DEBT MANAGEMENT INFORMATION
Swimming in Debt--What are the Options?
Are you having a hard time making ends meet during this recession? Have your hours been cut, have you been laid off or are you having a hard time budgeting your money to pay all of your bills including rent? While being in debt can be overwhelming and emotionally draining there are resources available to help you manage your debts.
Steps to Managing Your Debts
Set a budget. Make a list all sources of income and fixed expenses (expenses that typically don’t change), such as rent or mortgage payments, car payments and insurance payments. Now, cut costs on everything else, starting with food, clothing and entertainment. Budget Web sites can help you categorize spending and identify ways to save.
Reach out to your creditors. While you might be reluctant to ask your creditors for help, it is still worth a try. Creditors (e.g., credit card companies, utility companies, etc) may be willing to lower your interest rate, reduce your finance charges or lengthen your payment time if you call and explain your need for assistance. It is important to note that the federal Fair Debt Collection Practices Act requires debt collectors to treat you fairly by prohibiting certain methods of debt collection.
Consolidate your debt. Consolidating your credit debt can help to lower your interest rates and your payments. If you are in debt, get free and low-cost help from a trained, certified counselor who will assist you in determining the best options to meet your individual needs. Credit counseling programs can help manage your debts, offer solutions to your current financial problems and develop a personalized plan to help you prevent future financial issues. Be aware of red flags - some credit services are more likely to rip you off than restore your credit. For information on selecting the right credit counselor, click here.
Beware of Check Cashing and Payday Loans
There are check cashing places and payday loans all over the country. During financially challenging times, they might seem like an option however, costs can add up quickly and get you in more financial trouble. Click here to learn more about check cashing and payday loan institutions.
If you are facing financial troubles, always consider other alternatives such as negotiating with creditors or reaching out to friends and family instead of using check cashing and payday loans.
Important Information about Your Credit
As a consumer, it is important to stay on top of your credit even during times of financial troubles. Good credit is extremely valuable. Having good credit means that you can borrow funds to purchase things you would otherwise have to save for years to afford including homes, cars and a college education. It is also critical to renting a home and in some instances, obtaining employment. Credit is an important financial tool, but it can also get you in trouble and in serious debt beyond your ability to repay if you are not careful. That is why learning how to use credit wisely is one of the most valuable financial skills you can learn. For more information on credit, click here.
Access Your Free Credit Report
Missing payments or making late payments can affect your credit rating and your ability to access credit in the future. Creditors usually consider a number of factors including your credit history in deciding whether to grant you new credit. This is why it is important to make sure your credit report is accurate. For example, if your credit report shows that you were once late in making a payment but continues to show that you are delinquent (and you are not), it needs to be corrected immediately. Credit reporting agencies must show that your payments are current. You are protected by the Fair Credit Reporting Act which requires credit bureaus furnish correct and complete information to businesses to use in evaluating your applications for credit, insurance or employment.
By law, you can access a free copy of your credit report from AnnualCreditReport.com (maintained by the Federal Trade Commission). You can also get your free credit report by calling 1-877-322-8228. AnnualCreditReport.com provides you with the secure means to request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies (Equifax, TransUnion and Experian) in accordance with the Fair and Accurate Credit Transactions Act (FACT Act). You should be aware that there are numerous ads on the internet claiming to offer free credit reports – do not use these sites – they often try to get you to sign up for other costly services.
Tips to Protect Your Credit
Check your credit card and bank statements each month. It is important to check your statements each month to make sure the only charges that show up are yours.
Check your credit report at least 3 times a year. You can spread out your free credit reports from annualcreditreport.com over the course of 12 months. (You can request one credit report per credit bureau per year.) For example, you can request onecredit report from Experian, four months later get your second report from TransUnion and four months after that, request your third report from Equifax. If you find a problem and work with one credit bureau to get it corrected, this bureau must pass along the info to the other two bureaus. FICO scores are not part of these free reports but you can request your scores directly from the credit bureaus by phone or online for a small fee. It is important to know your FICO score because lenders use these scores to make lending decisions. The higher your score, the less risky you are in the eyes of a lender.
Protecting Your Identity
Identity theft is when someone finds and uses your personal information including your social security number, credit card or bank account information for their own gain often leaving you without any money in your bank and multiple charges on credit card accounts! To learn more about identity theft, click here.
Financial management Toolbox
There are several tools available to help learn to successfully manage your money.
Financial Literacy Tools
Foster Care Alumni of America would like to thank the Freddie Mac Foundation for their generous support in making these resources available. To learn more about Freddie Mac, visit the Freddie Mac Foundation website.
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