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In the late 1980s and early 1990s, the number of credit and debt counseling agencies in America increased significantly. An antitrust lawsuit was filed against the NFCC, arguing that the presence of creditors on the NFCC’s Board of Directors constituted monopolistic practices. As a result of this litigation, creditors agreed to fund non-NFCC member agencies as well.
These sharp increases of credit counseling activity also created other, more serious issues in the industry. By the early 1990s, abuses by certain credit counseling organizations were so significant, it led to criticism of the entire industry.
A credit counseling agency typically receives most of
Read more…Criticism of credit counseling (United States)
The first credit counseling agencies were created in 1951 in the United States when credit grantors created The National Foundation for Credit Counseling, or NFCC. According to W. Patrick Boisclair, Chairman of the NFCC’s Board of Trustees, “the NFCC initially monitored legislative and regulatory activity for its retail credit members” and “also conducted public awareness campaigns on credit.”(source) Their stated objective was to promote financial literacy and help consumers avoid bankruptcy, but they did not serve as collection agencies for the creditors. The first local credit counseling franchises emerged in the 1960s, offering education and counseling directly to consumers.
In 1993,
Read more…History of credit counseling
After joining a DMP, the creditors will close the customer’s accounts and restrict the accounts to future charges. The most common benefit of a DMP as advertised by most agencies is the consolidation of multiple monthly payments into one monthly payment, which is usually less than the sum of the individual payments previously paid by the customer. This is because credit cards banks will usually accept a lower monthly payment from a customer in a DMP than if the customer were paying the account on their own. Some DMPs advertise that payments can be cut by 50%, although a reduction
Read more…Common features of Debt Management Programs
Regardless of your particular need, selecting the right credit counselor is vital. Unfortunately, some organizations, including some that label themselves “nonprofit credit counseling agencies,” may be more interested in their own bottom line than in helping their clients. A 2005 report by a U.S. Senate investigating committee observed: “Some new entrants to the industry, however, have developed a completely different business model – a ‘for-profit model’ designed so that their non-profit credit counseling agencies generate massive revenues for for-profit affiliates.”
By contrast, the report lauded the National Foundation for Credit Counseling (NFCC) for its commitment to ethical credit counseling that
Read more…Guidelines for Selecting the Right Credit Counselor
As surprising as this may sound, the vast majority of consumers don’t know what their credit score is. That fact is almost as bad as not knowing what your blood pressure is, because by the same token, by the time you discover that it is not where it should be, it is frequently too late to avoid the detrimental or adverse effects of a poor credit score, or high blood pressure.
Sometimes, credit scores go by the name of FICO scores. Approximately ten percent of your FICO score pertains to a detailed analysis of the number and types of accounts
Read more…Improve Your Credit Rating
Keep your balance low in relation to your available creditKeeping your credit balance to 25% or below your available credit is a good general rule. But, don’t open credit accounts you don’t intend to use just to increase this ratio.
Pay your bills on timeLate payments make a huge (negative) impact on your score. If you have missed payments, get current and stay current.
Make more than the minimum paymentIf you make only the minimum payment on your credit card each month, it may take longer than you think to pay off your balance. For instance, say you have a
Read more…6 Ways to Improve Your Credit Score
Paying bills lateOne of the biggest factors in determining your credit score is your past payment history. While one or two late payments on your credit cards, loans, or other important obligations over a long period of time may not significantly damage your credit record, making a habit (or mistake) of it can count against you.
Not paying the minimum amount requiredI f you don’t pay at least the minimum amount due, your creditors will eventually report your account as past due, which can damage your score. Additionally, paying less than the minimum can result in late fees and additional
Read more…7 Common Mistakes That Can Lower Your Credit Score
Understanding the language of credit cards will help you make informed decisions when choosing one. Below is a list of some of the most commonly used credit card terms.
Annual FeeThe once-a-year cost of owning a credit card. Some credit card providers offer cards with no annual fees. The annual fee is part of the total cost of credit.
Annual Percentage Rate (APR)The yearly interest rate charged on outstanding credit card balances.
BalanceAn amount of money. In personal banking, balance refers to the amount of money in a savings or checking account. In credit, balance refers to an amount of money owed.
Credit BureauA
Read more…Credit Card Terminology
InterestWhen you use your credit card, the issuing bank is really giving you a loan for the amount of your purchases. The bank charges a fee, called interest, for using its money. The credit card company pays the dress shop or the furniture store within a few days of the transaction, and you must begin repaying the loan when your monthly statement arrives in the mail.
All interest charges can usually be avoided by paying the balance in full within the time limit specified on your statement. Obviously, the quicker the balance is paid in full, the less interest is paid.
Read more…Understanding Credit Costs
Know your limit – Obey your credit limit. Exceeding your limit may be deemed a violation of your account agreement and may result in additional fees or penalties, an increased interest rate, or the freezing or cancellation of your account.
Pay on time – Whether you choose to make the minimum payment or to pay the total outstanding balance, your payment must reach the financial institution or business by the payment due date. Otherwise, you could incur late fees, and you may damage your credit history.
Stay in good graces – Many payment cards offer a grace period within
Read more…How to build good credit
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