination techniques? It’s pretty easy, actually. The scam is based on the bogus “no money lent” argument, where the claim is made that credit card banks cannot loan money legally. Through strange leaps of logic, the scammers claim that credit card banks are actually operating illegally, and so you never really borrowed any money when you used your credit cards! Therefore, you don’t really need to pay anything back. You just have to follow their system and the debts will go away because the banks don’t want this knowledge disclosed to the public!

I realize this may sound ridiculous at first glance, but the con artists are very convincing, and there are dozens of websites promoting this dangerous scam. They refer to publications by the Federal Reserve Board, the Uniform Commercial Code, the Truth in Lending Act, and other public laws to bolster their claims and give an aura of legitimacy to their “program.” I’ve talked with numerous consumers who have been conned out of $2,500, $5,000, even up to $15,000 because they believed the hype that these snake-oil salesmen were peddling. If you’re $30,000, $50,000, or $100,000 deep in credit card debt, it can be very tempting to believe in a magic pill. What if you could pay someone 15% of the debt and make the rest of the debt disappear?

As tempting as the promoters make it sound, the debt elimination techniques they are using simply do not work. About the only thing they accomplish is getting you sued by your creditors. As you might expect, creditors hate this scam, and they come down hard on people trying to use this bogus “no money lent” system. You don’t need to take my word for this. Check out the complaints on ripoffreport.com about Liberty Resources, a debt elimination scam that was shut down in Ohio. Or do some research on New Leaf Associates out of Florida, a scam that was shut down by the Florida Attorney General after consumers were ripped off for millions of dollars. I’ve personally talked to people who were caught up in both of these scams, as well as others who were involved in scams that have not yet been shut down.

I also sometimes receive calls or emails from people promoting this system. Because I am easy to reach and I’m a well-known debt expert, they seem compelled to convince me of the worth and merit of their system. Often, the people contacting me are ignorant of the nature of the scam. That’s because this program is frequently sold through MLM or network marketing systems, and a lot of the people involved simply don’t know any better. I respond by making a simple request, and any “true believers” in this system who happen to read this article can take this as a challenge. All I ask is for a single verifiable court case where a judge agreed with the “no money lent” argument and ruled in favor of the debtor. It’s really that simple. After asking this question for several years, I’m still waiting. No such case exists, despite false claims to the contrary. The response is usually that the company must protect the clients’ privacy, but they have “hundreds of success stories” and have dismissed “millions of dollars” of debt.

Nonsense! The only way this system could possibly work is if a judge ruled on it in court. And since court cases are public record by definition, privacy cannot be an issue here. The “client” gave up any right to privacy when he or she tried to convince a judge that the 50 grand they owed on their credit cards was really just “funny money.” And yet the con artists cannot provide a single solitary case in support of their outrageous claims. (Note to scammers: Don’t waste my time emailing me with your threats or your legal mumbo-jumbo. I’ve heard it all before. Just send me the civil docket number for a single case where your “client” won in court using this system, and identify the court venue so I can look up the case myself online. Simple enough, right? I won’t hold my breath though.) In fact, the “no money lent” argument has been shot down in court on multiple occasions. When confronted with this embarrassing fact, the scammers simply reply that the courts are part of a “conspiracy” to keep this information from the public!

The absence of any verifiable documentation is the red flag that tells you this scheme simply doesn’t work. But let me take this a step farther. Let’s set aside for a moment the whole question of the legal basis for the “no money lent” argument. Let’s take a huge silly leap for a moment and say that the system is valid from a legal perspective. Well, it’s STILL not going to work for the average consumer! Why? Two reasons. First, it requires a fight in court, and the average consumer wants to go to court over debt-related matters about as much as they want to have multiple root-canals without anesthetic.

Second, nothing gets resolved this way. I’ve worked with thousands of people struggling with serious debt problems. I talk to people in this situation every day. I can’t think of a single instance where the person’s priority was anything other than to GET THE MATTER RESOLVED PERMANENTLY. The techniques used by the debt elimination scammers do not achieve any resolution at all. Even if the debtor successfully gets a creditor to back off from its collection effort, all that will happen is the creditor will sell the account to a debt purchasing company, who will then try to collect all over again. So the whole process will have to be repeated, over and over again as the debt gets sold multiple times down the line. There is no resolution here. Just a bag of useless tricks. Boil it all down and here is what the debt elimination scammers are telling you: Walk away from your debts, don’t pay, and duck and cover. That’s it. It’s a lot of hot air and bogus nonsense, and it only exists because debt-weary consumers are desperate for solutions.

