Average Amount of Credit Card Debt for Americans

We are frequently asked about the average amount of credit card debt carried by American consumers. I'm not sure why somebody would want or need to know this, aside from basic trivia. But the question is asked frequently enough to warrant a brief discussion. Emphasis on the word "brief."

The average amount of American credit card debt will vary based on whom you ask. When researching this article, I found a variety of averages given by many different sources. So instead of trying to put my own spin on the subject, I'll just cite some of the statistics I found during my research.

Credit Card Debt Statistics

According to a Nilsen report from April 2009, the average amount of credit card debt per American household was just over $8,000 (at the end of 2008). This statistic pertains to people who currently have an open credit card account, as well as those who do not.

When you only consider people with at least one card open, the average amount of credit card debt increases to more than $10,000. This is according to an article on CNNMoney.com.

The question is: Are the above statistics true, or have they been "selectively interpreted" to serve some kind of agenda? Here's something else to consider:

In an article on MSN, author Liz Pulliam Weston claims that these statistics are downright deceiving -- if not patently false. She points out that the majority of Americans have no credit card debt at all (citing a survey by the Federal Reserve). She goes on to say that "of the households that do owe money on credit cards, the median balance was $2,200 ... [and] only 8.3% of households owe $9,000 or more."

Like I said the numbers and statistics can be deceiving, because it varies based on whom you ask. It also varies based on the particular data being interpreted, and the manner in which it is interpreted. If there is some king of political agenda to be served, you can bet the data will be loosely interpreted at best.

Average Debt Doesn't Really Matter

Here's my advice. Stop worrying about the average credit card debt among American consumers, and start worrying about your own personal finances. It doesn't really matter where you fall in relation to national averages. It only matters how well you manage your own credit usage.

Having too much credit card debt can lower your credit score, which limits your chances of getting car loans, mortgages, and any other type of financing that requires a credit check.

Falling deep into debt also lowers your quality of life, by giving you one more thing to worry about. It's like falling into a financial sandpit -- every time you try to dig yourself out, the ground slides beneath you. The average amount of American debt means nothing to you, but the amount you are carrying means a lot. So manage it accordingly.

Related articles:

• Best Ways to Pay Off Debt
• College Students and Credit Card Debt

If you have any questions about managing your credit and/or debt, try using the search tool at the top of this page. There are more than 200 credit articles on this blog, so you're bound to find some helpful information.

Can I Negotiate a Credit Card Debt Reduction In This Economy?

Reader question: "I have heard about credit card debt reduction in the past, but I was wondering if these types of programs are still available in the current economy? I have about $15,000 in debt that I want to pay down, so that I can be in a better position to buy a home next year. Is there any way to negotiate a reduction with my card issuer?"

There aren't very many formal programs (if any) designed specifically for credit card debt reduction -- at least, not that I know of. Sure, you can negotiate with your card issuer to try to waive certain fees, or maybe even lower the interest rate. But these companies generally don't offer any formalized debt reduction plans, because it goes against their entire business model.

The Reluctance to Negotiate

You have to think about it from the perspective of a credit card company. Their goal is to have their customers carry debt -- and to pay interest on that debt -- for as long as possible. The ideal customer for a card issuer is the one who maintains a credit card balance for his or her entire life. That way, they can continue to make money in the form of interest and fees.

Bearing this in mind, you can understand why they wouldn't want to negotiate or offer credit card debt reduction plans. It reduces their revenue!

The Best Way to Reduce Your Credit Card Balance

The best way to achieve a reduction in your credit card balance is to establish a budget to pay the debt down over time. I have written about that in the past, and you can find an article about paying down your debts here on the blog. If you have more than one card, you should focus your efforts on the one with the highest interest rate first. By putting more money toward this card, you will save the most in the long run and get your finances under control more quickly.

You'll also need to pay more than the minimum balance due each month, because the minimum balance is designed to keep you paying forever. Remember, the credit card companies want you to maintain a balance for as long as possible. This is how they make money through interest rates and fees. So they generally establish a minimum payment that is mathematically designed to keep you paying for life.

If you pay no more than the minimum balance due, you will not be able to make any significant reductions in the balance you have accumulated. That's why it's important to establish a budget that allows you to pay more than the minimum.

