Taking Control of Credit & Debt: A Comprehensive Guide

Taking control of your credit and debt can be a daunting task, but it's a crucial step towards achieving financial stability.

According to the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, credit card companies can no longer charge hidden fees or penalties. This means you have more protection when using credit cards.

Having a credit score of 700 or higher can significantly improve your chances of getting approved for loans and credit cards. In fact, a good credit score can save you thousands of dollars in interest payments over time.

By paying more than the minimum payment on your credit card, you can reduce your debt and start building a positive credit history.

Debt is money you've already borrowed but haven't yet paid back. It's the result of using credit, which is the ability to acquire debt.

Using a credit card to make a purchase adds to your debt. The more you buy on credit, the more your debt grows.

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If you don't pay off all the debt you owe, you'll usually be charged interest, which is the cost of borrowing money.

A wise money habit is to avoid taking on unnecessary debt that you can't comfortably repay. Piling up credit card debt with everyday purchases can strain your budget and make it difficult to keep up with your monthly payments.

Increasing your debt can negatively impact your credit score.

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Understanding the different types of credit can help you manage your debt more effectively. There are three main types of credit accounts: revolving, installment, and service.

Revolving credit is a type of credit that allows you to borrow money up to a certain limit, such as with a credit card or home equity line of credit. You must make at least a minimum monthly payment and any remaining balance carries over to the next month.

Installment credit, on the other hand, is a loan for a specific amount of money that you repay in fixed, regular payments over a set period of time. Examples of installment credit include auto loans, mortgages, and student loans.

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Service credit is a type of credit where you agree to pay a service provider for past services, such as electricity or phone bills.

Here are the three types of credit accounts summarized:

Credit cards can be a useful tool for building credit, but it's essential to understand the basics before applying. The Consumer Financial Protection Bureau (CFPB) is a federal agency that protects consumers in the U.S. market for financial products and services.

Secured credit cards are a type of credit card that can help you build credit if you don't have a history or have a poor credit history. These cards are reported to the three major credit reporting agencies, and some companies will provide an unsecured credit line after a certain period of timely payments.

Some secured credit cards charge higher interest rates than regular credit cards, and annual fees can vary dramatically. Be aware that most banks or card issuers will pay interest on your security deposit, and some cards will charge an application fee or require you to purchase an insurance policy for a fee.

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Here are some key things to know about secured credit cards:

Secured cards are a type of credit card that requires a security deposit, which acts as collateral. This deposit is held by the issuer and can be applied to your outstanding balance if you default on payments.

Secured credit card accounts are reported to the three major credit reporting agencies, making them a good option for consumers who don't qualify for regular credit cards due to having no credit history.

Some secured credit cards can be used to repair a poor credit history, and in some cases, issuers will provide an unsecured credit line after a certain period of timely payments.

Secured cards charge higher interest rates than regular credit cards, and some issuers will charge an annual fee, which can vary dramatically.

Here's a breakdown of the potential fees associated with secured cards:

Travel cards are charge cards that require you to pay off all charges in full each month.

Some examples of travel cards include American Express and Diner's Club, which function like credit cards but have a different payment structure.

Travel cards can be a good option for those who want to avoid interest charges and pay their balance in full each month.

These cards can be used for a wide range of travel and entertainment expenses, such as flights, hotels, and restaurant bills.

Debit cards are a type of card that allows you to spend only what's in your account. They're linked directly to your checking account, so you can't overspend like you can with credit cards.

You can use a debit card to make purchases, pay bills, and withdraw cash from an ATM. Some debit cards also offer rewards and benefits.

Debit cards typically don't have an interest rate or late fees, which can save you money. This is because you're not borrowing money, you're using your own funds.

Some debit cards come with a daily spending limit, which can be a good thing if you tend to overspend. Others may have a low or no limit, which can be more convenient.

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Shopping for Cards can be a daunting task, but it doesn't have to be. The Consumer Financial Protection Bureau (CFPB) is the federal agency responsible for protecting consumers in the U.S. market for financial products and services.

The CFPB's Know Before You Owe: Credit Cards page is a great resource to learn about credit cards. It's like having a guide to help you make informed decisions.

The CFPB is a trusted source of information, so you can rely on their guidance when shopping for credit cards.

Managing credit and debt requires a solid understanding of how credit counseling and debt relief work. A Debt Management Plan (DMP) can help you pay off unsecured debts like credit card bills and medical bills, but secured loans, child support, and taxes are not eligible.