If you have become the victim of a debt elimination scam, I urge you to take action. Demand a refund in writing. Complain to the Better Business Bureau where the company is located (assuming you can even find them), complain to your state Attorney General and the Federal Trade Commission. And then get on the phone with your creditors and explain that you were misled and that you would like to work things out in good faith. It may be necessary for you to formally retract any documentation that the scammers sent to your creditors. Consumers may also feel free to email the author for further advice or information on this subject.

Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former senior executive with one of the nation’s largest debt settlement firms, he is the author of the Debt Elimination Success Seminar™, a five-hour audio-CD course that teaches consumers how to choose between debt program options based on their financial situation. The course focuses on comprehensive instruction in do-it-yourself debt negotiation & settlement designed to save $1,000s. Personal coaching and follow-up support is included. Achieves the same results as professional firms for a tiny fraction of the cost. Visit http://www.zipdebt.com for more information.

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Debt Settlement, Debt Management, Debt Termination – What’s the Right Choice?
By Charles Phelan

When you’re facing a mountain of credit card debt, the stress can be overwhelming at times. Collection calls, daily harassment, rude bill collectors, and nasty letters all add to an already intense situation. Consumers facing this kind of pressure naturally seek out the services of professional debt companies. But the search for reliable assistance can actually add to the stress! For example, just type in “debt help” on any search engine and you’ll see page after page of results. There are literally thousands of debt companies out there. How to choose? How to tell the scams and schemes from the legitimate services? Should you consult with a non-profit credit counselor? One company tells you they can cut your bills in half. Another outfit says you really don’t owe the banks any money at all and they can wipe the debt away for you. Who should you believe? Where should you turn?

Consumers face a bewildering range of choices when seeking debt assistance. As with any service, when considering a debt reduction program, “let the buyer beware.” Yes, there are some good debt companies out there. But many are only in the business to take your money. Some actually leave you much worse off than when you started.

Where to start? Let’s categorize the different types of debt program. This will cut down on the confusion and help you decide where to start your search. I’m assuming here that you are trying to avoid bankruptcy. I’m also assuming that you are struggling every month to keep up with the minimum payments on your debt obligations and have fallen behind or are about to start falling behind. Further, in what follows, I assume that you can’t borrow against your home or otherwise pay off your debts off. In other words, we’re talking about a financial rescue situation.

To simplify matters, let’s look at debt companies in terms of three rough categories:

1. Debt management plans require 100% repayment of the debt through a structured payment plan. This is what non-profit credit counseling agencies do, as well as for-profit debt consolidators.

2. Debt settlement or debt negotiation plans require payment of part of what you owe, usually around 50% or less, with the remainder forgiven by the creditor. Virtually all of these companies operate on a for-profit basis.

3. Debt termination companies claim to wipe away 100% of your debt through special legal procedures, so your total payout consists only of their fees.

Right off the bat, let’s cross #3 off the list. Sorry, but this one is a scam. You can recognize this type of company very easily. They make the claim that because of how our monetary system works, you never really borrowed any money in the first place! Their system is based on the false belief that credit card banks are operating illegally by extending credit to you. Absolutely do not give your money to one of these outfits! The fees start at $2,500 and go up from there. I spoke with one fellow who lost $15,000 in this scam.

Folks, there is no free lunch. The only thing such “debt termination services” will do for you is take your money. Their legal theories are total nonsense, and the courts do not recognize their arguments. These are the same people who also claim you don’t need to pay your income taxes either. As tempting as it might be to try one of these services, you’ll only get yourself in deeper trouble with your creditors.

That leaves #1 (debt management plans) and #2 (debt settlement). Debt management plans (DMPs) are offered through credit counseling companies that generally operate on a non-profit basis, and also through for-profit companies that use a similar business model. The essential idea is that you write one monthly payment to the agency, and they in turn distribute that money to your creditors. Companies offering DMPs work with your creditors to lower your interest rates so that more of your money goes toward paying off the debt. Of course, there are fees involved. The non-profit organizations are not free – a point that often confuses consumers. Also, “non-profit” does not mean the company is any good at what they do. Sometimes, a for-profit company can afford to provide a better quality of service because they can pay their staff a higher wage! So don’t automatically think that non-profit services are good while for-profit services are bad.

