The Freedom From Debt Blog

Credit scoring company Fair Isaac has announced that major changes are coming to the credit scoring system.  The changes, termed FICO 08, will attempt to correct what many feel are problems with the current credit scoring systems. 

Some of the major changes will involve:

• Small delinquincies of less than $100, generally non-credit related, will have a reduced impact or may be ignored, which will boost the scores of many people who have seen an overdue library fine or past due utility bill show up on their credit report.
• The authorized user piggybacking scheme, in which an authorized user can potentially help his or her credit score by piggybacking of the main account holder’s good credit, will no longer work.
• Changes to make credit scores less vulnerable to manipulations and “quick fixes” to artificially raise credit scores.

More analysis on the forthcoming changes is available here: http://www.visioncredit.org/fico-08-brings-new-enhancements-to-credit-scoring/.  You can also read more about how your current credit score works, directly from myFico, here: http://www.myfico.com/Downloads/Files/myFICO_UYFS_Booklet.pdf.

Thousands of borrowers who have student loans with Sallie Mae, the nation’s largest student loan lender, are seeing their credit scores plummet due to an error in Sallie Mae’s reporting to credit bureaus.  The error affects borrowers who are using the company’s graduated payment plan, which allows the borrow to make smaller payments, at times low enough to cover only the interest, for a limited period of time.  After the specified time period, payments are increased to a normal level.

Within the past week, Sallie Mae began reporting these customers to the credit bureaus in a way that basically shows them as delinquent.  As a result, many of these consumers are seeing their credit scores plummet. 

Sallie Mae has acknowledged that the reporting is due to error, and does not reflect a change in policy on how these loans are reported.  Still, consumers will suffer with drastically reduced credit scores until the error is fixed, effecting their ability to obtain credit. 

The error is only effecting consumers’ credit score with Equifax.  TransUnion and Experian credit scores remain unaffected by the error. 

As more and more people turn to the internet for their shopping, research, and various other needs, the popularity of online debt consolidation sites (and spam) has skyrocketed.  We generally recommend speaking with an accredited credit counselor who can answer questions, walk you through the process, and help you decide whether consolidating your credit cards with a debt management plan is the right option for you.  However, we understand that a growing number of people prefer to complete the entire process online without having to speak with a counselor.  With that in mind, here are some tips for consolidating your credit cards online. 

Choose the Right Site

When you choose a credit counseling (or debt consolidation) website, you should carefully research the organization that the site belongs to.  You should follow the same steps you would follow when choosing the right credit counseling agency offline.  For example, you’ll want to:

• Check with the Better Business Bureau to see if the agency is a member and has a good rating. 
• Ensure that all of the counselors are accredited or certified by a reputable organization. 
• Know in advance of any fees the agency may charge.  Be sure to get an explicit quote on if the agency charges a counseling fee, setup fee, monthly fee, or if the agency keeps your first payment as a fee. 

You will also want to determine beforehand whether or not consolidation is beneficial to you. 

Consolidate Your Credit Card Debt With Personal Financial Network

Personal Financial Network does offer online debt consolidation for those who wish to complete this process online.  We do recommend that clients give us a call at 866-406-4132 if you have any questions or problems with the online process, or if you are still unsure if consolidation is the right choice for your situation.  Otherwise, you can consolidate your debt online here, or simply get a free quote on what your monthly payment will be. 

If you are struggling with high interest rates, rising monthly payments, or high fees on your credit card debt, a DMP, or debt management plan, may be the solution you have been looking for.  If you are behind on your credit card bills, or simply want to get out of debt and are struggling to see any progress, you could benefit from speaking to an accredited credit counselor about a DMP.

How a Debt Management Plan Works

When you enroll in a debt management plan, your credit counseling agency contacts your creditors and negotiates some benefits for you that can be difficult or impossible for you to get on your own.  Through the dmp, you may get benefits such as lower interest rates, waived late and over the limit fees, and one low monthly payment.  Your credit card debt is typically paid off between 3 and 5 years, potentially saving you tens of thousands of dollars in interest and finance charges.  A debt management plan is not like a bankruptcy or debt settlement:  the dmp is designed to help you get out of debt while improving your credit score. 

Could You Benefit from a DMP?

If you are over six months behind on all of your credit cards and they are all charged off or held by collection agencies, you probably will not see much benefit from a debt management plan.  DMP’s also cannot help you with child support, tax debt, government guaranteed student loans, or secured debt such as mortgages and car loans.  However, if you have credit card debt that you want to get rid of, you could potentially benefit.  If you are a few months behind, if you have high interest rates, or if you are simply struggling with credit card debt, you should speak to a reputable, accredited credit counselor who can help you determine if a DMP is a good option for you. 

Many of us at one time or another have found ourselves in a position of needing help to pay the bills.  Whether it’s mounting medical bills, rising credit card debt, or simply unexpected expenses, it can be very overwhelming when you do not know where to turn for help.  Many people either panic or simply ignore the situation, which can often put you in an even deeper hole.  So what options do you have when you need help paying your bills?  [Read more →]

The House of Representatives passed a bill on Thursday aimed at slowing down the rapidly rising costs of secondary education and decreasing the burden of student debt.  Despite strong opposition from the Bush administration, the bill passed easily by a vote of 354-58.  The legislation proposes to establish a list, published by the federal Education Department, of the most expensive colleges in the nation.  The bill also hopes to limit how student loan companies use relationships with college officials to gain access to the student body. 

 A main goal of the bill is to discourage universities from raising tuition by publizicing which colleges are the costliest to students.  States that decrease funding to public colleges and universities would also be at risk of losing federal funding.  Many lawmakers expressed hope that the bill would create a much more affordable, less financially complex higher education system.  An amendment to the bill would also require college to report how much of their endowment they are spending to keep the costs to students down.   

Maybe you overspent your budget over the holidays, or maybe you have been struggling with credit card debt for several months now.  Whatever your situation, if you are in over your head in debt and dread seeing your credit card bills every month, you might be able to benefit from credit card consolidation.  Consolidating your credit card bills can potentially solve many of the problems you are experiencing due to your financial situation.  Here are four major problems that can be solved when you consolidate bills.  [Read more →]