To get started with a DMP, you'll need to work with a credit counseling organization that offers free consultations and resources. Be wary of organizations that charge high fees or pressure you into making "voluntary contributions." Always research the company and understand the fees and terms before enrolling.

If you're struggling with significant credit card debt, consider contacting a debt relief service like credit counseling or debt settlement. However, be aware that "nonprofit" status doesn't guarantee free or affordable services, and debt relief programs come with risks like lower credit scores and lawsuits.

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Credit counseling services are often offered by nonprofit organizations and typically start with an initial counseling session that lasts about an hour.

These services may offer free educational materials and workshops to help you manage your money and debts. You can also get follow-up sessions if needed.

Nonprofit status doesn't guarantee that services are free, affordable, or even legitimate. Some credit counseling organizations charge high fees that they might hide.

They may also urge you to make "voluntary" contributions that can cause more debt.

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A Debt Management Plan (DMP) can be a helpful tool for managing your credit and debt. You deposit money each month with the credit counseling organization, and they use your deposits to pay your unsecured debts, like credit card bills and student loans.

A DMP typically starts with a free consultation to review your credit and finances, and may also offer free resources or workshops on topics like housing and tax debt counseling.

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The initial setup and monthly fees for a DMP are usually low, and you may qualify to eliminate fees based on your total income and federal limits. However, enrolling in a DMP will likely restrict your access to credit, so it's essential to communicate with your credit counseling organization to understand when you can regain access to credit.

Here are some key things to keep in mind when considering a DMP:

If you experience a scam with a credit repair or debt relief organization, you can file a complaint with the Federal Trade Commission (FTC).

Requesting Substantiation of a Debt can be a crucial step in managing credit and debt. Under federal law, if you request information on a debt collector within 30 days of the first contact, the debt collector must provide you verification of the debt, including information about the original creditor.

You can make this request, called “Substantiation of a Debt,” on the phone with a debt collector, although the collector may then require you to send a written request. Sending a written request is the best way to request this information, because it provides a record of the request.

New York debt collection regulations give New Yorkers the right to request additional information on most “charged-off” debts. These are defaulted debts that a creditor removed from its books, and then, typically, sold to another entity to collect.

To make a request for Substantiation of a Debt, you can use a sample letter, such as the one provided by Experian, which can be found in the article section. This letter can help guide you in making a formal request for verification of the debt.

The debt collector has 60 days to comply after receiving the request. During this time, they must stop collection efforts until they provide you with the requested information.

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Your credit report is like a report card for your financial habits. It's a detailed history of your borrowing habits, including identifying information, credit accounts, inquiries, and public record and collection items.

A credit report typically includes information such as your name, past and present addresses, date of birth, and employment history. This information helps lenders understand your creditworthiness.

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Your credit score is also a crucial factor in determining your creditworthiness. A bad credit history can affect the credit that's made available to you or even cause you to be denied credit completely.

Here are the types of information that can be included in a credit report:

If you've been turned down for credit, you have the right to find out why within 30 days. You're also entitled to a free copy of your credit bureau report within 60 days.

Debt collectors can't call you before 8am or after 9pm, and they must stop calling if you ask them to in writing.

If you're struggling to pay your debts, you may be eligible for debt relief programs like debt management plans or bankruptcy. These programs can help you pay off your debts over time and protect your assets.

A debt management plan can lower your interest rates and fees, and some creditors may even forgive part of the debt.

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If you're struggling with debt, there are reputable credit counseling organizations that can help. These organizations offer in-person counseling and certified counselors who can advise you on managing your money and debts and help you develop a budget.

Their counselors discuss your entire financial situation with you and help you develop a personalized plan to solve your money problems. A successful plan requires you to make regular, timely payments, which could take 48 months or more to complete.

You can find these organizations through universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service. Your financial institution, local consumer protection agency, and friends and family may also be good sources of information and referrals.

If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend a Debt Management Plan (DMP). In a DMP, your creditors may agree to lower your interest rates or waive certain fees.

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Here are the two main types of personal bankruptcy:

Filing fees for bankruptcy are several hundred dollars, and you should speak with an experienced bankruptcy attorney to help you understand your options and next steps.

Debt collectors are not allowed to use or threaten violence, making repeated phone calls with the intent to annoy, abuse, or harass you, or using obscene or profane language when collecting from you.

They're also not allowed to call you at times they know or should know are inconvenient, including before 8 am and after 9 pm, unless you give permission otherwise.

You have the right to demand, in writing, that a debt collector stop contacting you, and they must stop most communication.