Another proven technique for credit card debt reduction is to send a payment every 14 days. As you know, card statements generally come once a month, so the average consumer makes one payment against credit card debt every month. But if you are able to double up your payments -- by sending a payment every two weeks -- you will pay down your balance much more quickly. This is a good technique to use for that card with the highest interest rate (i.e., the one that costs you the most money each year).

With New Credit Card Laws, Debt Reduction Is Less Likely

If you have been watching the news over the last month or so, you've probably heard that there are some new laws going into effect that will regulate the credit card companies. In fact, the first phase of those new laws went into effect just last week. The next major phase will go into effect in February of 2010.

These laws are designed to end a lot of the abuses of the credit card industry, such as jacking up interest rates on responsible customers and charging outrageous fees. As a result, these laws will reduce the revenues made by these companies. So you can bet that they will be less likely to entertain a debt reduction plan than they might have been in the past.

NFCC Offers A New Payment Strategy

While there aren't very many credit card debt reduction programs available these days, there is still plenty you can do to reduce your balances. We've already talked about the best way to reduce your debt, which is simply to establish a budget and pay the balance down. But there are other ways to negotiate with a credit card company as well, and one of them was recently announced by the National Foundation for Credit Counseling (NFCC).

The NFCC is a Nonprofit Organization that offers financial counseling to consumers in the United States. Their headquarters is located in Silver Spring, Maryland, but they have offices all over the country. The NFCC recently announced a program designed to help consumers pay down their credit card balances. Basically, they help you negotiation with your card issuer in order to have certain fees waived, or even to reduce the interest rate on your current balance. In Exchange, the cardholder would make every effort to pay down the remaining balance.

"This represents a significant action on the part of the creditors to take additional steps to help consumers, which is our collective mission," said Susan C. Keating, president and CEO of the NFCC.

This new program is called the "Call to Action" initiative, and you can learn more about it by visiting the NFCC website.

I don't know how willing the credit card companies will be to embrace such a plan, based on everything we've talked about so far. But it would be a disservice if I did not at least mention it to you, because it has a lot to do with credit card debt reduction, how to negotiate with your card company, and other topics discussed in this article. At the very least, it's worth looking into.

New Credit Card Rules Going Into Effect - August 2009

If you've been watching the news over the last 48 hours, you've probably heard that some new credit card rules and regulations are going into effect soon. It's actually the first in a series of new rules that will come over the next few months, and this one goes into effect on August 20, 2009.

Essentially, these new rules will give cardholders additional time for paying their bills and for considering a rate increase. Here's a summary of the new credit card regulations that will take effect this week:

• The credit card companies must now give their customers 45 days' notice before they raise interest rates on a card. This effectively triples the current requirement of 15 days. *
• Upon receiving notification of a rate increase, the customer can choose to pay off the remaining balance at the current rate -- but he or she won't be able to use the card anymore.
• Credit card bills must now be mailed 21 days before their due date, as opposed to the current requirement of 14 days. This gives cardholders an extra week to make their payments.
• This is only the first installment of new rules and regulations that will go into effect. The next milestone date is in February of 2010, when another set of credit card rules will be implemented.
  

* Eventually, the card companies will not be able to raise rates on their existing customers (at all), unless the customer is 60 days late or more on making a payment. This is one of the new credit card rules that will take effect early next year, in 2010.

But pay close attention. When you close one door on this industry, you can bet they'll find a window around back. Here is what I mean...

New Rules Will Create New Tricks

You can bet that the credit card companies will find ways to make up for their losses, after these new rules go into effect. All of the new regulations (that take effect over the next year) will reduce the amount of money they make from fees. So I recommend that you keep a sharp eye out for changes to your policy.

I already received a letter from American Express telling me they were going to raise my interest rate -- due to "changes in the economy." I am an excellent customer with not a single missed payment. So if it happened to me, it will happen to millions of Americans. Like I said, keep an eye out for it.

It's also a safe bet that it will be much harder to qualify for a credit card in the near future. The days of "credit for all" will soon be over. And if you ask me, this is a good thing.

New credit card rules are certainly needed. The industry has gotten out of hand with the kinds of money-making tricks they pull. It's time to reign them in with some new regulations -- the kind of rules that are actually enforced.

But if there is one thing we have learned from the financial industry over the last few years, it's this. When you establish new rules to limit the tricks they can play, they will work hard to create a whole new set of tricks. You've been warned.

