I was going to discuss how to get around the feeling that you can't afford your bills this time, but I decided to switch to dealing with collection agencies instead. If you are in the same boat I was, there's a good chance you already have a bill or two...or five in collections. First thing is to remember that this is not the end of the world. There is always a way out...always.
Most collection agencies are willing to set up a payment plan with you, if you contact them. The important thing to to call them as soon as you get the first bill. When you call, you will give them your account number or social security number and they'll pull up your file. When they ask you how you would like to pay, simply say that you can't pay the entire amount right now and you would like to set up a payment plan. Tell them how much you can afford to pay...whether it's $50 a month or $20 every paycheck. They'll most likely ask for your account information to set up direct deposit on said dates. If you're not comfortable with that, you can say that you will either pay them via check or online...even if they say they don't prefer that method of payment, if you send a check...they'll deposit it and it will come off your bill.
The most important thing to remember is that all they want is the money. It's nothing personal against you, they were hired by the credit company or loan company that you originally owed money to and they're just doing their job. What a lot of people don't realize is that they are often willing to settle and allow you to pay less money to satisfy your debt depending on the bill and the time that you're willing to pay it off in. I was in a situation that I owed $900 to Sprint and I told the collection agency that I could afford to pay them $100 a month, which I did for about 3 months. Then someone at work told me that you can negotiate with them, so I called again and asked if they could set up a deal with me. They said yes and brought the total amount due from $600 to $400 if I could pay it off it 2 months time. They took $200 out of my bank account on that day and set up the other half to come out at the same time next month, giving me enough time to budget and set aside enough to pay the remainder. This way, all I had to do was be a little tight with money for 1 month so I could save $200!! What a deal! Well, not really. The reason they're willing to negotiate is because chances are, a good chunk of the money you owe is either in late fees or finance charges, but whatever...it's still less than you thought it would be.
Negotiating works with most debt collections, but not with all. Medical bills are non-negotiable if you had insurance pay for part of it. I had to go to the emergency room after a root canal because my whole faced swelled up on a Saturday (no dentist is open) and I got some meds. After my insurance paid their part, I still ended up owing $700. I set up a payment plan with the hospital but missed too many payments and they sent me to collections. Recently, I called to see if I could negotiate, the woman said I could, only if my insurance didn't cover the procedure so I ended up having to pay the full amount. I was disappointed because I had negotiated before and now I was stuck...so I set up a payment plan with the collection agency and I stuck to it until my bill was gone.
Another common misconception is that the second your bill goes to collections, it's noted on your credit report. This is not the case. It normally takes about 9 months for your debt to show on your credit report, so if you're afraid of having more negative things on your credit report (I sure was) you have time. But don't take that time for granted. They will report it once that time is up. A payment plan should prevent your debt from being reported because you're paying them something...not just ignoring it.
Another thing that people often don't realize is that you have rights. The debt collector has boundaries that they cannot pass otherwise you can report them to the FTC (Federal Trade Commission). They are not allowed to call you before 8 a.m. or past 9 p.m., talk to you in a demeaning manner, curse or swear, badger you with constant phone calls, or call you at work if you told them not to. My boyfriend and I rented an apartment together and decided to get a puppy. This cute little dog decided to rip apart the carpet and pee on everything. We tried to fix what we could and get the stains up, but it wasn't enough. When we moved out, we got slapped with a $1600 fee in addition to taking our security deposit! We didn't read the fine print that stated that if we didn't pay the bill in 10 days it would be sent to collections, so it was. They started calling and we immediately tried to set up a payment plan, but they wouldn't have it. They said all or nothing. So we waited until we had some money saved up and called again, still no. Then the calls started. This man called at all hours of day and night, called my cell phone, my boyfriend's cell phone, and started calling us "worthless deadbeats", "liars", "low lifes" and worse. So I went online to www.ftc.gov and filed a complaint. The company is still being investigated and the result can be getting money back, or us being able to sue them.
Just remember that they are just doing their job and they are often friendlier than you may think. Just call and ask to negotiate some sort of deal, the worse they can say is no!
Sunday, April 20, 2008
Thursday, April 17, 2008
Which Bill to Pay First?
