Debt Counselors Blog

Plan the Plan – Work the Plan

debtconsultation — Sun, 02 Nov 2008 19:05:52 +0000

If we’re being honest about it, no one really wants to plan his or her estate. Thinking about what happens after we die is not a pleasant topic for even the most hardy amongst us. However, thinking about it terms of how you want to live can take the edge off and help you plan with enthusiasm. Where to start? The answer to the question is dependent on which financial issue you need help with – who do you want to inherit your assets, who do you want to make medical decisions for you? Estate planning can easily be broken down into four components and an assessment of your needs will determine where to begin.

1. Will: A will is a legal document detailing, to the world, where your assets go, who oversees that your requests are carried out, and if necessary, establish guardianship of your minor children. Without a will, the laws of the state in which you reside, will decide for you, even if you have a surviving wife and children. This can be costly, both in financial terms and family relationships.

2. Durable Power of Attorney: This is a living document, which can be changed as circumstances dictate, which establishes a representative to act on your behalf should you become ill, incapacitated or otherwise unable to manage your affairs. You set the limits of power – from something as minor as paying the bills to major decisions involving money management.

3. Living Will: This is your written intentions of what medical treatment you want or don’t want. It can include everything from routine tests and medications to blood transfusions and major surgery. It is worthwhile to take considerable time preparing a living will as family members, as well as hospitals, can challenge the language and intent of the document.

4. Medical Durable Power of Attorney: Commonly referred to as a health care proxy, this document authorizes your designee to make medical decisions on your behalf. Ideally this person must be comfortable with your wishes and be strong enough o carry them out, even when others object.

Who to turn to for help?

The laws, both state and federal, are not concrete. They are as fluid as time. The Tax Relief Act of 2001 ushered in sweeping changes that are being phased in over 10 years. But between now and 2010, things could change again. A trusted and competent estate planning professional is essential – no matter the size of your estate. Remember your objective: to minimize your estate and gift taxes and to distribute assets with minimal cost, minimal delay and probate court.

Think about the church, community, and professional organizations of which you are a member. Most likely there are doctors, dentists, financial planners and lawyers among the membership. Also, consider the financial institutions where you are already conducting business. Look to the professionals for guidance:

Financial Planners assess every aspect of your financial life – savings, insurance, stocks and bonds, tax liability, retirement and estate planning. Their strength is in quantifying your financial goals, developing a strategy on how to meet those goals and reviewing your process. They are also qualified to manage your investment portfolio. For financial planners in your area contact The National Association of Personal Financial Advisors (NAPFA) or The Financial Planning Association’s Planner/Search website.

Estate Planning Attorneys focus on estate needs and can draft all of the required legal documentation. Their greatest strength is developing strategies that enable your assets to pass directly to your heirs, in the most tax-efficient manner, without going through probate. Additionally, they can keep your estate abreast of current tax law. For qualified attorneys in your area contact The National Academy of Elder Law Attorneys or the American College of Trust and Estate Counsel.

In the end, clarity with your heirs about your intentions and desires, and having all the legal work settled, lessens the chance for disagreements and conflict after you’ve gone. Isn’t that a worthwhile gift?

About Christian Credit Counselors :

Christian Credit Counselors is a national, non-profit organization dedicated to helping consumers achieve financial wellness through counseling and education. Established in 1994, Christian Credit Counselors has provided Christian credit counseling to over two million individuals nationwide. Christian Credit Counselors is one of the top members of the American Association of Debt Management Organizations (AADMO), Christian Credit Counselors provides personalized and confidential consultations in person, by phone or online. Visit Christian Credit Counselors or call 800-557-1985.

Click Here to Schedule an Online Consultation with Christian Credit Counselors for Christian Credit Counseling.

The Why and How of Estate Planning

debtconsultation — Sun, 02 Nov 2008 19:05:07 +0000

Estate planning is like leafing through your photo album. As the years go by and your family and lifestyle changes, so too should your plan. You plan for college, you plan for retirement, and you should also plan your end-of-life decisions. Estate planning and death are interdependent but they don’t have to drive all of your decisions. In fact, by putting the focus on planning to live well vs. planning to die well, many of the decisions will become as sharp and clear as the photos in your album.

Here are a few tips to get the discussion started:

How and who whom will your assets be distributed after your death?
Do you want to distribute some of your assets during your lifetime?
How and by whom will you be cared for during your lifetime if you can’t care for yourself?
How and who will manage your assets during your lifetime in case you can’t do it yourself?

