What the FDCPA?! Understanding the Fair Debt Collection Practices Act

Posted on January 16, 2012 by Debt Dot Com

By: Jessica Zimmer, Debt.com Financial Fitness Trainer

The Fair Debt Collection Practices Act is a set of federal laws that protects debtors from abusive practices by debt collectors. A debt is defined as the obligation of an individual to pay money arising out of a transaction in which money, property, insurance or services are for personal, family, or household purposes. Overdue medical bills, dishonored checks for a family’s food supply, and student loans are debts. Unpaid taxes, municipal fines, and alimony are not debts. The FDCPA does not cover debts that an individual incurred to run a business.

Debt collectors are defined as individuals or businesses that regularly collect debts owed to others. Collection agencies, lawyers who collect debts, and companies that buy delinquent debts are debt collectors. Municipalities, hospitals, and creditors are not debt collectors. A creditor can become a debt collector, however, if it uses a different name in collecting the debt owed to it.

The FDCPA places limits on the type and extent of contact that a debt collector can have with an individual. The FDCPA does not protect the rights of businesses. The FDCPA requires that debt collectors refrain from contacting debtors at inconvenient times, such as before 8 a.m. or after 9 p.m., and places, such as the workplace, if the debtor has requested that the debt collector not contact him or her at the workplace. The FDCPA also limits the contact that a debt collector can have with people in the debtor’s social circle. A debt collector is allowed to ask other individuals the debtor’s address, home phone number, and workplace. A debt collector is not allowed to discuss an individual’s debt with persons other than the debtor or the debtor’s attorney unless they have the debtor’s permission.

Many states have laws that mimic the FDCPA. When a state law in conflict with the FDCPA provides a debtor with greater protection than the FDCPA, the state law overrides the FDCPA. Some state laws cover entities other than debt collectors, such as creditors. One example is the Pennsylvania Fair Credit Extension Uniformity Act.

In the past five years, debt collectors have come under fire for accessing social media content, such as Twitter accounts, to gather information about debtor’s expenditures and activities. Debt collectors have also used social networking sites such as Facebook to contact friends, family members, and employers of debtors. Laws vary across federal circuits. If a debt collector violates the FDCPA, a judge will find the debt collector in violation of the law. A judge has the power to order that a $1,000 penalty per violation and reasonable attorney’s fees be paid to a plaintiff. In cases that involve restraining orders, judges instruct debt collectors not to contact debtors or people in a debtor’s social circle.

Debt collectors are allowed to use publicly available data on websites such as Myspace. If a debtor does not erect any barriers to accessing their data, such as password protection or the creation of an invitation-only area, a debtor has no expectation of privacy.

© January 4, 2012 // All material copyright 1/4/2012 by Jessica Zimmer

 

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Debt Restructuring – The Basics

Posted on January 2, 2012 by Debt Dot Com

 

 

 

 

 

 

 

 

 

 

 

 

 

By: Jessica Zimmer, Debt.com Financial Fitness Planner

Debt restructuring is a tool used by a large company or sovereign nation to reduce its debt. Typically, only large entities, not individuals or small businesses, are allowed to restructure debt. The most common way to restructure debt is to change the terms of the original loan contract. This requires reforming the loan contract and both parties agreeing to the new terms. Usually, in a reformed contract, the borrower agrees to pay more money at a lower interest rate over a longer period of time.

The second most common way to restructure debt involves the same solution and a different legal mechanism. First the borrower issues callable bonds, or bonds that must be repaid on demand. After the borrower issues these bonds, the bondholders call the debt. The borrower is usually required to pay more money at a lower interest rate over a longer period of time.

A borrower that lacks assets may also agree to pay a new, lesser debt or the same debt at a reduced interest rate. A lender or bondholder typically accepts this arrangement only when they know that the borrower cannot pay the original debt or a greater debt in the future. A borrower can use debt restructuring to remain financially solvent or reduce its amount of debt as it files for bankruptcy. Companies and nations often use debt restructuring to avoid bankruptcy. Bankruptcy can cause damage to an entity’s reputation and cause it to incur high legal fees and fines. Debt restructuring can take place outside of a court or be ordered by a court. When a debt is restructured in court, the borrower may be required to pay court costs and legal fees for both parties.

Currently, many companies and several nations are engaging in debt restructuring.

Companies that restructure debt are required to abide by the relevant laws of the state and country in which they are located. Nations that restructure debt are typically aided by other nations. The global financial community attempts to prevent nations from defaulting on their loans. The ripple effect of a nation defaulting on its loans can be extremely destructive to banks and neighboring countries.

