To thoroughly understand this article, here are some definitions of common terms you might come across. A bad debt is any form of credit where what is owed has not been reimbursed within the terms and conditions of the borrowing agreement. A debt tends to become bad where it is unlikely that the loan provider will ever regain the money. Having a bad debt on your file will make it harder when you want to take on a loan in the future.

The National Debt Line is a nationwide helpline. It offers (free of charge), individual and private counselling to individuals on handling debt conflicts in the United Kingdom. Their helpline service can be reached all week long and they also have an internet site that has a lot of useful help and support on it. The National Debtline is part of the Money Advice Trust (MAT), which is a registered charity. The Money Advice Trust (MAT) gives consumers an ordered approach to handling critical debt so that they might regain control of their finances.

There are two types of debt - priority debts and non-priority debts. If you are experiencing financial difficulty and are unable to service all your debts, it is important that you understand the type of debts you have. That way, you can make sure that any money you have left every month to pay for debts goes towards the most important (ie: the priority debts) first.

Priority debts
These debts are where the companies you owe money to - the creditors - have the power to take severe legal actions against you if you fail to pay. The amount of the debt does not make it a priority, but what the creditors can do to recover their money from you that makes it a priority debt.

Examples of priority debts:
. Mortgage arrears - your mortgage lender can repossess your home
. Rent arrears ? you can be evicted by your landlord if you are in arrears
. Fines - fines such as those for traffic offences or magistrates court fines - child support, maintenance, council tax or rates. The Court can instruct bailiffs to possess your goods. If you still owe money after this, you can be sent to prison
. VAT and income tax - you can be imprisoned for non-payment of income tax or VAT or at the very least, made bankrupt
. Hire purchase - it depends on what the item, is, but, for example, it will be a priority debt if it is a car and you need it to get to work - if you do not pay the debt, it will be repossessed.
. Utility debts (eg gas, electricity debts) - your utility supply will be disconnected

These need to be repaid before your non-priority debts, so do not offer to repay any of your non-priority debts before dealing with these.

For non-priority debts, you are unlikely to lose the roof over your head or get imprisoned. However, you still do need to make an offer to pay ? otherwise your creditors will still take you to Court - and could send the bailiffs in.

Examples of non-priority debts:
. Overpayments on benefits
. Arrears on credit or store cards
. Overdrafts and loans (unless the loan is secured against your property, then it becomes a priority debt)
. Catalogue arrears
. Hire purchase - goods on HP that are non-essential, such as sofa or audio equipment

Popularity: 100% [?]

Low interest credit cards are available for those people and businesses with good enough credit to qualify for one. They are attainable if you know where to look. Visit creditcards8.com to compare credit cards by their interest rate online.
The differences in what credit card companies are charging for interest rates are alarming. Low interest credit cards are generally considered to be fewer than 10% interest rate. High interest credit cards can soar to over 30% in some cases. You need to be well informed of just how many credit card opportunities are available to you before making a selection.

Keeping the low interest rate over the lifetime of your account is easy if you play by the credit card company’s rules. All payments must be paid on time. No late payments will be tolerated by the credit card company. They will take away that low interest credit card and turn it into a default rate interest. This is usually the highest possible interest rate that they can charge you by law, around 30%. Yes thats right 30% is the average default rate. Credit card companies can do this even if the payment that you make late isn’t made to them. It can be any other bill that you have paid late on. If it is reported to the credit bureaus, chances are, your credit card company will find out about it and send you a notice of change in terms or something similar.

Finding a low interest credit card that you qualify for will benefit you in many ways. Most credit cards come with a very low to 0% introductory rate for balance transfers. This can potentially save you thousands of dollars over the life of your introductory period. If you transfer a balance from a credit card that has a high interest rate, the amount you pay will come directly off of the balance and no additional interest will be charged during the introductory period. You may even be able to pay off your debt completely with a low interest credit card that has a 0% introductory period. Divide the amount that you transferred by the number of months they allow for the introductory period . This will be the dollar amount it will take for each monthly payment to have it completely paid in full when your introductory period is over.

If you need a low interest credit card because you are thinking of making a big purchase that you want to pay off over a period of time, consider finding a card with an introductory rate on purchases made within a certain time frame. You might even get lucky and find a 0% on purchases. This lets you buy the item now and pay for it with no interest at all. They allow you to borrow money for free under certain conditions.

Popularity: 98% [?]

From bartering in ancient times, to metal coinage, to paper currency, the latest stage and development in the evolution of currency is credit and credit ratings. With increasing ease and usage of the internet, and e-commerce, electronic transfers and so-called “plastic currency” is fast replacing cash.

The way credit works is that it is a record of your spending and borrowing habits, and is used to determine effectively, how trustworthy/dependable you are with a particular transaction, will you be likely to make good on payments, or be unable to pay on time, if indeed at all? Whilst this is a simple mechanism to protect retailers from debt and bad creditors, it can be overly harsh, catching people somewhat unfairly meaning they are unable to buy things, or buy them at such a generous rate. Therefore, it is crucial that you maintain a clean and proactive credit rating. Just as sidenote, no reputation is as bad as a negative reputation, after all, if there is no history or record of your credit transactions, how else will lenders know you are worth the risk and effort?

Bizarre as it may seem, you have to buy credit in order to get your first (crucial) step on the credit rating ladder. Think of it like Ebay with its feedback system, once you establish yourself with small, inconsequential transactions, then the bigger items will be much more accessible. A great place to start is by opening a savings account, this is a huge plus with lenders, and the bank in question may offer you a credit card. If you do get a credit card, make sure to pay off any and all debts and outstanding charges immediately. This will ensure you are not hit with penalty charges, as well as increasing your credit rating “that your a prompt customer”.

