The holiday season seems to be a season of excess. Eating too much pie or drinking too much eggnog is one thing. Charging too many gifts on your credit cards is another.

Although the holiday season may entice you to spend more than you can afford, a little self-discipline can help you keep your purchases to a manageable limit.

 

6 Tips to avoid Holiday Debt

1. Start Saving! Spending cash instead of using credit for your holiday purchases allows you to avoid holiday debt all together. If you haven’t started saving, it's not too late to start.  put aside something each paycheck starting now and use that to finance your holiday purchases. Start a Christmas Savings Account
2. Set a budget BEFORE you shop! Setting a spending limit and sticking to it will keep you from overspending. Be disciplined and don’t go over your budget, no matter what. --> FREE Holiday Budget Spreadsheet
3. Make a list! Santa makes a list and checks it twice, so should you. Even though you might feel compelled to splurge on everyone in your life, you don't have to. People appreciate simple and meaningful over expensive and useless.
4. Use layaway! Layaway disappeared for a few years, but a lot of big retailers, like Wal-Mart and KMart, are bringing it back for the holiday season. Starting early means you can put a little toward your holiday purchases each month. In the end, all your purchases were made and you'll be free of holiday debt.
5. Ignore "big" sales. More often than not, they're not really sales at all. Those "Buy 2, Get 1 Half Off" deals only trick you into buying more than you would otherwise. Remember, stick to your list.
6. Leave your credit cards at home. Without your credit cards, you’ll have a hard time charging them up. 

Do you have and tips for smarter Holiday spending?  Please share your tips and tricks in the comment thread below!

 

Mortgage Forgiveness Debt Relief Act

In the past, homeowners using short sales or deeds in lieu of foreclosure were required to pay tax on the amount of their forgiven debt. However, the Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) changes this for certain loans. This Act, which has been extended through 2012, allows taxpayers to exclude income from the discharge of debt on their principal residence.

Under federal law, a creditor is required to file a Form 1099-C whenever it forgives or cancels a loan balance greater than $600. This may create a tax liability for the debtor because the canceled debt is considered “income” for tax purposes.

The Mortgage Forgiveness Debt Relief Act excludes the cancellation of the complete debt up to $2 million.  According to the IRS, the exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

The new law provides tax relief if your deficiency stems from the sale of your primary residence, or the home that you actually live in. Vacation homes, for example, do not qualify. Here is an overview of the rules:

 

• Loans for your primary residence. If the loan was secured by your primary residence and was used to buy or improve that house, you may exclude up to $2 million in forgiven debt. This means you don’t have to pay tax on the deficiency.

• Loans on other real estate. If you default on a mortgage that’s secured by property that isn’t your primary residence (for example, a loan on your vacation home), then you’ll owe tax on any deficiency.

• Loans secured by but not used to improve primary residence. If you take out a loan, secured by your primary residence, but use it to take a vacation or send your child to college, you will owe tax on any deficiency.

Insolvency exception to tax liability

If you don’t qualify for an exception under the Mortgage Forgiveness Debt Relief Act, you might still qualify for tax relief. If you can prove you were “legally insolvent” at the time of the short sale, deed in lieu, or foreclosure, you won’t be liable for paying tax on the deficiency.

Legal insolvency occurs when your total debts are greater than the value of your total assets (your assets are the equity in your real estate and personal property). To use the insolvency exclusion, you’ll have to prove to the satisfaction of the IRS that your debts exceeded the value of your assets.

 

 

photo by: Mike Licht

Your credit score is like a financial report card, and like a report card you are usually not the only one to see it. Applying for loans, mortgages, bank accounts, and new cars loans all require a credit check. There is much more that goes into building a good credit score than just paying your bills on time. To you understand just what does build and destroy a credit score, I have compiled the following list.

