FAQs

Frequently Asked Questions What is credit? The dictionary defines credit in many different ways.  One of the most significant involves financial status or reputation. Credit allows us to take advantage of goods and services and pay for them at a later date.  A good credit history can effect the interest rate of a loan and whether or not a loan will be approved.  A good credit rating can have a direct impact on lifestyle. Why is it important to have good credit? Good credit allows us many privileges including the ability to be viewed as a financially responsible individual. A good credit history comes into play on a regular basis. It can influence a potential landlord, financial institution, retail outlet, and possibly a future employer. How much credit can you afford? First, calculate your net income (total monthly take home pay). Then deduct your fixed expenses (rent, mortgage, utilities, savings) and flexible expenses (food, entertainment, clothing, etc.). The balance is what you have available to repay anything purchased with credit. What is a Credit or FICO score? It is a tally of information on your credit report ranging from 450-850 to predict your credit worthiness. What is debt consolidation? Debt consolidation reduces many loans into one.  It can be beneficial if it makes it easier to pay off debt and reduces collection calls.  It is even better if it also lowers your monthly payment for those debts you consolidate.  If, on the other hand, it does not make it easier to pay off your debts, does not reduce the number of phone calls you receive about your bills, or – worst of all – actually costs you money (beware of hidden charges and /or fees or if the combined interest rate is higher than the existing rate on the debts you consolidated), then it is NOT a good thing.  Remember the old adage:  If it sounds too good to be true, it probably is.  The Useful Links page will direct you to comprehensive debt consolidation information. What if... You are only paying the monthly minimum due? Take a hard look at your situation and see what you can do to increase your monthly payments.  Some suggestions include: • Develop a simple budget and stick to it.  There is a form on the Useful Links page. • Give yourself an allowance.  Make it the smallest amount a week you can live on.  Keep a detailed log for 2 weeks itemizing every purchase you make and the total cost of that purchase.  Re-evaluate your allowance:  make sure it is the smallest you can live on for out-of-pocket expenses. • Stop all optional or discretionary spending. • Double-check your payroll deductions to be sure they are accurate. • Get professional advice.  Even if you are doing or starting to do some of the things mentioned above, getting help before your reach your crisis point is far preferable to having to find help when life is really ugly and creditors and bill collectors are calling and you are thinking bankruptcy is the only way out.  A link to Consumer Credit Counseling may be found on our "Links" page. You have been denied credit. Determine what caused the refusal. Examine your credit reports to see if there are any inaccuracies.  If there are, contact the credit-reporting agency to address them.  (See Credit Bureau on our "Glossary" page for more information.) You cannot pay your bills. Communication is key to preserving your credit record. Explain your situation to each of your creditors and work out a payment plan.  Failure to do so can damage your credit. Bill collectors are calling you. Debt / bill collectors may call you if you are late in making payments on a debt or if an error was made on your account.    Remember, bill collectors are only doing their job.  That you failed to act responsibily is not their fault.  Rather than get angry or refuse to deal with them, most  bill collectors will help you figure out your income, debt and work with you on a payment plan.  Usually, payment plans mean you will pay the full amount over time, with interest accruing.  Why not propose a discounted lump sum payment?  The worst that the bill collector will say is "no" and will usually make a counteroffer.  Also, remember that the collection professionals are experienced in assisting account holders who are having financial problems.  If you refuse even to communicate with the collection professional, they will not be able to determine whether you are one of those individuals who can afford to pay their bill, but are simply refusing or whether you are someone who has inadvertently fallen upon hard times and simply needs assistance working out a satisfactory payment arrangement.   Bill collectors are not mind readers and cannot be expected to know whether you are a "can't pay" or a "won't pay"!