When should you consider enrolling in a DMP? While many financial advisors seem to think that DMPs are the answer to every debt problem, in reality companies in this end of the business are basically acting like collection agencies for the banks. In the real world, a DMP only makes sense if you are in a relatively short-term financial crunch. Let’s say you are between jobs but know that your income prospects will get better in 6-12 months. A DMP would make sense in such a situation because it would bring the temporary relief that you need until you can take your bills over again and start paying down your debts at a faster pace. On the other hand, if your situation is long-term and you don’t see any light of the tunnel, then a more aggressive approach might make sense.

Debt settlement or debt negotiation can provide a more aggressive approach to debt reduction that makes sense for many consumers. It should be viewed as an alternative to bankruptcy. In fact, it’s a very good alternative to Chapter 13 bankruptcy in particular. (For a detailed comparison between debt settlement and Chapter 13 bankruptcy, see http://www.new-bankruptcy-law-info.com.) It also gives consumers a fighting chance to work their way out of serious debt problems without the feelings of failure and loss of privacy that come with bankruptcy. One of the best features of debt settlement is that it involves a reduction in debt principal (the amount you owe), rather than just interest rates as with DMPs. The result is a much faster path out of debt. It’s also a much more flexible approach than other types of programs, because it’s the ONLY approach that allows for adjustments up or down in the monthly funding commitment. That’s especially important for consumers with unstable finances.

Debt settlement isn’t a perfect solution though. One of the major drawbacks is that the fees are usually quite steep, often amounting to 15% or more of your starting debt level. Also, settlement has a negative impact on your credit score (although your credit will take a hit under a DMP as well). However, when viewed as an alternative to bankruptcy rather than a cure-all for financial woes, it provides a good solution for many consumers. Essentially, debt settlement is really nothing more than a negotiated compromise with your creditors. It’s actually a win-win scenario for you and the creditor.

Further, you don’t need to hire a professional to do this for you. Debt settlement has become so common and popular in the last few years that many of the major credit card banks will automatically offer 50% settlements (or less) in order to cut their losses. Why pay those big fees when you can do it yourself and save $1,000s? Even if you don’t get as big a reduction as you would with a professional negotiator, you’ll still come out ahead by not having to pay the fees. For more information on the DIY approach to debt negotiation and settlement, see the free 32-page consumer report, “How to Eliminate Your Debts Quickly and Safely Without Filing Bankruptcy,” available for instant download at http://www.zipdebt.com/free_eliminate_debt_ebook.php.

If you’re drowning in debt, the time to act is now. Explore your options, establish a game plan, and take action!

Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former senior executive with one of the nation’s largest debt settlement firms, he is the author of the Debt Elimination Success Seminar™, a five-hour audio-CD course that teaches consumers how to choose between debt program options based on their financial situation. The course focuses on comprehensive instruction in do-it-yourself debt negotiation & settlement designed to save $1,000s. Personal coaching and follow-up support is included. Achieves the same results as professional firms for a tiny fraction of the cost. Visit http://www.zipdebt.com for more information.

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How to Quickly Improve Your Credit Score by Adding Positive Payment History to Your Credit Report
By Charles Phelan

Most consumers are aware that negative items on a credit report can be disputed with the three major credit reporting bureaus. Often, this process can lead to a significant improvement in credit score through deletion of the derogatory items that were lowering the score.

To achieve excellent credit, however, it’s not enough to just remove negative entries. Why? Because a lack of positive payment history is also an obstacle to having good credit. You need to demonstrate a record of on-time payments in order to raise your credit score.

In this article I will describe two simple techniques for rapidly ADDING good credit entries to your file.

THE CO-SIGNER TECHNIQUE

All that is necessary to add years of excellent credit history is the love and trust of a friend or family member who has good credit.

Credit card companies are always willing to have their best customers add extra cards for family members. By adding your name to one or more of their accounts, they will actually cause a new credit card to be issued in your name. The “catch” is that they will be the co-signer on the account, meaning that they are responsible if you miss payments.

Of course, you never want to risk the credit rating of a friend or family member, so simply have them use their own address on the application for the extra card. That way, the card will be mailed to them, and even though it has your name on it, the card will remain in their possession. They can even cut it up if they want to.

The simple beauty of this approach is that the new card will show up on your credit report, and normally it will show the opening date of the original card (not just the application date for the extra card), as well as the entire credit history of that card! It’s like getting years of good credit added to your file with the stroke of a pen.