1. Accounts
   Depending on the type of accounts you hold, and how many, your credit could gain or loose points. Generally, a good mix of account types makes for good credit. Having a mortgage, car loan, and a couple credit cards in good standing should leave you with a lot of valuable credit points.
2. Payment History
   Your payment history on loans and credit cards can affect your credit for years to come. Making payments on time will add points to your credit credit score. On the other hand, missing payments often can result in the loss up to 100 points!
3. Owed Debt
   If you have debt then it may drop your credit score. However, some debt is actually good for your credit score. Having credit cards and mortgages, can help build your credit if you regularly make your payments. However, if you owe a lot of debt to many different lenders, it could potentially destroy your credit. A good rule of thumb is to keep your loans in check, and never borrow more than you can pay off.
   
4. Credit Age
   If in good standing, having credit for a long time should improve your credit score. Try keeping accounts open for a long time and making payments regularly and on time. If you are new to the credit game and are just starting to build your score, then you want to make sure and open an account that you know you will be able to keep.
5. Loan History
   Taking out a loan does not necessarily take down your credit score. Actually, taking out a loan for something like a car could help your credit. However, late payments or very low payments and high interest could get you in to trouble and hurt your credit score. Always think of your loan in the long term before you take one out.
6. Credit Checks
   You may be surprised to know that having someone check your credit (i.e. a new employer, landlord, or lender) will drop it by few points. This is frustrating, but an unavoidable fact. To help prevent yourself from missing out on too many points, try to reduce to the number of times you have your credit checked, and only have it done when absolutely necessary. Read More --> Hard Pull vs Soft Pull: What's the Difference?
7. Unpaid Parking or Library Fines
   Although they may seem unrelated to your credit, having unpaid parking violations, or library fines can negatively affect your credit score. It is always a good idea to pay off any debt, regardless of how small or seemingly unrelated.
8. New Credit
   Getting too many credit cards is a sure way to hurt your credit score, no matter if you make timely payments or not. In this case, consolidating some cards could help you in the future. While consolidation will normally drop your score by a few points, building credit will be easier from then on.
9. Collections History
   Having a history of being given over to collections does not look pretty on a credit report. If you are looking to get a big loan or buy a house, try to take care of any situations involving a collections agency first. Over time, the scar of being put in collections should start to fade, but not until you pay off the debt and start rebuilding your points.
10. Bankruptcy
    Filing bankruptcy is never fun to go through, and rarely good for your credit. If you have or need to file bankruptcy, be prepared for a plummet in your score. There are some options to help you avoid bankruptcy all together.  Bankruptcy should only ever be used a s a last resort.  However, bankruptcy can be the best option for someone who realistically has no way of ever paying their debt down.

Does your Credit Report Card have room for improvement?

Now that you understand what can help and hurt your credit score, what does your credit report card look like?  If you are struggling to get your credit "GPA" up, you might need a tutor.  The Solutions Specialist at Debt Relief can help you work though your credit issues and find a solution tht best fits your needs. 

1-877-492-4109

Short Sale or Foreclosure?

The decision to do a short sale or to let your home go to foreclosure, is not an easy one. While for some homeowners, it is easier to throw up your hands and let the bank take your home, that might not be the wisest thing to do.

 

Benefits of a Short Sale

• You are in control of the sale, not the bank.
• You may sleep better at night knowing who is buying your home.
• Your home sale will be handled like any other home sale.
• You will be eligible, under Fannie Mae Guidelines, to buy another home in 2 years instead of 5 years.
• If your credit report does not reflect a 60 day late pay, under Fanny Mae guidelines, you will be eligible to buy another home immediately.

Benefits of a Foreclosure

• No mortgage payments to make
• The home is yours until the foreclosure is final
• No strangers touring your home
• Some banks offer "cash for keys" after a public sale

How do Short Sales and Foreclosures affect your credit score?

A short sale may be considered to be a derogatory mark on your credit even though credit bureaus do not show the word "short sale" on your credit report. It may say "paid in full for less than agreed" or "settled for less," among other categories. Some clients have reported negative FICO score drops from 50 points to 130 points.  Major point drops are typically due to being in default, meaning you have fallen behind on your payments.