Greece’s debt restructuring was particularly complex because it necessitated agreements with bondholders and investors which bought insurance on bonds. This type of insurance is a sort of derivative, a financial contract which has value because something underlying it has value. Here, the insurance has value because the bond underlying it has value. The insurance is sold in the form of credit default swaps (CDS).

If an entity defaults on its bonds, a seller of a bond must pay a buyer of a CDS the face value of the bond. The seller receives title to the defaulted bond and the right to recover the value of the bond from the entity. The terms of Greece’s bailout agreement involved an agreement by bondholders and buyers of CDS to take a 50% reduction in the face value of Greek bonds. The investors agreed to the write-down because they preferred taking a loss to loan default. Now, investors can expect to receive interest payments and wait for Greece to become financially stable.

© December 11, 2011 // Copyright all material 12/11/2011 by Jessica Zimmer

 

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WA$ Filthy Rich – Christie Brinkley

Posted on December 29, 2011 by Debt Dot Com

By: Jennifer L. Lopez, Debt.com Financial Fitness Trainer

A Supermodel with a Less-than-Model Financial Reputation

 

 

 

 

 

 

 

 

Christie Brinkley has a lot going for her.  Despite being 57 years old, she is still stunning, and looks many years younger than her actual age.  She has flourished in an impressive modeling career since she was discovered in 1973 by an American photographer while she was studying art at a Paris college.  She has appeared on the cover of over 500 magazines, and holds the record for obtaining the longest modeling contract in history, a 20-year contract with cosmetics giant Cover Girl that was later renewed in 2005.  That is not to mention her contracts with numerous other well-known brands and advertising campaigns.  She has also had an acting career since her first role in 1983 in the comedy film National Lampoon’s Vacation, in addition to appearances in music videos, television series, morning shows, cable TV infomercials, and more recently, a role on Broadway in the musical Chicago. She is also known for her almost decade long marriage to musician Billy Joel.  Add the titles of activist, illustrator, writer, photographer, health/fitness expert, and designer to her resume, and Christie Brinkley is one busy and talented lady reportedly worth $80 million dollars.

But recent news reports suggest that there is one thing that Ms. Brinkley does not have going for her at the moment—her finances.  According to the New York Daily News, the IRS is claiming that she owes $531,720 in back taxes, and they filed a lien on November 21, 2011 against one of the properties worth $30 million that Christie Brinkley owns in Long Island, NY.  Since it is reported that most of her monetary worth is wrapped up in the real estate that she owns in the Hamptons, the filing of this lien is of concern.  And according to her representative, this lien came as a surprise to Christie, and after hearing of it, she ordered her team to work towards a swift resolution.

Though the IRS insists that a lien is only filed after an individual has been notified of the outstanding debt and given a grace period in which to pay, Christie Brinkley insists that though she regrets not paying more attention to her accounting, the oversight was due to her recent focus on her parents that have been experiencing poor health.  The property that was put under the lien was one that she has attempted to sell on and off since 2002, but finally took off the market in 2010 after not having any luck.  The beachside mansion known as the Tower has 11 bedrooms, 9 bathrooms, and the property consists of 20 acres of land.  Though she has experienced liens in the past due to outstanding expenses for pool and landscaping work, this is the first we have heard about any tax problems.  Sources close to Christie Brinkley have vouched for her by saying that her finances are in control and that the situation was just due to a simple oversight, an opinion that she concurs with by stating that the situation was due to a tax error, that she would pay the full amount due by December 7, 2011, and that she expected the lien on the property to be lifted shortly after.  As of the date of this article, confirmation of payment has yet to be published.

Since it does not appear that Christie Brinkley has a history of financial irresponsibility, it seems potentially feasible that the recent misstep that led to the IRS lien was merely that—a mistake or error.  In hindsight, as she has said, I am sure that she wishes that she had paid closer attention to her financial obligations in order to avoid the damage that this issue has caused both to her credit and public image.  I think we can all agree that she would have preferred to avoid being lumped in with the ever-growing group of other celebrity offenders that have experienced financial setbacks.  Though we do not know what occurred behind the scenes, she should have wise counsel in place to take care of her affairs, so that even in spite of stressful personal circumstances, her financials are still in order.

So, even though she is a wealthy celebrity, and we are most likely not, what can we learn from her situation?  The biggest thing to remember is that mistakes can happen to anyone.  I can personally vouch that you can owe money to the IRS, even after receiving letters stating the opposite, and you may not find out until the matter has gotten very serious.  Find financial professionals that will be on top of your situation, but also make sure that you have a solid grasp regarding what is going on, because, unfortunately, blaming it on someone else, even your accountant, will not be good enough when the money is owed in your name.  If you are unsure, contact the IRS before the issue escalates.  Get things in writing.  Once you have a lien on your credit report, it may last for years, so it is better to do whatever is in your power to avoid it at all costs.