THE PASSBOOK SAVINGS LOAN TECHNIQUE

The “Passbook Savings Loan Technique” is a great way to add positive payment history to your credit file. It will also give you an excellent credit reference to use for most types of financial applications. This technique does require some cash – at least $500 to $1,000. However, this amount will be held in a savings account as loan collateral, and the total out-of-pocket cost to complete this technique should be well under $50.

Here is the Passbook Savings Loan Technique in detail, so you can see exactly how everything works.

STEP 1 – Locate a Small Bank that Meets Your Requirements

I recommend that you work with smaller community banks and not the major chains. The smaller banks are more likely to have the exact type of account that you will need to open, and they are more likely to work with you and be flexible. Savings & Loan institutions and Credit Unions can also be used, provided they meet the requirements. The product you want is called the “Passbook Savings Account,” which is basically just a simple savings account. And the type of loan you will take out is a “Passbook Savings Loan.” This is the easiest type of loan to get because it is totally secured with your own cash. Most banks are only willing to loan you 85% of the amount you have on deposit, so there is always some reserve money in the account.

Your target bank will be suitable for this method if it meets the following three requirements:

A. The bank must have a Passbook Savings Account product with NO MONTHLY FEE on balances of $500 to $1,000.

B. You must be able to borrow up to 85% of your balance on a 12-month loan schedule. This is typically called a Passbook Savings Loan.

C. CRITICAL: The bank MUST report activity on this account to the three major credit bureaus (Experian, TransUnion, and Equifax).

If the bank product does not meet these requirements, then do NOT use that bank. There are thousands of small banking institutions throughout the country, so it should be fairly easy for you to find an appropriate one in your local area.

STEP 2 – Open a Passbook Savings Account

Go to the bank you’ve chosen and open a Passbook Savings Account for $1,000 or less—depending on what you have to work with. Take your Passbook home and wait a week or so, because you don’t want it to look like you opened the account only for the purpose of taking the loan.

STEP 3 – Obtain a Passbook Savings Loan

Return to the bank and ask to see a loan officer. Look your best, be courteous, and explain that you wish to take out a Passbook Savings Loan for $850 (or 85% of whatever amount you actually deposited).

When you take out your loan, your savings account is frozen. However, every time you make a payment you unfreeze an amount equal to your payment, less a few dollars for interest. Be sure to ask that the loan term be for at least one year, with minimum monthly payments. Do not get a simple one-year loan with no payments. This will not benefit you at all, because you are trying to establish a history of payments.

You will not be turned down for this type of loan no matter what your previous credit history and in most cases it will not even be checked. If you have bad credit, make sure you tell your loan officer before he or she pulls your credit history. Tell the bank representative you are trying to re-establish your credit and that a good credit rating is very important to you now.

STEP 4 – Make Your Payments

Assuming an interest rate cost of 6%, your monthly payments on the $850 loan will be $73.16. (Remember, this is a secured loan, so the interest rate should be fairly low.) Since you have “borrowed” $850 in cash, you will use that money to keep the payments going on the loan. Be sure to make your payments well before the due dates. Always pay EARLY in order to be on the safe side in establishing good payment history.

STEP 5 – Pay Off the Loan Early

After six months, pay off the loan early. At this point, you will have approximately $980 remaining from your original $1,000 deposit, part of it as cash on-hand, and some remaining in the savings account. You will have paid a whopping $20.31 in interest (assuming the rate was 6% for the secured loan). I’m sure you will agree that $20 is a small price to pay for adding six months’ worth of good payment history to your credit report!

STEP 6 – Make Sure the Loan Shows on Your Credit Report

After you have paid off the loan, obtain fresh copies of your credit reports to verify that the loan payment history is showing correctly. Since you selected a bank that reports regularly to the big three credit bureaus, everything should show up correctly. But mistakes do happen. If the loan is not reported correctly, then ask the bank directly to fix the omission, or ask the credit bureaus in writing to add the credit reference to your report.

The Passbook Savings Loan Technique is a simplified version of the more complicated “Three Bank Technique.” Basically, the concept is to use the secured loan proceeds from one bank to open up another account at a second bank, and then to repeat the process for a third bank. The math is a lot more complicated, but the principle is the same, with the added benefit of having three simultaneous loans adding positive payment history to your credit report. This approach costs a little more in interest expenses, and involves a lot more work, but can really turbo-charge your positive credit history.

Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former senior executive with one of the nation’s largest debt settlement firms, he is the author of the Debt Elimination Success Seminar™, a five-hour audio-CD course that teaches consumers how to choose between debt program options based on their financial situation. The course focuses on comprehensive instruction in do-it-yourself debt negotiation & settlement designed to save $1,000s. Personal coaching and follow-up support is included. Achieves the same results as professional firms for a tiny fraction of the cost. http://www.zipdebt.com

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When Debt Collectors Cross the Line – Bogus Threats & Illegal Collection Tactics
By Charles Phelan

If you are behind on your bills and on the receiving end of collection phone calls, you will probably hear collectors make some very threatening statements. While most debt collection professionals try to stay within the boundaries defined by the Federal Fair Debt Collection Practices Act (FDCPA), many others cross the line on a regular basis. Last year, the Federal Trade Commission (www.ftc.gov) received more than 58,000 complaints about debt collectors, a figure which represents 17% of the total number of complaints received by the FTC. Consumers complain about the collection industry more than most other industries combined.

Collection professionals would probably respond that the enormous size of the industry and the sheer volume of collection activity accounts for the large number of complaints. However, only a small percentage of violations are actually reported by consumers, so the data collected by the FTC represents only a tiny fraction of the true scope of the problem. Even so, a pattern of abusive and illegal collection activity has been well-documented by the FTC, and it is getting worse instead of better.

Here are some common threats made by debt collectors:

“We’re going to take your house unless you pay this bill immediately.” This is a bogus threat. Unless the debt being collected is secured by the house in question (i.e., a mortgage or home equity loan), the creditor does not have the power to take your house away from you.

“If you don’t pay this bill today, we’re going to have a warrant issued for your arrest.” Nonsense. Failure to pay a debt is a civil matter, not a criminal matter. Threatening a debtor with jail time or accusing them of committing a crime is totally against the rules.

“We don’t care that you sent a cease communication notice. We’re going to call you anyway.” The FDCPA gives you the right to terminate contact efforts by a debt collector. Failure to respect a cease communication notice is a clear violation of Federal law.

“We’re going to garnish your wages to recover this debt.” A collector can only threaten action it has the legal authority to take, and the vast majority of collection agencies have zero legal authority. Your wages can only be garnished by a creditor after they have won a judgment against you in a lawsuit.

“We know where you live, so you better pay up.” Yes, threats of violence still happen in this industry. Nearly 300 complaints against collectors received by the FTC last year cited the threat of violence as the cause of the complaint. This is absolutely illegal.

Aside from the usual bogus threats, collectors also use other tactics that are illegal. For example, discussing your debt with a third party is a clear violation of the FDCPA. Yet collectors routinely call neighbors, relatives, and employers to obtain information on debtors. So long as the collector does not discuss the actual matter of the debt, they still have their toes on the right side of the line. But as soon as they mention or even hint that they are calling about a debt, they have crossed the line.

Since many debtors have taken to screening their phone calls at home to cut down on the relentless barrage, debt collectors frequently call at work when they can obtain an office number. In theory, a consumer can get the collector to stop calling at the office simply by stating that they are not allowed to receive personal phone calls at work. That puts the collector on notice that such activity constitutes interference with the consumer’s employment, which is not permitted. In practice, however, collectors routinely ignore this rule and continue to call at work.

There are many other techniques of harassment and intimidation that cross the line from permissible to impermissible collection activity. Use of obscene or profane language, shouting, constant and unrelenting telephone calls, failure to respond to written disputes, and publication of debtor information all constitute illegal activity as defined by the FDCPA.

So if you are on the receiving end of illegal collection actions, what can you do to protect yourself? First and foremost, it’s important to know and understand your rights as a consumer. A description of your rights under The Fair Debt Collection Practices Act may be obtained directly from the FTC (http://www.ftc.gov/bcp/conline/pubs/credit/fdc.htm).

If you believe that a collector has violated your rights in their attempt to collect from you, then you should not hesitate to file formal complaints with the Attorney General for your state (www.naag.org) as well as the Federal Trade Commission. If enough complaints are received about a particular collector, then these authorities are empowered to bring an enforcement action against them, which may result in expensive fines that will make the agency or collector think twice about using such tactics in the future. You also have the right to bring a lawsuit yourself against a collector that harasses or abuses you, or otherwise violates your rights under the law.