Debt collectors cannot contact you at work if they know or have reason to know that your employer prohibits you from receiving personal calls, such as debt collection calls, at work.

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You can tell a debt collector the best time to contact you, and they must respect your wishes.

Here are some specific things debt collectors cannot do:

If you're contacted by a debt collector you don't recognize, you may want to request additional information from the collector.

You can request information on a debt collector within 30 days of the first contact, and the debt collector must provide verification of the debt, including information about the original creditor.

Requesting additional information can stop collection efforts until the collector provides the requested information. The collector has 60 days to comply after receiving the request.

You can make this request, called "Substantiation of a Debt", on the phone with a debt collector, but sending a written request is the best way to do it, as it provides a record of the request.

Sending a written request can also help you keep track of when you asked for information and when you heard back from the collector.

You should keep records of your request and the collector's response to ensure you can follow up if necessary.

Even if the collector advises that the alleged debt is not "charged-off", you can still ask for additional information.

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Payday loans are a type of high-cost loan that can trap borrowers in debt, with annual percentage rates often exceeding 400%.

In New York State, payday lending is illegal and can result in a violation of state law. This is because payday loans are designed to be short-term, but most borrowers cannot afford to repay the loan and their other important expenses.

If you're struggling to pay your bills, consider asking your creditors for more time or working with a community development credit union or non-profit financial cooperative. These organizations may provide affordable small-dollar loans to eligible members.

To avoid falling victim to high-cost loan scams, be aware that it's against the law for anyone to ask you to pay in advance to receive a loan or credit card. Legitimate lenders will never guarantee a loan or credit card before you apply, especially if you have bad credit or no credit.

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There is no such thing as a guaranteed credit card. Never pay anyone in advance for a so-called guaranteed credit card.

A legitimate lender will never guarantee you a credit card before you apply, especially if you have bad credit, no credit, or a bankruptcy petition on your credit report.

These scams involve a company claiming that they can guarantee you a credit card if you pay them a processing fee or an application fee in advance.

It's against the law for anyone to ask you to pay in advance to receive a credit card.

Don't ever give out personal information or agree to a loan over the phone or via the Internet.

Here are some red flags to watch out for:

If you see these red flags, it's likely a scam. Don't fall for it!

High Cost Home Equity Loans can be a financial trap. Home equity is the value of your home minus the money you still owe on the home.

To avoid falling into a high cost home equity loan, don't give out personal information or agree to a loan over the phone or via the Internet. This is a common tactic used by scammers to get you to commit to a loan without thinking it through.

Don't let anyone who may be working on your home, like a contractor, steer you to a particular lender. They may have a vested interest in getting you to take out a loan with their preferred lender.

A low monthly payment isn't always a deal. Look at the TOTAL cost of the loan, including interest rates and fees. This will give you a clear picture of what you're getting yourself into.

Here are some red flags to watch out for when considering a home equity loan:

If you're considering a home equity loan, take your time and read everything thoroughly. Don't sign a document that has blank spaces or pages in it that the lender promises to fill out later.

You're dealing with debt collectors and lawsuits can be a real challenge. Under state and federal laws, you're protected from abusive, deceptive, and unfair debt collection practices.

You have rights when dealing with debt collectors, and it's essential to know them. You're entitled to be treated fairly and honestly, and collectors can't harass or threaten you to get you to pay.

If you're sued by a debt collector, the New York State Unified Court System has information on your rights and how to handle a debt collection lawsuit. You can even learn how to overturn a wrongful judgment against you.

You're contacted by a debt collector and you're not sure what to do. Under state and federal laws, you're protected from abusive, deceptive, and unfair debt collection practices.

Many people struggle with debt collectors calling from companies they've never heard of. You have rights when dealing with debt collectors, and knowing them can help you protect yourself.

Debt collectors must follow specific rules to ensure they don't take advantage of you. These rules include not calling you at unreasonable hours, not using abusive language, and not threatening to sue you unless they intend to do so.

If you're unsure about the debt or the collector, you can ask for proof of the debt and the collector's identity. This can help you determine if the debt is legitimate and if the collector has the right to contact you.

You don't have to deal with debt collectors alone. There are tools and tips available to help you navigate the process and protect yourself from being defrauded into paying a debt you don't owe.

If you're facing a debt collection lawsuit, you have rights that the New York State Unified Court System can inform you about.

The court system has information on how to handle a debt collection lawsuit, which is crucial in making the right decisions.

You may be able to overturn a wrongful judgment against you in some cases, according to the court system's information.