Who Needs a Plan?

You must be thinking—who needs estate planning? And the answer is: everyone. With a house, car, and some money in the bank, a few stocks and bonds, your 401k—these are assets that need to me managed to your advantage. For small estates, focus on who will receive and what they will receive. For larger estates, think in terms of preserving your assets—specifically ways to reduce or postpone the tax liability.

What Exactly goes into my Plan?

Simply put, everything you have of value to you. Bank accounts, real estate, stock and bonds, furniture, cars, jewelry, art work, life insurance, pets, retirement accounts and more—potential inheritances for example.

How is this Different from a Will?

A will is a term that everyone is most familiar with. But technically speaking, it is a legal document which names who receives your assets after your death, nominates an executor to manage the process (this includes paying your debts, expenses and taxes) and nominates a guardian for surviving children.

For some, a will may be sufficient. Each state has its own requirements/laws. Check your state government website.

Having an estate helps protect your family. Dying without a plan jeopardizes much or most of the value of your estate by interference from probate court, creditors, lawsuits, lawyers and death taxes.

About Christian Credit Counselors :

Click Here to Schedule an Online Consultation with Christian Credit Counselors for Christian Credit Counseling.

Fixing credit report errors periodically is a good idea

debtconsultation — Sun, 02 Nov 2008 19:04:30 +0000

It’s always a good idea to periodically review your credit report to check for errors, especially if you plan on making any large purchases, such as a house or car, in the near future. The information on your credit report is only as good as the person doing the data entry, and they do make mistakes. Negative errors could cost you a lot of money in terms of paying higher interest rates, and even getting a job or insurance. It’s up to you to get the errors corrected.

Common Errors

Each of the three national consumer reporting agencies, Equifax, Experian, and TransUnion, can have slightly different information in your report, so it’s important to check all three because the mistakes can be different. As you go through the reports, look for the following common errors:

· misspellings or numerical mistakes in names, birthdates, or addresses

· the same loan or account listed more than once

· missing positive information such as a loan being paid off or an account that is up to date

· closed account shown as still open

· payments listed as late when they were not

· someone else’s information—Mr. Smith Sr. might appear on Mr. Smith Jr.’s report

· outdated information regarding address, employer, or previous spouse

Removing Errors

The process for removing errors from your credit report is free, but up to you. Begin by writing to the particular credit reporting agency as well as the company or person who gave them the information. Explain what information you think is incorrect and ask for it to be cancelled or removed. Make sure you include your full name, address, as well as specific account information in error. Make a copy and send the copy, not the original, to the credit reporting agency by certified mail, return receipt requested. This way, you’ll have proof that they received it. The agency must investigate your submission within 30 days and send copies of the dispute to the company or individual who reported the information. It then becomes their responsibility to investigate and send the results back to the credit agency. If the findings are that the information actually is incorrect, then they have to contact the other credit agencies to delete it. Finally, once the investigation is over, the credit agency must give you written results and a copy of your credit report if changes were made, free of charge.

About Christian Credit Counselors :

Click Here to Schedule an Online Consultation with Christian Credit Counselors for Christian Credit Counseling.

Taking the Mystery Out of Credit Reports

debtconsultation — Sun, 02 Nov 2008 19:03:53 +0000

You may be familiar with commercials urging consumers to get a free copy of their credit reports. It is definitely a good thing to do in order to know get a look at your finances through the eyes of the credit bureaus and others who may be conducting a credit check. In 2003, Congress made it possible for consumers to request a copy of their credit report from each of the three nationwide consumer report agencies – Equifax, Experian, and TransUnion. If you’re wondering what to look for, here is some information to help you decipher it.

How Do I Read My Credit Report

Once you’ve received your credit report, the next step is to review the information and make sure it’s accurate. It is a history of your debts and how they’re paid. Each of the three bureaus has their own way of arranging the information, but they do share some basic categories:

1. Personal Information—name, address, Social Security Number, date of

birth, and current employment.

2. Credit Account Information—a list of all your credit accounts opened in the last seven to ten years. Not only are current accounts included, but closed accounts as well. Specifically, you’ll see:

· Account number

· Name of creditor

· Current balance

· Date account was opened

· Timeliness of payments

· Late payments

· Credit limit

· Loan amount

3. Inquiries—lists all companies and individuals who have pulled your credit report. There are two types:

· Soft inquiries are indicated when a company looks at your report for pre-approvals, when you request your credit report, and when your existing creditors monitor your account. Soft inquiries do not have any influence on whether credit is denied.