One final point. The FDCPA technically only applies to third-party debt collectors, which includes collection agencies and collection attorneys. It does not apply to the original creditor when collecting their own debt. For example, if you borrow money from a bank, the bank is not regulated by the FDCPA. However, numerous other public laws protect consumers from deceptive or abusive collection practices even by original creditors, and many states also have laws that parallel the FDCPA but go further and include original creditors in the definition of debt collector. So if an original creditor is harassing you or has crossed the line, you should still file a complaint with your state’s Attorney General as well as the FTC. If a clear pattern of abuse emerges, the original creditor can be charged with unfair or deceptive acts or practices, either under state law or under the FTC Act that governs conduct of commerce in our country.

To sum up, if you are on the receiving end of collection harassment, don’t just take it. Educate yourself on your rights as a consumer, vigorously dispute debts that you don’t believe you owe, and take action yourself in the form of complaints to your Attorney General and the Federal Trade Commission. By standing up for your rights, you can put a stop to bogus threats and illegal collection tactics.

Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former senior executive with one of the nation’s largest debt settlement firms, he is the author of the Debt Elimination Success Seminar™, a five-hour audio-CD course that teaches consumers how to choose between debt program options based on their financial situation. The course focuses on comprehensive instruction in do-it-yourself debt negotiation & settlement designed to save $1,000s. Personal coaching and follow-up support is included. Achieves the same results as professional firms for a tiny fraction of the cost. http://www.zipdebt.com

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Debt Settlement & Income Taxes — What You Need to Know
By Charles Phelan

Debt settlement has become a popular approach to resolving problem debts without having to file bankruptcy. With this approach, creditors agree to accept a portion of what you owe (usually around 50% or less) to settle the account, and the remaining balance is forgiven. This technique will certainly continue to grow in popularity now that the new bankruptcy law makes it tougher to fully discharge debts in a Chapter 7 bankruptcy.

As with anything, there is no free lunch, and creditors are required to report canceled debts to the IRS on Form 1099 (when the canceled balance is $600 or greater). Therefore, the possibility exists that you may owe taxes on the forgiven portion of the debt. For this reason, many financial writers and debt counselors are strongly critical of debt settlement, to the point where they actually recommend against it just because you might end up owing taxes. But the tax consequences of settling your debts are greatly over-emphasized, and this is a really just a minor issue at best.

First, even if you end up owing taxes on the canceled balances, that’s because you saved a bunch of money off your original debts. The total of what you paid the creditor, plus the taxes, will still be much less than what you owed to begin with. There is still a net savings. So it’s hard to understand why this is viewed as a problem in the first place!

Second, the great majority of people who settle their debts are not required to pay taxes on the forgiven part of the balance. That’s because of the “insolvency” rule, described in IRS Publication 908, “Bankruptcy Tax Guide.” Don’t let the title fool you. You don’t need to have filed a formal declaration of bankruptcy to take advantage of the insolvency rule.

Basically, “insolvent” means that you have a negative net worth — that is, you “owe” more than you “own.” As a consequence, most debtors do not have a tax liability on the canceled debts, simply because most debtors are insolvent! It usually comes down to home equity. If you have enough equity in a home (or other property) to outweigh the total of your liabilities (debts), then you have a positive net worth, and will likely have to pay taxes on the forgiven debt amounts. However, the majority of people in serious debt trouble have a negative net worth, and are therefore insolvent. The way it works is that you can offset the canceled debt up to the amount by which you were insolvent at the time you did the settlement.

Come tax time, be sure to get professional tax advice specific to your situation. Also, be sure to read the section in IRS Publication 908 on “reduction of tax attributes,” which requires people using the insolvency rule to reduce their basis in such things as rental property, loss carryovers, etc. Most of that probably won’t apply to you, but again, get specific advice before winging it.

So, the message is, relax about paying taxes on canceled debt balances. That should be the least of your concerns if you’re upside down financially. Don’t let the misguided criticisms of financial writers (who haven’t done their homework) discourage you from looking into one of the most popular and flexible options for achieving debt-freedom.

Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former senior executive with one of the nation’s largest debt settlement firms, he is the author of the Debt Elimination Success Seminar™, a five-hour audio-CD course that teaches consumers how to choose between debt program options based on their financial situation. The course focuses on comprehensive instruction in do-it-yourself debt negotiation & settlement designed to save $1,000s. Personal coaching and follow-up support is included. Achieves the same results as professional firms for a tiny fraction of the cost. http://www.zipdebt.com

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