Alternatively, a foreclosure will generally remain on your credit report for 7-10 years and your credit score will drop by over 150 points.  If a prospective employer runs a credit check on you, your job application may be denied if you have a foreclosure on your record. 

Which one is better?

As you can see there are a lot of potential problems with both a short sale and foreclosure. So, which one is better? Short sale wins every time. In all aspects, a short sale is more beneficial to you, the home owner, as well as the bank. It saves them money from legal fees and paying for the foreclosure process, and it also saves your credit report, potential taxes, and deficiency judgments.

If you’re facing a financial hardship and think you may need to seek a short sale, talk to a Realtor ASAP to get the process started. The faster the better. Don’t wait until the sheriff is knocking on your door to repossess your home. 

photo by: respres

 

There are only three states, Claifornia, Hawaii, and Massachusetts, that prohibit insurers from using credit information when calculating premiums.  If you live in one of the other 47 sates, your low credit score could affect your insurance premium. 

Why does your credit score affect your insurance premium?

The answer is simple.  Insurers have found a strong correlation between credit scores and insurance claims. It turns out, people with low scores are more likely than people with high scores to file claims. And when insurers looked more closely, they discovered that people who made late payments were the ones who tended to have more claims.

They didn't find as strong a correlation with other factors, such as taking on too much new credit, which other lenders care about because they worry that you won't be able to keep up with your payments.

Insurance companies use a different credit score to determine your premium

The version insurers use is slightly different from the one that lenders use. Both types of scores are based on information from your credit report, but insurers weigh the items differently. For example, insurers look a lot more closely at how you've managed credit over time rather than how much credit you've applied for recently.

Your insurance score can vary from insurer to insurer, based on the company's claims history. Insurance companies won't reveal all of the details of what goes into their scores, but you can get a version of your insurance score from TrueCredit, available through TransUnion for $9.95. The site provides separate scores for auto and homeowners coverage, which weigh the factors a bit differently, plus advice for improving your insurance score.

Even though your insurer may use its own calculation, the general advice can help anyone improve his or her score. Because each insuance company uses it's own calculation, it is important to shop around occasionally.  You can often find a better deal if you look.

Improving your score can make a big difference in your auto insurance premiums. If you need help eliminating your debt, there are several options available to you.  The Solutions Specialists at Debt Relief can discuss your situation with you and help you find the best option to get out of debt fast!

Give Us a Call --->>>   1-877-492-4109

Getting behind on bills is a scary position to be in. Dealing with debt collectors is never fun, but the good news is that even if you owe money to a creditor, you still have rights. 

The Fair Debt Collection Practice Act (FDCPA)

It doesn’t matter if the collector works for a collection agency, a corporate collections department, a third party, or is an attorney. The Fair Debt Collection Practice Act covers personal debt such as medical bills, car loans, mortgages, and money owed on credit cards—but it doesn’t cover business debts.

When a debt collector starts the collections process, they need to know where you live, your phone number, and where you work, for instance. They might call a relative or a business, like a utility company, to get the scoop on you. An important rule that’s often violated is that debt collectors may not discuss your debt with anyone other than you, your spouse, or your attorney. 

You may be surprised to know that a debt collector can’t just ring you up any time they feel like it. They can’t call you before 8:00 am or after 9:00 pm in your time zone. They can’t call you at work if you notify them that you’re not allowed to take calls there. And if you have an attorney who is representing you about your debt, a collector must speak to them, not to you.

How to Dispute a Debt with a Debt Collector

After a debt collector makes initial contact with you, they have to send you a written “validation notice” about your debt within five days. The notice should include the name of the creditor and the amount they believe you owe. If you don’t agree that you owe some or all of the debt, take these four steps to dispute it:

1. Tell the collector over the phone that you believe there’s an error and ask them to stop contacting you.
2. Send a letter to the collector, within 30 days after you receive their validation notice, stating that you believe they’re mistaken and to stop contacting you. 
3. Make a copy of the letter for your files.
4. Send the original letter by certified mail and pay for a return receipt so you have proof that it was received. 