The other thing to remember is that communication is key.  Whether this is the case or not, the IRS claimed that Christie did not respond in a timely manner, and that is why they went ahead with the lien proceedings.  Even if you do not think you owe the amount at all, think that you owe less, know that you have already paid it, or do not have the money to pay the debt right now, keep in touch with your creditors.  You are then able to correct potential errors, and also make it less likely that they will take things a step further to claim what is due them.

Christie has proven herself to be the model of success throughout the long expanse of her career, and it does not appear that she is going to let this issue hold her down.  She seems to have the ability to continually reinvent herself to create new income opportunities, so if she continues to keep close tabs on her financial situation, she is very likely to rebound from this unfortunate slip-up.  If she applies the number one rule of modeling that if you make a mistake or stumble, you keep on going, she should fare just fine, and can look forward to a secure financial future.

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Are You Considering a Credit Card Balance Transfer – READ UP

Posted on December 8, 2011 by Debt Dot Com

By: Tim Brugger, Debt.com Financial Fitness Planner

Considering a Credit Card Balance Transfer?

If you’ve been struggling with debt, particularly multiple credit cards requiring minimum payments that are causing problems, a balance transfer can seem very appealing. And, sometimes they are. But before you jump on the first ad for a “no interest for six months balance transfer!” offer, stop and consider a couple of very important things.

 

Fees

Unless your credit is absolutely stellar, you’ll likely pay a fee for transferring one or more credit card balances to one new card. These fees can be exorbitant, so make certain you know what the impact will be before completing the paperwork. For example, if the fee is 3% and your balance is a couple thousand dollars at a high interest rate, that’s not too bad. But if your balances or $9,000, $10,000 or more 3% is significant.

Whatever the fee is, it will be added to your totals immediately. In other words, not only does your $10,000 balance jump by $300 (a 3% fee), you’ll actually pay interest on the $300 until the card is paid off. Over the course of years, that too will add up to a significant amount.

No or Low Interest, But for How Long?

Most balance transfer ads and offers quote an extremely low or sometimes even no interest for the transfers; sounds great, right? The problem is that’s nearly always for a limited time, sometimes as short as three or six months. Unless you plan on having it paid off within that time frame, which isn’t likely or you wouldn’t consider a balance transfer to begin with, take the time to learn what the interest rate will be after the introductory period. Paying fees and transferring balances for what ends up being the same, or nearly the same rate, probably doesn’t make sense.

The Impact of a High Balance to Your Credit Limit

One of the factors creditors and credit agencies consider when determining your credit worthiness is the amount of credit used vs. the amount available. For example, if you have three credit cards each with a $2,000 limit with a balance of $600 on each, you are considered a good credit risk. That’s because creditors view this positively because you have credit you could use, but don’t need or want to.

The flip side of this coin is if you have the same three cards and outstanding balances, and decide to do a balance transfer. Let’s assume the new card, the one the balances are transferred to, has a credit limit of $7,500. Transferring close to $6,000 to the new card places your balance to limit ratio near the top of the chart. Even though you may have made the transfer for all the right reasons, until the balance is paid (way) down creditors are going to view this as a negative.

Again, not all balance transfers are bad. In fact, they can sometimes save debt-ridden families hundreds of dollars a month in lower payments. The key is to objectively analyze the long-term benefits of the transfer. Along with closely reviewing the costs and interest rates, both short and long-term.

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Pre-Paid Cards: A Truly Useful Budgeting Tool for Consumers Everywhere

Posted on November 15, 2011 by Debt Dot Com

By: Tim Brugger, Debt.com Financial Fitness Trainer

Pre-paid debit cards were first introduced in the 1990’s, and remain a popular choice among consumers practicing safe, responsible spending habits. In the United States, debit cards are far and away the preferred method of completing transactions, and pre-paid debit cards can help to fill this void for many consumers.

History
Pre-paid debit cards are derived from a product credit card companies began offering during the 1990’s. Secured credit cards were, and are, a means for consumers with less-than-stellar credit to obtain credit, and slowly begin re-building their credit rating. The secured credit card was issued with a credit limit equal to an amount deposited with the company by the consumer. As on-time payments are made, the credit limit is eventually extended beyond the secured amount, as with traditional credit cards.

As later variations of the secured credit card were introduced, some began to take on the features and benefits of today’s pre-paid debit cards. Funds are loaded onto a Mastercard or Visa debit card either at a merchant, an ATM, the phone or online, and the card can be used until the funds are depleted or additional monies are re-loaded onto the card. As the popularity of the cards has grown, so too has industry oversight (groups like the National Branded Prepaid Card Association among others) and consumer protection.