· Hard inquiries are indicated when you apply for credit, mortgages, and loans. Lenders, insurers, or landlords see all the hard inquiries to evaluate your creditworthiness.

4. Public Records—this section contains all public records. The length they stay on your report varies:

· Tax liens

· Bankruptcy

· Foreclosures

· Unpaid court judgments

· Criminal convictions

There also may be sections for accounts in good standing and accounts past due.

Knowing what is on your credit report can only benefit you and help you make wiser decisions when it comes to spending, credit, and debt.

About Christian Credit Counselors :

Click Here to Schedule an Online Consultation with Christian Credit Counselors for Christian Credit Counseling.

Credit Score – Who Needs It?

debtconsultation — Sun, 02 Nov 2008 19:03:14 +0000

Lenders aren’t the only ones relying on credit scores to predict whether or not you’ll pay your bills. Credit scores are sometimes referred to as FICO scores, named after Fair Isaac Corp. who compiles the information. You may already be familiar with credit reports, but many people, young and old, aren’t familiar with the role the credit score plays when it comes to renting an apartment, qualifying for a loan, or even getting a job.

What’s the Score?

Briefly, a credit score is a three digit number generated by formula which is based on information that is currently in your credit report and compared with the data of millions of other people. In the U.S., the median FICO score is 723, meaning, half fall below and half fall above that point. The top score is 850, but it isn’t very common. The higher the score, the better it will be for you.

1. Lenders – This is the most common group that people associate with their credit score. A high score will give you the most competitive interest rates for a home loan, auto loan, credit cards, or even a small business loan. A low score, or even a nonexistent one can make it very difficult to quality at all but if you do, you’ll pay more in interest charges.

2. Insurers – For decades, the insurance industry has used credit information to help determine if an application is accepted or denied. Further advances have allowed for the development of an “insurance score” based on a person’s credit history to better assess the risk of future claims. Statistically, those with a poor insurance score are more likely to file a claim. Thus, the higher your predicted risk, the higher your rates will be.

3. Landlords – The leasing industry has used credit scores to predict your ability to pay rent and pay on time. If your score leaves a little to be desired, it may be difficult to get a lease, or at least one without a co-signer. In some circumstances, your rent may be higher.

4. Cell Phone Services – Increasingly, cell phone companies are conducting credit checks to see how responsible potential customers will be in terms of paying bills and paying on time. You may be required to put down a deposit, or worse—not qualify at all.

5. Utility Companies – Other types of services are also using credit scores to determine your rates. Those with credit problems may be required to pay a deposit.

6. Employers – Credit reports are gaining popularity among employers faced with the task of finding reliable and honest employees. With your permission, they can look at your credit report. Using it as a screening technique, they can determine if a potential employee would be a good match for positions like bank tellers or couriers. It can indicate financial honesty as well as personal integrity.

Building and maintaining a high credit score will only benefit your and your family, saving you hundreds, even thousands of dollars over your lifetime.

About Christian Credit Counselors :

Click Here to Schedule an Online Consultation with Christian Credit Counselors for Christian Credit Counseling.

Why You Need to Avoid Bankruptcy

debtconsultation — Sun, 02 Nov 2008 19:02:30 +0000

At first glance, bankruptcy may seem like the only possible way to get out of the financial crisis that you’re in. The stress and pressure of debt can certainly be overwhelming. Whether it’s because of something out of your control, such as loss of employment or a medical crisis, or from overspending and self-induced credit card debt, it’s not always the best solution. In fact, most bankruptcy cases can be avoided. Anyone who has been through bankruptcy can tell you what a devastating and life-changing event it was.

Bankruptcy in History:

In the US, federal bankruptcy laws were temporary responses to bad economic times. The first bankruptcy law was enacted in 1800 in response to land speculation, but repealed 3 years later. Two more laws were enacted in the late 1800’s and also repealed. All these laws contained some allowance for discharge of unpaid debts for individuals and corporations. Modern bankruptcy laws emphasize reorganizing. In 1978, the laws were substantially reformed and it was at this time that Chapter 11 & 13 was established. Through the 80’s, 90’s, and since 2000, several more Acts have been passed to clarify rules and protect consumers. For more information, consult The Bankruptcy Yearbook & Almanac.