After they receive your dispute letter, a collector can only contact you to confirm that they won’t be contacting you anymore, or to inform you about a legal action that they’re going to take.

If the debt collector sends you back a written verification of the debt, such as a copy of a credit card bill that you haven’t paid or a promissory note that you signed, then the process starts over and they can contact you again.

Debt collectors are prohibited from harassing you or lying to you.

The following are some examples of what’s not allowed:

• Calling you repeatedly
• Threatening to harm you or using profane language
• Publishing your name as someone who hasn’t paid a debt (except to a credit reporting agency)
• Misrepresenting their identity, company name, or the amount you owe
• Telling you that legal action will be taken against you if they don’t intend to do it or if doing so would be illegal
• Sending you anything that looks like an official government document if it isn’t
• Depositing a post-dated check early
• Mailing you a collection notice by postcard 

You can report a debt collector who violates The Fair Debt Collection Practice Act to your state Attorney General’s office and to the Federal Trade Commission. You can also sue a debt collector within one year of a violation. If you win, they’re liable for damages that you can prove, such as lost wages. You could also be reimbursed for your attorney’s fees and court costs. However, winning a case against a collector who violated the law doesn’t erase your debt if you still owe it.

I certainly recommend that you pay all your bills on time. But if you can’t, try to get help before the collectors come calling by communicating directly and honestly with your creditors. They’re more likely to give you favorable treatment when you take the initiative to let them know you’re having a temporary financial setback but that you still plan to pay your debt.

The doorbell rings and you are handed a summons regarding one of your past due credit accounts.

What do you do when you receive a summons?

First…DON’T PANIC!

• You are not going to jail!
• You will not have to go to court!
• They are not going to garnish your next paycheck.
• They are not going to garnish your bank account.
• They are not going to come take all of your belongings!

 

Next…DON'T IGNORE THE SUMMONS!

For the sake of this post, we're talking about unsecured debts such as:

• Credit cards
• Personal loans
• Medical bills
• Personal line of credit
• Store cards, etc.
• Auto Repo

After numerous phone calls and letters, a creditor may decide to start legal action in order to collect the debt that you owe.  Not knowing how the process works, most people are intimidated and somehow find a way to pay the entire debt.  Once you understand the summons process, you will find that you can still settle that debt for less than the full balance.

The Summons Process

(The entire process usually takes 3 months or so.)

1. A CLAIM will be filed in the county court where you reside.
2. You will receive a SUMMONS. This is usually hand delivered and will state something to the effect that you have 20 or 30 days after receipt of the summons to ” ANSWER THE CLAIM.”
3. An answer is your side of the story that you would file ONLY if you feel you do not owe the amount of the claim. Even though you don't like the additional interest, late fees and now court costs, you still owe that as part of the debt. 
4. If you owe the debt, there is no reason to spend the time or money for an answer and, YOU DO NOT NEED TO GO TO COURT.
5. Contact the  attorney for the plaintiff (the creditor). If you are employed and receive normal W-2 wages, you need to try and work out a repayment plan so they do not proceed with the legal action.

If you are a Debt Relief client, you can skip step #5 and CONTACT US IMMEDIATELY by faxing or emailing the summons to your negotiator.  We (DRNW, Inc.) will contact the attorney for the plaintiff on your behalf, and we will most likely be able to negotiate a settlement based on a repayment plan to stop the legal action. Although we cannot guarantee that we will be able to negotiate a sollution, we are successful about 99% of the time!

When most people think of a credit check, they think of this vague thing where the someone checking their credit puts in their name and other private information and gets this number along with everything they have ever done wrong financially. However, it’s a little known fact that there are actually two kinds of credit checks: Hard Pulls and Soft Pulls.

 

 

So, what is the difference between a Hard Pull and a Soft Pull?

Soft pull

This is a basic inquiry of your credit score, and is meant for informational purposes only. a soft pulls does not show up on your credit report.