How to Correct Credit Report Errors

How can I correct my credit report, and why is it important to do so? That is the subject of today's lesson. So let's jump right in and talk about why it's important to correct errors you might find on your credit reports.

When you apply for a mortgage loan, a car loan, or any other type of financing, the lender is going to review your credit score. In truth, this is only one of many things they will review when considering you for loan. But it's also one of the most important criteria. Your score is derived from the information contained within your credit reports, and those reports are a reflection of your financial history and habits.

Dealing With Credit Report Inaccuracies

Unfortunately, credit report errors are a fairly common thing. I once saw an independent study that suggested more than 70% of consumer credit reports contained errors of some kind. So why is this such a big deal? Well, when you have erroneous information within your reports, it can lower your score. So, by extension, these credit report errors can reduce your chances of getting approved for a mortgage or any other type of loan.

That is why you must correct errors whenever you find them. Of course, you cannot correct any mistakes until you get copies of the reports and review them for accuracy. So that's the first step in the process we will discuss.

Step One - Get Copies of Your Current Reports

This is actually the easiest step in the whole process. By federal law, you are entitled to receive a free credit report from all three of the reporting bureaus, once per calendar year. You can request your reports by visiting the government-mandated website at AnnualCreditReport.com.

Step Two - Review You Were Reports for Errors

Here's an article I wrote in the past that explains how to read your credit report for accuracy. It also explains the key sections you will find in your reports when reviewing them. Basically, you are looking for any information that is inaccurate or outdated.

Inaccurate information might include a misspelled name, an incorrect address, or -- even worse -- an incorrect Social Security number. Outdated information may include a negative entry on your report that is beyond the expiration date.

Negative information (such as missed payments and other delinquencies) can only remain on your credit report for up to seven years. Bankruptcy information can stay on their for up to ten years. But beyond those expiration dates, the negative entries must be removed from your credit reports. If they are not removed at the right time, you can dispute it with the credit reporting company that produced that particular report.

Step Three - Dispute Any Errors That You Find

If you find an error on one or more of your credit reports, you should correct it immediately. We already talked about the reasons for this, so let's move on to the actual process that takes place.

All three of the credit-reporting companies (Experian, Equifax and TransUnion) have a "disputes" section of their websites. You can find it from the home page of these companies, and you can initiate the dispute process online. In some cases, you may need to follow the online process by mailing certain documentation. For example, if you have documents that support your dispute, you should send those to the credit reporting company as well. This will increase the chances that they correct your credit report errors in the manner you have requested.

Step Four - Proper Follow-Up

That is how to correct errors in your credit reports, step by step. But there is one important thing we haven't talked about yet, and that is persistence.

The reporting bureaus don't really have any incentive to correct your reports. It takes time and effort on their part, but they really don't get anything out of it. Yes, they are required by law to investigate all disputes, and to make timely corrections were needed. But this doesn't change the truth regarding the credit industry -- and the truth of the situation is that you must stay on top of them to get your reports corrected.

I recommend keeping a log or journal of all the actions you take to correct your credit report errors, such as documents you have sent, any applicable names and dates, and whatever correspondence you have with the people at the reporting bureau(s). If everything works like it should, you won't really need any of this information because your reports will be corrected in a timely and proper manner. But if your dispute is ignored for any reason, you'll be glad you kept notes along the way.

Credit Report Errors Are a Reality

In a perfect world, you wouldn't need to know how to correct errors on your credit reports, because they would never happen in the first place. But we obviously don't live in a perfect world, and the truth is these errors are fairly common. So the best thing you can do is research the process required to make corrections, and pursue it with diligence and determination.

I hope this article helps you correct your credit report, and I wish you all the best in your financial endeavors. If you have additional questions about this or any other credit-related topic, try using the search tool at the top of this website. You might also want to review the related articles listed below.

Related articles:

• How to Fix Credit Errors - And Why You Should
• Writing a Letter to Dispute Your Credit Report

Thanks for visiting our website, and good luck!

Raising My 600 Credit Score After Late Payments

Reader Question: "I am seriously considering purchasing my first home in 2010. Unfortunately, my credit score is a bit below 600 and my credit report is full of late payment history. I have successfully paid off all balances just recently. At this point, what steps should I take to begin raising my credit score? Thanks."

