If you are in debt, well over your head in debt that is, there are options to help you overcome this situation. Let’s examine five possible responses and uncover which ones lead to true debt relief.

1. Declare bankruptcy. Not as easy as it used to be especially since Congress passed and the president signed into law legislation to toughen personal bankruptcy laws earlier this year. Still, it is an option for some. Just remember: depending on which course of action you take, Chapter 7 or Chapter 13, it can have a long term impact on your credit standing.

2. Consolidate your debt through a consumer credit counseling service. Be careful as often all these companies do is get your interest rates reduced for a period of time, earn money off of your payments, and sink your credit rating! You can probably negotiate directly with your creditors for relief and save yourself money as well as your good name.

3. Get a consolidation loan. Watch out as this means borrowing from the equity you have in your house [secured credit] to pay off debt that is unsecured. Do you really want to expose your most valuable asset in that way?

4. Debt settlement. Just because you owe $50,000 to creditors does not mean you absolutely must pay it all back. With the services of a company who would arbitrate on your behalf, you can get real debt relief without the stigma of bankruptcy. Yes, your credit would take a bit of a hit but it it isn’t the same as bankruptcy. You could then get out from under the remaining debt over a period of time.

5. Sit on it. In other words: do not do a thing. Sure, it is an appealing option for some but you cannot run and you cannot hide. Better to choose one of the first four options than this one!

Debt relief is possible, but it requires determination and research on your part. If you are using the services of another company to help you gain debt relief, make sure you read the small print and check out their references. Ultimately, your credit standing is in your hands. Do not trust it to those who are not actively working on your behalf.

Matt Keegan is The Article Writer who writes about topics from Aviation to Zoos. For samples of some of his work, please visit http://www.thearticlewriter.com

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Most of us don’t talk about money, finances, credit, debt….Young people especially go into the real world blind about these issues. They have had it easy or difficult growing up financially. Some kids use their parents credit cards or are even issued one. Some don’t have anything above the necessities. Then some “EARN” an allowance and are taught to spend conservatively. I think all of us have a responsibility to steer them in the right direction.

It is necessary to establish credit. Choose, for example a reputable credit card company. Often this can be obtained through the credit union or bank where an account has been active. Carefully read all of the disclosure. Pay close attention to the interest, grace periods and penalties. Most importantly, spend the way you always have and absolutely no more. Charge one or two of the usual expenses and be sure to pay the bill on time. This creates the needed credit and good score to buy bigger things.

Credit is a good thing in some ways. But as we all know it is more often a problem. One problem is people lose control of spending. I think there’s something psychological that makes it easier to sign a piece of paper than to write a check or whip out the cash. One is your money, the other doesn’t seem to be. The worst part of being up to your eyeballs in debt is that it snowballs quickly and usually hopelessly. There are debt reduction programs and free consultation services and unfortunately bancruptcy. But it’s easier not to get there. Another problem is bad credit on the report that’s incorrect. Amazingly this happens very often and consumers aren’t usually aware of it until they apply for something. It pays to check about once a year. If something is in error it’s usually not difficult to get it corrected.

I had a young man (19) come to see me yesterday. He said he wanted to buy a house and no one would pay attention to him. What a sad statement. He has belonged to his credit union for years. He has rented a house for a year and paid the utilities. He’s a certified mechanic who took first place in the state. He has worked in the same field for several years. That’s more stability than I’ve seen in some forty year old people. John went to the credit union and spoke to someone in the mortgage department. I’m fairly confident it went well and I will find him a good property and a good deal because I know him and I’m proud of him. I think he was hesitant to talk to me because his mom and I are best friends. I wish the other people had treated him with the respect this young man deserves.

Suzie is a certified residential appraiser, licensed real estate broker and an expert author with twenty years experience in the business. Other professionals in the field have contributed as well. http://www.freewebs.com/realestatenews

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Most of us are aware of the credit score - a numerical quantity widely used to assess your credit worthiness. But there’s another scoring tool that can debar you from getting credit. It’s the Bankruptcy Risk Score - a supplementary score that most creditors and lenders scrutinize prior to offering credit.