Examples of a Soft Pull:

• Checking your own credit
• A lender checking your credit for "pre-approval"
• An employer checking your credit
• A landlord checking your credit

Hard pull

A Hard Pull is the complicated report that gets done when you apply for a loan, mortgage, as well as many other things. This type of credit check can affect your credit score.

Examples of a Hard Pull:

• Credit check when applying for a mortgage
• Credit check when applying for a credit card or signature loan
• Credit check when opening a new checking or savings account
• Credit check when opening a new wireless phone account
• Credit check when you open a new cable television account

The first couple of Hard Pulls don’t really do anything, but after several in a row, it will start to affect your credit score. If you’re opening multiple accounts that require multiple hard pulls, you’re spending a lot more money. If you are already paying on several accounts that you have recently started, how do they know that you’ll be able to continue your payments on another new account? Luckily, this is only 10% of the total calculation of your credit score.

So, what does this all mean to you?  First, be aware of how often your credit is bing looked at, and try not to have too many Hard Pulls at the same time.  Next, feel free to shop around a bit for the best home loan, but make sure to find out all of the details first and only apply for your top couple of choices. Finally, keep checking your credit report for inacuracies, and report any errors that your find.  Checking your own credit does not affect your credit score, and making sure that the information is accurate will help you when you do apply for thos more complicated loans.

phot by: the Italian voice

As you are working to clean up your debt, it is extremely important to order copies of your credit report and credit score.  You can easily get a copy of your credit report for free and your credit score will cost your around $15. The information found on these reports will directly affect the interest rates you're offered on credit cards, mortgages and other loans, so it is best to know what you are dealing with before you start applying!

Everything you need to know about Your Credit Report and Credit Score

There are three major credit bureaus: Experian, Equifax and TransUnion. Each collects information on your credit history which is turned into a credit report. From that report, a credit score is derived. That score is a quick way for lenders to assess how risky you are as a potential borrower. The higher your score, the less risk you pose to lenders and the more likely it is that you'll get their best available rates.

The score most commonly used by lenders is the FICO score, developed by Fair Isaac.

When lenders review your credit reports and FICO scores, they take into account not only how much you owe but also how much credit you have available to you. Too much of either, and they may not loan you any more money.

When you get your reports, check for inaccuracies. The bureaus are required to investigate and correct any issues once you report them. Look for things that may lower your credit score, including open lines of credit you never use or accounts you thought had been closed long ago.

Each of the bureaus may have different information about your credit history, which means your credit score can vary slightly from bureau to bureau. Therefore, it's important to view reports from all three.

You can get any of the bureaus' credit reports free at www.annualcreditreport.com and your FICO score from MyFICO.com.

 

In this economy, Americans are up to their eybrows in debt.  In fact, the average American household with at least one credit card has over $10,000 in credit-card debt, and the average interest rate runs in the mid- to high teens at any given time.

Some debt is good

Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.

Some debt is bad

Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay for them with cash when the time comes.

Controlling your debt is possible if you start by getting a handle on your spending.

Most people spend thousands of dollars without much thought to what they're buying. In order to get a handle on your spending you need to creat a BUDGET. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.

Get your debt paid off!

Now that you have gotten a handle on your spending, it is time to get your debt paid off.  The key to getting out of debt efficiently is first to pay down the balances of loans or credit cards that charge the most interest while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.

If you can't keep up with your payments or you have extremely high interest rates, you should consider a Debt Management or Debt Settlement program.

These programs will help you eliminate your debt quickly while saving you money!

Don't fall into the minimum trap

If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe. It will take you years to pay off your balance, and potentially you'll end up spending thousands of dollars more than the original amount you charged.

Watch where you borrow

It may be convenient to borrow against your home or your 401(k) to pay off debt, but it can be dangerous. You could lose your home or fall short of your investing goals at retirement.

Get help AS SOON AS you need it

If you have more debt than you can manage, get help before your debt is too far gone. There are reputable debt counseling agencies that may be able to consolidate your debt and assist you in better managing your finances.

DEBT RELIEF CAN HELP! 1-877-492-4109