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Can debt settlement companies help me?

June 29th, 2010 at 01:52 pm

You have seen them on tv many times before. "Let us settle your debt for pennies on the dollar" They advertise being able to settle for 60% off of what you owe. Sounds like a great idea doesn't it? I went through this disaster first hand and want to prevent anybody else going through it.

First thing you need to ask yourself is. Are you behind on your credit card bills? If you answered no, then be prepared to get behind. Because the first thing they are going to tell you to do is to stop paying your bills and to not communicate with your creditors.

But of course they are not going to do this for free. What they do usually is they have you make monthly payments to them. I believe we paid somewhere around $200+ a month. The first 3 months of payments go right into the pocket of this company. Then after that they get half of your monthly payment and the other half goes into an account to "save up" money to pay when a credit card will settle with you.

A credit card company will not settle with you unless your usually 3-6 months behind on your bills. When you are so far behind the credit card company will make you an offer to settle your debt. In the meantime while we were "saving up" with this company to settle our debts, I was sued by 2 different credit cards. That is about enough to scare you to death. I immediately quit using this company and worked out the debts myself

Why would you purposely stop paying on debts that were not behind in the first place to wreck your credit and fill your life with harassing phone calls from credit card companies?

Work through your debts yourself. Don't look for a magic pill to solve all your financial problems because it will only lead to grief.

Credit Scores are Stupid

June 26th, 2010 at 08:29 pm

Why to people cling to their credit score like its the most valuable thing in the world? A credit score actually helps keep the bank in business. To keep a high credit score you need to borrow money, borrow it often and pay it back. What is the point? People need to stop worshiping their credit scores.

Lets look at what makes up a credit score.

35%- How you pay your bills

30%-Amount you owe and available credit

15%-Length of Credit History

10% Mix of Credit (credit cards, loans, ect)

10%-New credit applications

But what if I want to buy a house, Don't I need a good credit score? No you don't. Banks can actually give you a mortgage loan by doing what is called manual underwriting. This is where they actually look at you as a person (if you paid rent on time, job history, ect) And not just look at your Credit Score.

If you stop borrowing money your credit score is slowly going to go down, eventually it will be zero. But does that really matter? Not if you promise to never borrow money again. And yes its true that car insurance companies are using your credit score to determine your yearly premium. But I would rather pay a little more on my insurance than keep borrowing a bunch of money just to keep a worthless credit score high.