It sounds like you're off to a good start, simply by paying down your balances. You might want to check your reports again, just to make sure they reflect the pay-offs you've made.

Keep in mind, however, that the history of late payments will stay on your credit reports for up to seven years from the last default. So they will have a negative impact on your scores for some time. But that negative effect will lessen over time, provided you do everything else right. This means paying all of your bills on time, maintaining low balances on your credit cards, etc.

If your credit score is 600 right now, and your late payments are far in the past, there's a chance your score has "bottomed out" at 600. This means it will continue to increase in conjunction with (A) the amount of time that passes, and (B) the proper use of credit going forward.

Here's an article + video on our blog that's worth a look:
How to Raise Your Credit Score Fast

As already you seem to realize, a 600 credit score is too low for mortgage qualification -- at least by most lenders' guidelines. I don't even know if you could get an FHA loan with a 600 score, plus or minus. But don't despair! If you follow the plan presented in the article and video I've linked to above, you should be able to improve your 600 credit score steadily over time. The only thing I cannot answer (or anyone else for that matter) is how long it will take.

Related Q&A sessions:

• I cannot get my credit score over 600
• How can I raise my score from 499 to 750?

I hope this helps you out, or at least points you in the right direction. Good luck breaking through the 600 barrier. I'm sure you'll do just fine in the long run.

How Can I Check My Credit Score Online for Free?

Reader question: "Every time I visit a mortgage or real estate website, I see ads for free credit scores and reports. Is this a gimmick, or can I actually check my credit score online for free someplace?"

This question is too complex for a yes or no answer, so let's take a step back and look at the bigger picture of credit reporting. And I promise to answer your question before all is said and done.

Credit Score Terminology

Everything I'm about to tell you will make more sense if we start with a few definitions. When you're dealing with websites that allow you to check your credit score online (for free or otherwise), there are generally three pieces to the puzzle. You generally have the credit reports, the scores, and some form of monitoring service.

You don't always need all of these things to accomplish your objectives, but they are generally present when you try to check your credit score online.

So let's talk about each one of these items in turn:

• Credit Reports -- You actually have three different reports, one for each of the credit reporting agencies that maintain data on U.S. consumers. You can get all three of your reports for free once per year, so there's really no need to discuss them further in this article. What you need to know about your reports is that they are used to produce your credit scores (which are the numbers used by lenders to determine your creditworthiness).
• Credit Scores -- When you apply for a home loan, or any other type of major financing, the lender will review your FICO credit scores. And just like the reports mentioned earlier, you have three of these scores as well -- one for each of the reporting bureaus. I have yet to find a website where you can check your credit score online for free, without having to pay for some kind of monitoring service (next item).
• Credit Monitoring -- This service is also referred to as identity theft prevention, credit protection, and a few other names. Regardless of what you call it, the service is generally the same. The company will basically monitor all three of your credit reports, with an eye out for suspicious activity that may be a sign of credit fraud.

Checking Scores Online for Free

So let's get back to your original question: Is it possible to check your credit score online for free with no strings attached? In my experience, there is no such thing as a totally free score, because you always have to pay for something in the end.

In most cases, companies will offer a free score online, with the caveat that you must sign up for some kind of identity theft prevention or credit monitoring service. In fact, when you see one of these offers online that allows you to check your scores for free, you can read the fine print and probably find something to this effect.

Here's what you should take away from this article. It's important to check your credit score when you plan to buy a house and apply for mortgage loan. If you just want your scores, without any kind of monitoring service, you can expect to pay a small fee for them. If you do accept one of the offers that allow you to check your score online for free, you'll probably have to sign up for some kind of monitoring service, as described above.

Do you need such a service to protect your identity? That's a decision you have to make on your own, by researching the ID theft statistics and weighing the risks.

Filing for Chapter 7 Bankruptcy - The Steps Involved

What is chapter 7 bankruptcy anyway? What kind of protection does it give you against creditors? How does one file for chapter 7 in the United States? Unfortunately, these are common questions right now. We are having hard financial times right now, and whenever that happens the number of bankruptcy filings will increase dramatically.

In this article, I'll talk about some of the steps involved when filing for chapter 7 bankruptcy, and other important facts you should know about it.