Use retailer programs, so for any large purchase, which offers instalments of a fixed amount per month spread over an agreed period of time are a great way of increasing your credit. Just make sure the retailer in question will actually reward you for your work by reporting your loan (or instalment payments) to the major credit bureaus.

For a shortcut, get a co-signer for any loans you take out. This will allow you to take advantage of their credit score, and will also provide the lenders with an extra assurance that should you be unable to pay, then payment can be recovered from the co-signer. Note that this is double-edged sword, whilst you get the benefit of the co-signers good reputation, they will bear the brunt of your bad reputation if you fail to keep up with payments or generally default. If you are going to act as co-signer for someone, be very careful and draw up a clear strategy to avoid getting a bum deal.

Remember you are legally entitled to access your credit report at anytime, and this can give you a clearer idea as to what areas you need to improve upon to increase your flagging credit score.

Popularity: 96% [?]

There are lots of people are unable to pay their bills or loans due to their poor financial conditions. Due to heavy rates of interest they find difficulty in repaying the amount. Thus, huge amount of bill get debited on their name over the years. Debt consolidation is the right option for them to settle all their old mounted bills. Debt consolidation companies give loan at very low rate of interest and with the help of debt consolidation service people can overcome their bad credits. One can apply for the debt loans from the financial institutions and this debt loan may not free him from the payments, but it definitely lessens his problems by reducing multiple debts into single monthly payments, which become convenient for one to repay.

A debt consolidation company first checks the credit history of the individual before giving a debt loan. To deal with creditors for the settlement of payment at low rate of interest, debt consolidate services employ trained professionals who arrange for a small monthly payment to help one repay his past loan amount. Normally, it’s very difficult for a bad creditor to get another loan owing to his past records and in such situations debt consolidation loan is a boon. If you are in a similar position, you may choose a reputed debt consolidation company with an established track record.

There are many online debt consolidation services from where you can avail the details about the debt consolidation service. You simple have to browse through the Internet and get the details by reading articles and reviews. Choose a company that gives you loan at a lower rate of interest than others. So, it is wiser to compare the loan rates with other companies. Before going for a debt loan, calculate separately the terms of loan and the amount of with the interest on it. Also make sure the company is authentic and not a hallucination. It is a must to ensure that you do not get trapped by wrong people, as this would make your life even more difficult than before. Normally, the debt consolidation companies talk with creditors to reduce the loan interest and also shorten the length of the loan period. Even the creditor co-operates with them because this helps them get back their loan amount.

Popularity: 70% [?]

The correct way to respond to a collection letter is with a written request for debt validation. This is your right under the Fair Debt Collection Practices Act (FDCPA), and if done in a timely and correct manner can produce fantastic results. Let’s start with the law: FDCPA § 809. Validation of debts [15 USC 1692g (b) “If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.”

Timing is Everything

Please note that there is only a 30 day window of opportunity to request your debt validation. Collectors must abide by the laws spelled out in the FDCPA, but these laws only mandate a response for the 30 days following the date of the initial collection letter. Beyond the 30 day window collectors have no obligation to provide the documents that you request and you have lost the opportunity to force compliance. Don’t procrastinate. Your credit is too important.

Why Validate the Debt?

Why request validation of a debt? There are two good reasons that you should request debt validation on every collection letter you receive, even if it looks legitimate. First, how do you know that the collector has the legal right to collect? You don’t! Debt is regularly sold, and just as often re-sold. You may have incurred an obligation with the original creditor, but you don’t know anything about the party that is currently demanding payment. So exercise your rights and ask them to prove that they own the debt. Secondly, how do you know that the amount of the debt is correct? Is the interest calculated properly? Are there other fees added? You deserve to know. As with any other credit repair tool, it’s about exercising your rights!

The Debt Validation Letter

Let’s get to work. Write a letter to the collector. Make it neat. Reference the debt using the identification they provided in the collection letter, such as collector account number, creditor account number, creditor name, etc. Clearly state that you dispute the collection and that according to the FDCPA you demand that the collector provide proof that they own the debt and have the right to collect, as well as proof of the amount owed by providing a copy of your signed credit agreement with the original creditor and a complete accounting of amount in question. Attach a copy of the collection letter, and send it certified mail. If you are not comfortable doing this yourself contact a reputable credit repair company. Most legitimate credit repair businesses offer debt validation as part of their arsenal and will be happy to do this for you.

The Response

What happens next? Once you have sent a debt validation letter to a collector they must satisfy your request with adequate documentation. Ownership of debt may be proven with a contract or purchase agreement transferring the debt to them. The amount owed may be documented with account statements from the original creditor, or a copy of the original signed loan agreement and an accounting of the total. It is never sufficient for the collector to provide their own internal itemization of the debt. In all cases, the documentation should be clear and provide definitive proof of the collectors claim.

Say Goodbye to the Collector

What happens if the collector cannot (or does not wish to) provide the documentation that you request? If they can’t comply …they can’t collect, they can’t contact you, and they can’t report the collection to the credit bureaus. It’s that simple. And it is likely that you will never hear from them again.

An Important Note

Our credit repair clients occasionally express concern that if the collector is pushed too hard they will send a summons and attempt to get a judgment. It is not legal for a collector to take any additional steps to collect, including getting a judgment, until they have satisfied their obligation under the FDCPA. If you receive a summons after challenging a collector with a debt validation letter you will need to appear in court with proof that you requested validation. Going to court is not an attractive option, but if you kept proper records and appear with your certified mail receipt you will prevail.

Popularity: 59% [?]