Realize you're in debt...check. Contact credit companies...check. Start paying off bills...ummm where do I start? If you feel this way, you're not alone. A lot of young men and women who take the first step to get rid of debt get a little overwhelmed when they take a look at what they really owe. They don't know where to begin. Don't worry! There are several ways that you can go about it and I'm going to tell you about 3 successful options.
1. Pay off 1 bill at a time.
As far as I can tell, this is the most popular method. It consists of choosing a bill and putting all of your extra money towards it until it's gone (while at the same time not neglecting other bills). I recommend starting with the 1 with the highest APR or the smallest balance. If you want to avoid paying more money right now, you should choose the card or bill with the highest APR. This is because the sooner you get the balance down, the less you'll be paying. (Always check your APR rates, they're probably higher than you think). But, if you're looking for instant gratification, I would pay off smaller bills first. This way you get the satisfaction of physically getting rid of a bill, which can provide motivation to continue. Either way, you're well on your way.
2. Pay of a little of each with each paycheck.
This is a method that can work if you stick to it, but it can also make you feel like you're running around in circles if you don't pay enough. When you split your income among the bills you have, they're all getting lower, but not very quickly. This is a good plan if you're trying to get on track with paying your bills on time. Just take a calendar, mark you're paycheck days and split it evenly (don't forget about rent and food!). Over the course of the next few months all of your bills will decrease and you can get into a bill paying rhythm. But if you're looking to get satisfaction quickly, I would choose method 1 or 3.
3. Choose 1 bill per month.
This is good if you're not looking to pay off one bill at a time, but you don't want to keep splitting your extra money to cover several bills. I came up with this easy method myself and my debt has seriously decreased. After paying your monthly bills in total, take any amount of money you have left over (we'll talk more about budgeting another time) and put it toward 1 bill. You choose which one, it could be the one with the highest balance or lowest balance. As mentioned with #1, it can be more satisfying to pay little bills off first (the ones that won't come back like store cards, medical bills, or loans), but because you're taking a substantial amount of money to it (you already paid the minimum balance, remember?) it will make a serious dent in the balance, leaving you with a feeling of accomplishment. This is a great way to get several bills down in a matter of months. If you have 4 credit card bills and pay the "bulk" money to 1 each month, in 4 months you have 4 bills that are much lower, if not gone! This method doesn't have to be by months either, you can do it every 2 weeks or 2 months or whatever you feel comfortable with.
Regardless of which method you choose, always remember to pay more than your minimum balance for each bill (not including utilities, unless you're backed up on your payments). If you simply pay the minimum balance, you're doing nothing more than paying your finance charges, if that. Even 5 dollars more (you can spare that don't worry) will get you ahead in the long run.
Next time..."AHHH...I can't afford this!"
1. Pay off 1 bill at a time.
As far as I can tell, this is the most popular method. It consists of choosing a bill and putting all of your extra money towards it until it's gone (while at the same time not neglecting other bills). I recommend starting with the 1 with the highest APR or the smallest balance. If you want to avoid paying more money right now, you should choose the card or bill with the highest APR. This is because the sooner you get the balance down, the less you'll be paying. (Always check your APR rates, they're probably higher than you think). But, if you're looking for instant gratification, I would pay off smaller bills first. This way you get the satisfaction of physically getting rid of a bill, which can provide motivation to continue. Either way, you're well on your way.
2. Pay of a little of each with each paycheck.
This is a method that can work if you stick to it, but it can also make you feel like you're running around in circles if you don't pay enough. When you split your income among the bills you have, they're all getting lower, but not very quickly. This is a good plan if you're trying to get on track with paying your bills on time. Just take a calendar, mark you're paycheck days and split it evenly (don't forget about rent and food!). Over the course of the next few months all of your bills will decrease and you can get into a bill paying rhythm. But if you're looking to get satisfaction quickly, I would choose method 1 or 3.