A Basic Definition to Start With

Let's start with a quick definition, just so we're all on the same page. Chapter 7 is a type of bankruptcy in which your debts are essentially wiped away, in exchange for your surrendering of certain nonexempt property. This is different from a chapter 13 bankruptcy filing, in which the debtor follows a court-approved repayment plan to repay the debts he or she owes.

In a chapter 7 bankruptcy filing, the court-approved trustee will basically gather all of the nonexempt property owned by the debtor and sell it off to pay any claims against the debtor. In other words, the person's assets will be used to cover his or her debts -- or most of them, at least. This is the core principle that makes a chapter 7 filing different from other types of personal bankruptcy, such as chapter 13.

The debtor will be allowed to keep certain exempt property, and in this context "exempt" refers to items that are not allowed to be seized as part of the bankruptcy filing and judgment. In other words, and exempt item is something the debtor gets to keep.

The Process of Filing Chapter 7

As I stated in the beginning of this article, this is a general overview of chapter 7 bankruptcy. So I'm not going to get into the complete steps on filing for such a bankruptcy, because it gets fairly complex from a legal standpoint. With that being said, these are the basic steps involved when a person files for chapter 7 protection from creditors:

1. The first step is for the debtor to file a petition with the bankruptcy court. This is typically done within the county where the person lives, or where the business is located in the case of a business bankruptcy filing.
2. The debtor must also file a variety of financial documents, in addition to the actual petition. This will include income-related documents, expense reports, a general statement describing the person's financial condition, a list of assets and liabilities, and a few other items.
   
3. You can expect to pay a filing fee when you initially file for Chapter 7 bankruptcy, and this fee usually averages between $200 and $300. There may be some other miscellaneous fees involved as well, but they generally don't amount to very much.
4. If the debtor is married, things can be a little more complicated. This is because the courts will require financial documents for both the person filing for bankruptcy and his or her spouse. This is true even if only one spouse is filing for Chapter 7.
5. When you initiate your bankruptcy filing, you will be able to protect certain pieces of property. In legal terms, these assets are referred to as "exempt" property. The types of property that are considered exempt will vary from one state to another.
   
6. Debtors may have the option of choosing between the state's definition of exempt property or a federal package that outlines such exemptions. This is one of the areas where things can get confusing, so it's probably best to consult a bankruptcy attorney if you have questions about these exemptions.
7. After these preliminary steps, the debtor will work closely with the court-appointed trustee to provide additional paperwork, to surrender nonexempt property, and to otherwise discharge the chapter 7 proceedings.
8. Once the bankruptcy has been fully discharged (a legal term for "completed"), the debtor is released from some of the debts he or she has accumulated. In addition, creditors are prevented from carrying out any kind of debt collection against the debtor.
   
9. When you hear somebody talk about "protection from creditors," this is generally what they are referring to. It is the element of a chapter 7 filing that protects the debtor against creditor claims.

Again, I'd like to stress that these steps may vary from one state to another, and from one debtor to another. But regardless of these differences, most people will go through the steps I've outlined above when filing.

Continuing Your Bankruptcy Research

While this article offers a brief introduction into the world of bankruptcy law -- and chapter 7 filing in particular -- it is by no means an all-inclusive lesson. My goal with this lesson is simply to explain the basic steps involved with chapter 7 and how they affect the person who files for such protection.

If you think you may be forced to file for personal bankruptcy in the near future, my advice is to research far and wide to get a better understanding of the subject. It's probably a good idea to hire a bankruptcy lawyer as well, especially when it comes to property protection. Here's a good place to continue your research (the official website of the U.S. court system).

Related Q&A Sessions:

• How can I improve my credit after bankruptcy?
• Improving your FICO score after Chapter 7
• Buying a home after a bankruptcy filing

I hope you have found this article helpful. Good luck!

Creditor and Debt Collector Harassment - Know the Laws

Reader question: "I have been receiving a lot of abusive and harassing phone calls from debt collectors regarding an unpaid debt I owe for a store credit card. I know these people are not known for being friendly, but I truly feel they have gone over the line. What can I do about debt collector harassment from a legal standpoint?"

Unfortunately, your question is a common one. We receive a lot of e-mails regarding debt collectors and the kinds of techniques they use. While I cannot generalize that all collection agencies are dirty, I can say there are plenty of bad apples in this bunch. Many of these companies resort to various methods of harassment in order to get the debtors to pay.