The Big Myth

Many people think that after bankruptcy you’ll be able to start over financially and have “clean slate.” The reality is that it causes long-term damage not only to your credit report, but to your psyche as well. Bankruptcy will stay on your credit report up to ten years. Even after that, loan applications and many job applications ask if you’ve ever filed. No matter how long ago the bankruptcy was, you’re obligated to answer “yes.” It stays in court records for twenty years. Also, it’s important to realize that not all debts can be discharged, such as alimony, child support, student loans, and most tax claims.

There are also other reasons to avoid bankruptcy that you may not have realized:

· More difficult to qualify for a mortgage or rent a home

· More difficult to qualify for an auto loan or other loans

· You’ll have higher interest rates

· May have to liquidate assets or set up a repayment plan

· Be subject to property repossession

· Time consuming and complicated process

· Prevent or slow personal goals

· Tarnish social status

· Damage business

· Damage marriages

The bottom line is that bankruptcy is not a wise solution for all debtors and it is followed by harmful consequences. The best debt solution is to put all your energy into a debt management program through a professional and licensed credit counseling agency. It’s their job to present a solution to your debt problem. With guidance, you’ll obtain the resources to become debt free, your credit won’t be completely ruined, and you’ll gain peace of mind.

About Christian Credit Counselors :

Click Here to Schedule an Online Consultation with Christian Credit Counselors for Christian Credit Counseling.

Is Your Spouse Sabotaging Your Budget?

debtconsultation — Sun, 02 Nov 2008 19:00:32 +0000

Convincing your spouse to stick to a household budget can be one of the biggest problems for couples who need to cut back, pay off debt, and begin saving. Often, there is one spouse who isn’t so happy with the way the other one is spending. Whether it’s because of overspending from habit or in spite, the family budget needs to be discussed between husband and wife in a respectful, non-threatening way. Otherwise, it will never succeed. Here are some suggestions to try to get your spouse on board:

· Discuss your short and long term financial goals, including savings, to see if you’re on the same page.

· Work together to come up with a reasonable budget that you’re both happy with.

· Highlight the benefits of sticking to the budget.

· Reiterate that it isn’t set in stone; the budget can be revised as time goes on and circumstances change.

· Reinforce each other’s strengths and weaknesses, in terms of your financial relationship.

· Be aware of your tone of voice and language. Stay away from the “you always” and “you never’ approach.

· Agree that neither spouse will make large purchases, such as a new television or stove, without discussing it first.

· Listen openly and try to incorporate some of your spouse’s suggestions.

· Agree to keep anger and resentment out of the discussion.

· Remember, you’re working toward mutual goals.

· If necessary, allocate an allowance for each of you, whereby neither spouse has a say as to how it gets spent. The amount doesn’t necessarily have to be equal; it should be based on need.

Remember, marriage is a relationship of cooperation, commitment, and sharing. Working together will enable your household budget and financial goals to succeed.

About Christian Credit Counselors :

Click Here to Schedule an Online Consultation with Christian Credit Counselors for Christian Credit Counseling.

See How Easily You Can Pay Your Mortgage

debtconsultation — Sun, 02 Nov 2008 18:59:28 +0000

No matter who you are or what financial circumstances you find yourself in, bill paying time is something most of us put off or try to avoid. Your mortgage payment, however, must get paid on time, every month. Why not make it easy on yourself and set up an automatic payment with your lender to ensure it gets paid and take the worry off your shoulders. In fact, most lenders prefer to receive payments electronically rather than through the mail and may even offer incentives for you to set it up. Basically, you need to give your lending institution permission to dip into your checking account every month and make a withdrawal. For those of you who are unfamiliar with the process, here is the set up procedure:

Step 1: Contact your mortgage lender. Find out if they have an automatic payment option. Chances are, they do because it’s in their best interest to get their money automatically every month.

Step 2: Ask for an automatic checking/savings withdrawal form. This will give the lender permission to take the money from your account.

Step 3: Fill out the form and send it in. You’ll need to provide the routing number and checking account number from your check, or they may prefer a voided check or deposit slip. Also, you need to give them the amount, as well as the day of the month for the transaction. For example, if your mortgage payment is due the first of every month, request it to be paid 5 days earlier.

Step 4: Verify payment. Especially for the first automatic payment, make sure the transaction actually went through and was received.

The process works best if you have your paycheck automatically deposited into your account through payroll. This way, the funds will most likely be available and it’s a good way to avoid late fees. It may also give you renewed motivation to keep your checking account balanced and have more control over your spending.

About Christian Credit Counselors :

Click Here to Schedule an Online Consultation with Christian Credit Counselors for Christian Credit Counseling.