3. Choose 1 bill per month.
This is good if you're not looking to pay off one bill at a time, but you don't want to keep splitting your extra money to cover several bills. I came up with this easy method myself and my debt has seriously decreased. After paying your monthly bills in total, take any amount of money you have left over (we'll talk more about budgeting another time) and put it toward 1 bill. You choose which one, it could be the one with the highest balance or lowest balance. As mentioned with #1, it can be more satisfying to pay little bills off first (the ones that won't come back like store cards, medical bills, or loans), but because you're taking a substantial amount of money to it (you already paid the minimum balance, remember?) it will make a serious dent in the balance, leaving you with a feeling of accomplishment. This is a great way to get several bills down in a matter of months. If you have 4 credit card bills and pay the "bulk" money to 1 each month, in 4 months you have 4 bills that are much lower, if not gone! This method doesn't have to be by months either, you can do it every 2 weeks or 2 months or whatever you feel comfortable with.
Regardless of which method you choose, always remember to pay more than your minimum balance for each bill (not including utilities, unless you're backed up on your payments). If you simply pay the minimum balance, you're doing nothing more than paying your finance charges, if that. Even 5 dollars more (you can spare that don't worry) will get you ahead in the long run.
Next time..."AHHH...I can't afford this!"
Monday, April 14, 2008
Facing Your Fears--Contacting Credit Companies
Sometimes it feels like you're in such a debt-hole that there's no way to climb back out. Some people just keep avoiding the problem, like I did, and then some people tackle the problem head on (the better thing to do). The thing is, if you keep letting more and more time go by, you will continue to get late fees and finance charges that can more than double the amount you already owe. Follow the next 3 steps and you have begun to diminish debt from your life. I did and afterwards I felt like a huge weight had been lifted off my shoulders.
1. Call the company.
Yes call. Call and speak to someone (don't forget to get their name) and explain the situation. Say that you want to pay off your debt and would like to see if they can set up a payment plan for you. Explain that you only have x amount of dollars to give them at a time and in most circumstances they'll be happy to work with you. Remember, they want their money and are most times willing to take a little bit of a loss to get at least something in return. When I called my first credit company and told them I could pay 100 dollars now and then 100 dollars in 2 weeks, the creditor told me that all I had to pay was 115 dollars to bring my account up to balance. What a deal! I owed way more than that in fees, but what I didn't realize was that they can waive over charges and finance charges to bring the payment down. So ask them what they can do for you, if they're willing to decrease the amount great, if not, you're not any worse off than you were before.
2. Make Payments.
Once you speak to the company, you have to continue to make the scheduled payments on time every pay period. You're getting a break, so don't make the company think that you're not reliable. If you have extra money, put it towards you bills. Even if it's 5 dollars it's still 5 dollars less that you owe.
3. Put other things on hold.
Not your bills! If getting rid of straggling debt means not going out to the bar or going to the movies, it's worth it! I'm not saying never do anything that's fun, but before you go out socially or buy something ask yourself which is more important, going to a movie, club or bar that you will have nothing to show for afterwards or putting the money you would have spent there towards your debt. It didn't take me long to realize that it felt much better to pay something off than to feel guilty about going out when I had other responsibilities to take care of first.
Follow these three things and I'm sure you'll start to get rid of your debt and start building a way to less stressful life.
Next time...Which bill to pay first?
1. Call the company.
Yes call. Call and speak to someone (don't forget to get their name) and explain the situation. Say that you want to pay off your debt and would like to see if they can set up a payment plan for you. Explain that you only have x amount of dollars to give them at a time and in most circumstances they'll be happy to work with you. Remember, they want their money and are most times willing to take a little bit of a loss to get at least something in return. When I called my first credit company and told them I could pay 100 dollars now and then 100 dollars in 2 weeks, the creditor told me that all I had to pay was 115 dollars to bring my account up to balance. What a deal! I owed way more than that in fees, but what I didn't realize was that they can waive over charges and finance charges to bring the payment down. So ask them what they can do for you, if they're willing to decrease the amount great, if not, you're not any worse off than you were before.
2. Make Payments.
Once you speak to the company, you have to continue to make the scheduled payments on time every pay period. You're getting a break, so don't make the company think that you're not reliable. If you have extra money, put it towards you bills. Even if it's 5 dollars it's still 5 dollars less that you owe.
3. Put other things on hold.
Not your bills! If getting rid of straggling debt means not going out to the bar or going to the movies, it's worth it! I'm not saying never do anything that's fun, but before you go out socially or buy something ask yourself which is more important, going to a movie, club or bar that you will have nothing to show for afterwards or putting the money you would have spent there towards your debt. It didn't take me long to realize that it felt much better to pay something off than to feel guilty about going out when I had other responsibilities to take care of first.