Debt Collection Harassment & What You Can Do

Fortunately, there is plenty you can do to stop this kind of harassment from creditors and/or debt collectors, so let's talk about that.

The first thing you need to do is review a piece of legislation called the Fair Debt Collection Practices Act, or FDCPA for short. This is the law that governs what collection agencies can and cannot do when trying to recover a debt. As I mentioned earlier, there are plenty of bad apples in this particular bunch. As a result, the government has frequently stepped in to create legal guidelines for the debt collector industry.

The branch of government that enforces this law is the Federal Trade Commission, commonly referred to as the FTC. This agency has a very informative website through which you can learn about debt collector harassment (and the laws that are designed to prevent it).

It's important to understand the stipulations of this law, because that's the only way to know if a creditor or collection agency has violated the rules. You must learn what is allowed and what's not allowed, so you can know when the line has been crossed.

What Creditors and Collectors Cannot Do

Here are some of the things a debt collector cannot do when trying to collect from a debtor.

• Debt collectors cannot threaten you in any way. In particular, they cannot use garnishment of wages or any other legal action as an intimidation tactic. They might be able to garnish your wages, if such an action were approved by a judge. But they cannot use it as a verbal threat or an intimidation tactic.
• For example, a debt collector cannot call me on the phone and say, "You need to pay this bill or we will sue you in court, and you might even go to jail." That constitutes verbal harassment under the FTC guidelines, and is therefore not allowed.
• Debt collectors cannot call you early in the morning or late at night. I don't want to cite the exact time windows in this article, because it has changed in the past and it may change again. You can visit the FTC's website to find out about these times.
• A debt collector may not call you at work. This is one of the most common forms of harassment that consumers complain about, along with various threats being given.
• If you make a written request that the collection agency stop contacting you altogether, they must honor that request. If they call you after you have submitted such a request, they are in violation of federal law.
• Calling many times in a single day, or using abusive language and profanity, is another violation. This kind of harassment is not tolerated by the FTC or any other enforcement body.
• Creditors and collectors may not tell other people about the debts you owe. For example, they cannot share information about you with your neighbors or coworkers, as an attempt to embarrass you into paying. This prohibited by law.
  

The FTC is serious about enforcing these laws. Just last month, I read a news release on their website about a debt collection company that admitted to violating federal law. As a result, they had stiff fines imposed upon them -- upwards of $220,000.

As long as we have debt collectors, we will have cases of harassment associated with them. That's just the kind of industry this is. In my opinion, people do not go into this line of work by choice. Who wants to sit in a cubicle all day long, calling people about unpaid debts? Add in the fact that they are talking to people who don't want to deal with them (debtors), and you have all the ingredients for a potential harassment scenario. Hey, it is what it is.

The best thing you can do is learn about the Fair Debt Collection Practices Act and the types of debt collector harassment it outlaws. You can also make a complaint through the FTC website, or by using the toll-free hotline they have set up for that purpose.

Related Q&A Sessions:

• Can creditors garnish my wages for unpaid debt?
• Can a collection agency sue me for a debt I owe?
• Can a credit card company sue me?
• Dealing with debt collectors the right way
  
• A debt collector threatened to sue my daughter

I hope you have found this article helpful in stopping harassment from creditors. And remember, the best way to get these people "off your trail" is to pay what you owe!

Consumer Credit Counseling Services - Nonprofit Counseling

These days, you can find plenty of consumer credit counseling services that can help you manage your credit and debt. But they're not all created equally. Some are nonprofit agencies that offer counseling for little or no cost, while others are entirely profit driven.

In today's blog entry, I'm going to steer you in the right direction by providing a list of nonprofit credit counseling services. So without further ado, here are my top-three recommendations:

National Foundation for Credit Counseling (NFCC)
This nonprofit organization has been around since 1951. They have a network of counselors across the United States, with more than 850 offices. So no matter where you live in the U.S., you can probably find a counselor within driving distance. Their headquarters is located in Silver Spring, Maryland. This nonprofit offers a full range of credit counseling services, including debt management.
Learn more at www.NFCC.org

Consumer Credit Counseling Services (CCCS)
This is another good option for nonprofit assistance. Their main office is located in Atlanta, Georgia, and they have other offices spread through the southeastern United States. They offer their counseling services to consumers across the U.S. It is a true nonprofit with 501(c) designation, and was originally founded in 1964. They offer counseling on debt management, credit, bankruptcy and more.
Learn more at www.CCCSatl.org