Process of applying for a mortgage is a stressful time

debtconsultation — Sun, 02 Nov 2008 18:58:53 +0000

Going through the process of applying for a mortgage is a stressful time. Just looking at the numbers can make you have second thoughts. Understanding the loan process and doing your homework before you even talk to a mortgage lender can alleviate most of the anxiety. Here are some mortgage must do’s that can make all the difference:

1. Fix your credit first—request your credit report and score at least six months before you go mortgage shopping. You’ll have plenty of time to get any errors corrected and pay down debt.

2. Look into first-time home buyers’ programs—often sponsored by state governments, they typically offer lower interest rates than those offered by private lenders. For those with damaged credit or a low down payment, it’s a good option.

3. Get pre approved—this isn’t the same thing as “pre-qualified.” Pre-qualification is when a lender tells you how much money you’ll probably be able to borrow based on what you tell them about your income, savings, and debt – it’s pretty informal. On the other hand, pre-approval is much more formal and involves filling out forms, verifying income, pulling your credit report, etc… After everything is verified and approved, the lender will give your maximum loan amount to you in writing.

4. Don’t borrow the maximum amount a lender will allow—give your budget a little wiggle room. One of the biggest mistake people make is borrowing as much as they can. The pay raise or bonus you’ve been counting on may never happen. Unfortunately, lenders are too willing to let you overextend; it’s their business to loan as much as they can get away with, hoping you’ll give up saving or vacations rather than default on a mortgage payment. Always borrow less than what you’re offered so you can pay your bills, save, and have money to do other things.

5. Shop around and compare rates—Become knowledgeable about the interest rates from various lenders because they will be different. Even just a few percentage points can have an affect on your payment.

6. Fees—Be prepared for the flood of fees. While some may be legitimate, others may be inflated, or worse, just unnecessary. Get a copy of your closing documents in advance to challenge any questionable fees before you sit down to sign. Some can actually be eliminated or decreased.

7. Plan for closing costs—At closing, you’ll be expected to pay for expenses such as taxes, title insurance, attorney’s fees, and homeowner’s insurance, as well as points or other fees. Sometimes closing costs can be up to 7% of the cost of the house. You don’t want to be shocked, so talk to your lender to get a good estimate.

8. Don’t become cash poor—scraping together every last penny you have and raiding your kids’ savings accounts for your down payment won’t help when something unexpected comes up. When you go through the approval process, don’t rely on your entire savings. It’s crucial to keep several months of living expenses available.

About Christian Credit Counselors :

Click Here to Schedule an Online Consultation with Christian Credit Counselors for Christian Credit Counseling.

To Cut or Not to Cut: How many credit cards are too many?

debtconsultation — Sun, 02 Nov 2008 18:58:13 +0000

It’s time to take out your wallet and actually count how many credit cards you have. Then add the ones you have stashed in your desk drawer because they won’t fit in your wallet. You probably didn’t realize how many you’ve accumulated over the years.

It’s not surprising and you’re not alone. Promising better rates, various perks, and lower fees, credit card companies have been bombarding consumers with offers via mail, internet, phone calls, and even in check out lines. You’ve heard cashiers ask “Would you like to save 10% right now by opening a [insert store name here] card?” Of course we’d all love to have 10% off our bills, who wouldn’t? Applications can now be approved within minutes. It’s no wonder why our wallets are stuffed with cards.

What this means for you

Having so many cards can be a red flag for lenders. It shows them your potential for debt and this can negatively affect your credit score and interest rate. Even if your balances are low or zero, credit agencies warn that the more cards you have, the more likely you are to rack up the debt.

What’s the magic number?

Pinpointing an acceptable number of credit cards is difficult because there are many factors to consider:

· Is your debt-to-income ratio increasing?

· Are you able to keep your purchases under 50% of the credit limit?

· Do you have more credit cards than other types of loans or credit accounts?

· Are you experiencing difficulty keeping up with your credit card balances and due dates?

· Can you pay off your balances without charging them up again?

The number of credit cards to carry all depends on your ability to keep up with the payments and pay off the balances. However, the more you have, the better your chances of creating more debt. If you find yourself paying unexpected late fees or other penalties because it’s become difficult to manage you probably have too many.

Try simplifying your life. Fewer cards will help you monitor your spending and bill paying activity. It can also help you avoid deceiving yourself about how much you really owe. On top of it all, the fewer cards you have will minimize the interest and/or fees you’re likely to pay.

About Christian Credit Counselors :

Click Here to Schedule an Online Consultation with Christian Credit Counselors for Christian Credit Counseling.