Thinking about Credit

• Take the amount of the purchase you intend to make and add about 20 percent to it. That's about the average percentage most people pay after you consider monthly interest rate and pay off time. Keeping this in mind makes those hard to resist bargains a little less attractive.  You are not really getting 20 bucks off on that golf club if you put it on your credit card.
  
• Before you make that purchase, think, "Can I pay this off in 25 days?"
  If the answer is no then you should reconsider the purchase. It only takes a few months of not completely paying off your balances to shoot your monthly payment up.
  
• Read the terms very well. Pay close attention to the interest rates and annual fees. Some annual fees are very high. Don't be tempted by a special introductory rate. They are usually for a very short time and your balance is set to the new interest rate as soon as the introduction is over.

Understand that bad credit cost you far more money in higher interest rates on your credit cards and loans. Keep an eye on your credit score by ordering your credit reports at least once a year. Check them for accuracy and be quick to dispute anything that does not seem correct.

Excerpt from Give Yourself Credit
Creditor Direct Strategies

Settling Your Debts
Many times we have been asked, "Can I just delete the negative listing without paying the debt?" In most cases, the question comes from someone attempting to dishonestly escape a financial obligation. While it is true that negative debt listings can be deleted from the credit report - even while the debt remains unpaid - it is also true that these listings stand a good chance of reappearing on the credit file sooner or later. There is a better alternative than attempting to escape the debt.

You can create a true win-win situation by settling the debt with the creditor. It is our experience that the average consumer settles a debt for about 75 cents on the dollar. It is also our experience that a professional negotiator will settle an average debt for about 60 cents on the dollar, including their fee. There is rarely a good reason to attempt your own debt settlement. Creditors will not take you half as seriously as they will take your attorney. Handled properly, you will save time and money by seeking a good attorney to negotiate with your creditors.

Understanding the True Risks and Realities of Overdue Debts
Most consumers overestimate the risk involved with overdue debts. They worry about possible repercussions such as wage garnishment and property seizure by their creditors. When the debt relates to a secured property, such as an automobile or a home, the possibility of repossession is serious, but unsecured debts, such as credit cards and deficiencies are much less pressing.

In fact, very few creditors will push all the way to a garnishment on a relatively small unsecured debt. Garnishment and seizure are a creditor's most terrifying weapons used to collect past due debt, but they are expensive and time-consuming. Even if the creditor went all the way to recover the debt, they probably wouldn't be able to recover enough to offset their collection costs. There is little risk of a creditor taking an unsecured debt past simple collections.

It is important to remember, however, that the creditor would be in his rights to get a garnishment and seize property, even for a small debt. There is some risk of financial reprisals when a debt goes unpaid. Many consumers fold under the perceived strain of unpaid debts. Hundreds of bankruptcies take place in the United States each week for amounts under $5000.

These consumers are so intimidated by their creditors, that they flee to bankruptcy, even though bankruptcy can bring total financial devastation for at least the next ten years. If these same consumers had simply waited, and ignored the threatening letters and telephone calls, they would have realized that their creditors were all bark and no bite. Bankruptcy is the best option for a few consumers, but it is much over-used. And, when a consumer files for bankruptcy, everyone loses - especially the creditors.

The risks of judgments, garnishments, and property seizures must be properly balanced against the likelihood that such drastic collection measures will ever happen. The risks, and the decision to take that risk, are entirely yours if you're in such a position.

Which Debts Can Be Settled?
An unsecured debt is a debt where there is no collateral. Unsecured debts include medical bills, credit cards, department store cards, personal loans, collection accounts, student loans, amounts remaining after foreclosure or repossession, and bounced checks. Most unsecured debts can be settled. But, utility companies generally won't settle for less than the full balance. There are some few creditors, who will never compromise, but most will take a less-than-full payment as settlement in full to close a troublesome account.

Secured, collateralized debts, such as a home or automobile, are another story. If the creditor can simply repossess the property, why should he negotiate? You can often renegotiate a short payment relief with a secured debt, but don't attempt to settle the account while you still possess the property.

Also, the creditor must have a good reason to want to settle. If the account is paid current, and there is no recent history of late payment, it will be difficult to convince the creditor that it is in their best interest to settle. This should not be read as a recommendation that you stop paying your current bills. If you stop paying your current bills, you will almost certainly make your credit situation worse. Perhaps bad credit is not an issue for you at this point and you feel you must stop paying your bills in order to settle them and get back on top of your debt load. If this is the case, you make such a decision at your own risk.