Springboard (Credit.org)
Springboard provides nonprofit consumer counseling on a variety of financial topics. This organization was founded in 1974, and they have offices in most (but not all) states across America. They offer a toll-free 800 number on their website, as well. They counsel consumers on housing-related issues, bankruptcy filing, credit score improvement, debt reduction and more.
Learn more at www.Credit.org

Watch Out for Fake Nonprofits

Unfortunately, there is no shortage of companies that take advantage of people in financial distress. One of their favorite tricks is to position themselves as nonprofits, when in fact they are entirely profit driven.

Do a Google search for the phrase nonprofit consumer credit counseling and you'll see what I mean. In the "Sponsored Links" section, you'll find many companies that operate under a pure profit model. They pay to show up on Google results for various "nonprofit" phrases, and some of them even use that word in their search engine ads.

Here's the bottom line. Almost all of the companies that pay for Google listings (i.e., those that show up in the "Sponsored Links" section of results) are profit-driven companies. Very few of the true nonprofits pay for sponsored links, because they don't have money for that sort of thing -- being nonprofits and all. I recommend that you avoid the pretenders and stick with the three credit counseling services I've listed above.

Can Creditors Garnish My Wages for Unpaid Debt?

Reader Question: I have some unpaid debts on a couple of credit cards. Can these creditors garnish my wages for what I owe them?

The short answer to your question is yes, a creditor can use wage garnishing if it's approved in a court of law. But there's more to this issue, so let's take a closer look. First, I'd like to offer some definitions for other readers who may not be familiar with this topic.

• Creditor -- This can be any organization that has extended credit to you in some way. A creditor can be a credit card company, a department store that has extended you a line of credit, or a bank. There are other types of creditors, but these are the most common ones within the context of your question.
• Garnish -- This is a legal term that simply means to withhold pay, earnings or other assets. In most cases, garnishment must to be approved by a judge. Such is the case with creditors, as we will soon see.

Situations When They Can Garnish Wages

Let's say I go to a department store and open up a store credit card. In this scenario the store becomes my creditor, because they are extending me a line of credit to make in-store purchases.

Let's further assume that I make some purchases and rack up a balance of $1,200, but then I stop making payments on the debt. Can the creditor garnish my wages in this kind of situation? Yes, but it must be initiated by a lawsuit and approved by a judge. They cannot just "swoop" in and take my money away.

It's also important to realize that garnishment of wages is usually a last resort. Nobody wants to go through a court trial, if it can be avoided. So the store mentioned in the earlier scenario would probably make repeated attempts to collect on the debt, before initiating a lawsuit against me. They would send me letter about the unpaid debt, call me on the phone, etc. Eventually, they might even turn the account over to a debt collection agency. But neither the original creditor nor the debt collector could garnish my wages without court approval.

What Your Creditors Cannot Do

I've stated that a creditor can sue you in court, and that such a lawsuit might result in the garnishment of your wages. But debt collectors cannot use this as a threat. They can take such action -- they just can't use it as a harassment / intimidation tactic. There are federal laws that prevent this, namely the Fair Debt Collection Practices Act (FDCPA). For example, if a creditor or collector calls me on the phone and says, "You better pay this debt or we will sue you and garnish your wages" ... then they have violated the FDCPA.

These laws are enforced by the Federal Trade Commission. So let's go straight to the source and see what the FTC says about the subject. The FTC says that creditors are prohibited from saying "they'll seize, garnish, attach ... wages unless they are permitted by law to take the action and intend to do so." In other words, they can't even mention unless they've already been given permission by a judge to garnish your wages for the amount owed.

It's also important to realize that there's a statute of limitations on this kind of lawsuit. In non-legal terms, that simply means there's a time limit for how long they can sue you, after you have defaulted on the account. This will vary from one state to another, so you should check your state attorney general's website for more information (or do a state-specific Google search for the information).

Related Articles and Information

This article was written in response to the question: Can creditors garnish my wages to cover debts? Here are some related articles we've written in the past, as well as related resources on other sites:

• Can a Collection Agency Sue Me in Court?
• Can a Credit Card Company Sue Me?
• Statute of Limitations for Debt Collectors
• FAQs About the Fair Debt Collection Practices Act (FTC website)

We hope this answers your question about garnishment of wages, and we thank you for using our website for guidance.