Personal bankruptcy seems to be a major consumer credit problem for lenders and credit providers. Since creditors cannot recover losses due to bankruptcy without litigation, so consumers filing bankruptcy are more costly for them. The year 2005 has experienced record number of bankruptcy filings - at least 31.6% higher than 2004 prior to the new law coming into effect.

But the new law has hardly helped debtors. Reports suggest that only 3.3% of the debtors could get rid off debts using debt management plans. The mandatory credit counseling sessions under the new law proved useful to only a maximum of 5% and minimum of 1%-2% of the filers. Here lies the need for Bankruptcy Risk Score to make debtors more aware of how much credit they can deal with. On the other hand, creditors and lenders get the extra edge over traditional scores, as they are better informed of the consumers’ credit status. This helps them in making credit decisions accordingly.

Creditors assess the score when you apply for a mortgage, a credit card or any other bank card. Before extending credit, banks may also review the score while checking your accounts. Banks need to maintain a standard capital-to-risk ratio, and Bankruptcy score enables them to evaluate the risk within their portfolio. A combination of your credit score and spending habits (how you use credit card, shopping card, etc) helps in the evaluation.

You may be looking for a single loan, either a mortgage or an auto loan. But multiple lenders may ask you for the credit report. In order to make up for this, while determining the Bankruptcy score, multiple auto or mortgage inquiries are taken as a single inquiry. Over applying for credit also matters a lot as far as this score is concerned.

Bankruptcy Risk Score Vs FICO Score

Unlike the FICO credit score that gives a general overview of your credit history, the Bankruptcy Risk Score highlights your chances of getting bankrupt. The score varies from -200 to 2018, with the most ranging between 0 - 1000. Higher score indicates greater risk of filing bankruptcy. This is in contrast to the FICO scoring model where a low score implies there is higher risk in offering credit.

With Bankruptcy Risk Scores, creditors can:

• Supervise existing portfolios
• Decide upon the initial credit limit
• Raise or lower the existing credit limits.
• Determine the collateral requirements for mortgages and other secured loans.
• Identify lower and higher risk debtors and then offer loan programs as per their payment ability.

Bankruptcy scores are not available to consumers, only the creditors are informed about it by credit reporting agencies. However, the credit reporting agency, Experian has decided to provide consumers with such scores, knowing which consumers can anticipate debt problems and thus be more cautious. Experian has also compiled the following list of states with higher bankruptcy scores.

Texas

Nevada

New Mexico

Louisiana

Arizona

With a high bankruptcy score, you can hardly get credit at some of the best rates prevailing in the market. Just like you go for a credit repair in order to raise your FICO score, you should look forward to different means of improving the bankruptcy score.
Here are some easy-to-follow steps to guide you in the process.

Pay your bills in time:
Late payments or missed payments create a negative impact on the bankruptcy risk score. Other factors affecting the score are accounts being referred to collection agencies, repossessions or an already declared bankruptcy. You can avoid such situations by using automated payment system which helps you to pay in time. You may also check out with the credit reporting agencies for any error or dispute in your credit report.
Maintain a low debt balance:
Keeping a low debt balance, that is, a low balance-to-limit ratio is necessary. Using up a credit card beyond the limit affects your score. But you can have multiple cards with minimum balance on each. And, in case you have indeed crossed your credit limit, you may consult the creditor for an alternative repayment plan.

Open accounts only when required:
It’s better not to open several accounts within a very short period of time. This can lower both your credit score as well as Bankruptcy score. Credit report statistics show that an individual applying for new credit 6 times in the past 1 year is 8 times more likely to file bankruptcy than others are.

Bankruptcy score depicts whether you will be bankrupt, delinquent or go through a charge off in future. With this score, analysis of your credit history becomes more precise with creditors being well-informed of your credit status. While creditors and lenders can judge your credit worthiness better, you too can decide as to whether you can afford to manage debts, provided you know your score.

Jessica Bennet is a financial writer associated with the MortgageFit Community. With her knowledge and experience, she has made a mark in writing and advising on all financial issues. Her guidance and support has helped us in building up a strong Community where all the members contribute towards industry development.

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