Follow these three things and I'm sure you'll start to get rid of your debt and start building a way to less stressful life.
Next time...Which bill to pay first?
Sunday, April 13, 2008
How did I get here?
Do you cringe when the phone rings? Do you not like to open your mail because you're afraid of what you may see? Does the though of your ever-decreasing bank account make you want to vomit? Well, you're probably struggling to get out of debt like millions of other Americans are right at this very moment, and not too long ago, I was one of them.
When I got my first credit card, I had my mother's words in the back of my head saying "Never put more on your credit card than you can pay off in one month." Sure, I thought, no problem. But having that card with a 1500 dollar limit in my wallet was way more temptation than I can handle (who gives a seventeen year old that much money anyway!). At first I was good, I didn't really use it that often and I paid it off as soon as I could...then things changed. I was traveling a lot to visit family and got a frequent-flier card and the smart 18-year old I was, put all of my tuition onto that card for the semester. Bad move! It took me almost a full year to pay off something that I could have paid cash for. After that I kept applying for more and more cards and credit companies kept giving me more and more cards.
Things were ok until I moved out of my parents' house. I seemed to be missing due-dates, a lot of them. Collection calls started and I kept ignoring them. I don't know why exactly, I worked and could definitely make the minimum 15 dollar payment, I just didn't for some reason. Being on my own made me nervous with my money. What if I couldn't pay rent? What if I couldn't pay for food? I surely wasn't going to give up my weekly going out money, going to bars and club was what I did for fun and dropping a 200 dollar bar tab in 1 week didn't seem too extravagant for me at the time. So, I kept ignoring the bills, ignoring the calls and before I knew it...POW...I was going to collections and my credit score was 546 (a.k.a. really bad).
I'm writing this blog to help out all of the other young girls and boys that are just discovering credit and debt and show them how to keep their credit good or fix the bad credit they've made. I'm 23 years old and for the first time in 3 years I'm seeing the light. I know that doesn't sound like a very long time, but I finally pulled myself up by the bootstraps and took my problem head-on. I'm not out of debt, not by a long shot, but I have control over it now and I'm getting closer and closer each month to raising my credit score and get debt off my back.
In the entries to follow I will go over how to assess what damage there really is and how to take care of it the right way.
When I got my first credit card, I had my mother's words in the back of my head saying "Never put more on your credit card than you can pay off in one month." Sure, I thought, no problem. But having that card with a 1500 dollar limit in my wallet was way more temptation than I can handle (who gives a seventeen year old that much money anyway!). At first I was good, I didn't really use it that often and I paid it off as soon as I could...then things changed. I was traveling a lot to visit family and got a frequent-flier card and the smart 18-year old I was, put all of my tuition onto that card for the semester. Bad move! It took me almost a full year to pay off something that I could have paid cash for. After that I kept applying for more and more cards and credit companies kept giving me more and more cards.
Things were ok until I moved out of my parents' house. I seemed to be missing due-dates, a lot of them. Collection calls started and I kept ignoring them. I don't know why exactly, I worked and could definitely make the minimum 15 dollar payment, I just didn't for some reason. Being on my own made me nervous with my money. What if I couldn't pay rent? What if I couldn't pay for food? I surely wasn't going to give up my weekly going out money, going to bars and club was what I did for fun and dropping a 200 dollar bar tab in 1 week didn't seem too extravagant for me at the time. So, I kept ignoring the bills, ignoring the calls and before I knew it...POW...I was going to collections and my credit score was 546 (a.k.a. really bad).
I'm writing this blog to help out all of the other young girls and boys that are just discovering credit and debt and show them how to keep their credit good or fix the bad credit they've made. I'm 23 years old and for the first time in 3 years I'm seeing the light. I know that doesn't sound like a very long time, but I finally pulled myself up by the bootstraps and took my problem head-on. I'm not out of debt, not by a long shot, but I have control over it now and I'm getting closer and closer each month to raising my credit score and get debt off my back.
In the entries to follow I will go over how to assess what damage there really is and how to take care of it the right way.
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