Experian FICO Score is No Longer Available

Until recently, you could obtain your FICO credit score from all three of the reporting companies (TransUnion, Experian and Equifax). But Experian has stopped releasing their FICO scores through the MyFICO.com website. But you can still get a credit score from that company -- it just won't be produced using the FICO scoring model.

Are you totally confused? Okay, here's what you need to know:

• Fair Isaac Corporation is the company that created the FICO credit scoring model. That's where the name comes from -- it's an acronym for Fair Isaac Corporation.
• Until recently, all three of the credit bureaus (TransUnion, Experian and Equifax) have used the FICO system to produce scores for consumers. And consumers were able to obtain all three of their FICO scores through the MyFICO.com website.
  
• Earlier this year, however, Experian told Fair Isaac that it wants to terminate their existing agreement, which means consumers will no longer have access to their Experian FICO scores through the MyFICO.com website.
• Mortgage lenders, however, will still be able to get all three of the FICO scores for a consumer in order to perform a credit check.
• As a consumer, there's really nothing you need to do and/or worry about, regarding this drama. Just keep using your credit responsibly, and you'll maintain a good score.
  

The Experian / FICO Drama - Don't Sweat It

This blog entry is for your general information only. There's really nothing you need to worry about. Nor do you need to change your financial or credit-related behavior in any way. Mortgage lenders and other creditors will still check your credit score as they always have. But you will no longer have access to your Experian FICO score anymore.

As a consumer, the only thing you need to be concerned with are your financial habits. If you practice good habits and use credit responsibly, you will maintain a good credit score with all three of the agencies, including Experian -- regardless of how they produce their scores or what they call them.

Identity Theft Statistics - And How to Avoid Becoming One

In this article, I'll offer some statistics on ID theft, and I'll also give you some tips on protecting your own identity. Whether you take the do-it-yourself approach, or you pay a protection service to monitor your credit, the important thing is to be proactive and vigilant.

Identity theft statistics are pretty disturbing. When researching and writing this article, I didn't even realize how pervasive this problem is. I found the numbers disturbing, and you will probably have the same reaction. Here are some of the statistics I was able to find:

Some Disturbing Statistics on ID Theft

I've seen a lot of conflicting information surrounding the statistics of identity theft, the number of victims, etc. This could be the result of innocent misinterpretation, or a blatant example of marketing scare tactics. Whatever the case, I thought you would enjoy some straight facts for a change.

Here are some statistics I was able to uncover by using reliable data sources, such as the Federal Trade Commission (FTC) and similar agencies.

• In 2007, the Consumer Sentinel (an FTC database) registered more than 800,000 complaints of fraud and identity theft crimes. This data comes from various law-enforcement agencies and is compiled by the FTC.
• In 2008, the number of complaints sent to the Consumer Sentinel database received more than 1.2 million fraud and identity theft complaints from the reporting agencies. In other words, there was a 50% increase in reported fraud and ID crimes from 2007 to 2008.
• In 2008, the most common form of identity theft was credit card fraud. This type of crime accounted for 20% of all complaints reported.
  
• Obviously, 2009 data is not available yet. But I predict another increase in identity theft statistics for this year. Why? Because economic hardships like our current recession usually correspond to an increase crime rates, and that includes ID theft crimes.
• Based on previous data and rising trends, it's possible that 1 out of every 200 people will be a victim of fraud or ID theft in the next year.
  
• Since it was first created in 1997, the FTC's database has collected more than 7.2 million complaints of fraud and identity theft.
• The states with the highest per-capita rate of identity theft are Arizona (#1), California and Florida.
  

Sources: These statistics came from the annual reports and data summaries provided on the FTC's website. Complaints are sent into the Consumer Sentinel Network database from a wide variety of law enforcement and consumer agencies. These include the Better Business Bureau, National Fraud Information Center, U.S. Postal Inspection Center and more. In other words, these identity theft statistics come from the most reliable sources available.

I'm not trying to scare you into using an identity theft prevention service. That's not our style here at the Home Buying Institute. In fact, I'm going to give you plenty of tips for preventing ID theft on your own, without paying anyone else to do it. With that being said, I do feel there is a legitimate need for identity protection services. They're not for everyone, but they are certainly useful for some.