Uses and Benefits
There are several reasons pre-paid debit cards continue to grow in popularity. Some of the more notable are:

• Safety – Carrying cash of any significant amount is not a good idea, particularly when it is so easy to avoid having to do so.

• Budget Control – Determining in advance how much discretionary income you have to spend each week or month is an important part of gaining control of your budget. Sticking to that pre-determined amount is the challenge for many consumers, particularly in today’s job and economic environment. Certainly you are able to add funds to a pre-paid debit card, but tracking the time it takes to exhaust the funds will help you catch potentially bad spending habits early.

• Transaction History – Tracking your spending habits is a necessary first step to begin improving your budgeting and financial wellness. Invariably, people are amazed when they review pre-paid debit card transaction histories and see each and every transaction.

• Worldwide Acceptance – Since pre-paid debit cards are generally issued will either a Visa or Mastercard logo, they are accepted across the globe.

• Accepted regardless of credit rating – Unlike a credit card, pre-paid debit cards do not require a certain credit score or a strong credit history. Anyone over the age of 18 is eligible for one.

• Online Purchases – Many online etailers require a credit or debit card to make purchases. Pre-paid cards are used like a credit card, so making online transactions is not a problem.

• FDIC Insured Funds – just as with a bank card, the funds used to load the pre-paid debit card are insured by the Federal Deposit Insurance Corporation (FDIC).

Considerations
When you explore pre-paid debit card options, take a moment to learn some of the particulars of your new card. For example:

Are there transaction fees, and if so what are they?
Any additional fees?
How easy is it to reload the card; is it convenient?
Are there any points, or bonuses for usage like with some credit cards?

Making informed decisions; decisions that can help you either stay or get back on the right financial track, are critical to long-term, economic success. In many instances, a pre-paid debit card can be a tool to help, particularly if users take the time to utilize the product’s many benefits.

Conclusion
A great way to manage your spending and ultimately your financial well-being is to put boundaries in place. This will limit the chances of mistakes being made. Whether the mistake is simply spending too much or an honest miscalculation won’t matter. Both will result in overdraft and late payment fees best avoided.

For their myriad of uses; a child going off to college, a family vacation or those interested in taking proactive steps to manage their financial future, pre-paid debit cards are worth taking a good, hard look at.

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Beginning to Budget

Posted on November 11, 2011 by Debt Dot Com

By: lovemoney.com

If you’ve never attempted to budget your finances, then the prospect may seem a little daunting. However, it doesn’t have to be a hugely difficult process – just a few small changes can equate to significant financial improvements, which will help you to avoid unmanageable debts. The best way to decide what your budget should be is to work out what you are spending you money on already. Keep cash receipts as well as a record of all your bank transactions, so that you can see exactly where your money goes.

You might be surprised to learn that buying an reasonably priced lunch on a daily basis adds up to rather a lot over the course of a month. This might be all you need in order to motivate you to make your lunches at home instead Of course, there will be a number of other areas in which you will need to find ways to save money, but this can often be done relatively easily.

There are a good range of websites, such as lovemoney.com, which can offer useful money-saving ideas, many of which you may simply not have though of before. You might discover that you are currently not signed up for the best mobile phone deal for you, or you might find that you car-maintenance costs are far higher than they need to be. It is essential that you are honest with yourself about your current spending habits in order that you are able to make the necessary adjustments.

Lastly, you should remember to make sure that your budget will cover some leisure spending and treats. For example, it can be far easier to prepare meals from scratch at home if you know that, at the end of the month, your budget will allow you to dine out at a restaurant. These are just some of the ways in which you can learn to budget effectively.

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Year-End Tax Savings Tips

Posted on November 1, 2011 by Debt Dot Com

By: Tim Brugger, Debt.com Financial Fitness Trainer

It’s never too early to consider saving money on your taxes, and certainly not now as we head into Fall. Each tax year is different; sometimes dramatically, other times consisting of a few minor adjustments. Understanding and implementing all the strategies available to you is the only way to maximize your tax savings.

So with that in mind, here are several steps you can take between now and year-end to keep a little more of your hard-earned money where it belongs; in your pocket.

Maximize your Flexible Spending Account (FSA)
If you or your spouse has a FSA available from your employer, there’s been a change this tax year you should be aware of. Over the counter medications are not eligible for reimbursement as they were in previous years. To be reimbursed for these expenses, and they can be significant, you must get a written order from your physician.

Medical Costs and Bunching
Combining needed medical expenses with the calendar is a strategy known as bunching. Here’s how it works: medical expenses beyond 7.5% of your adjusted gross income (AGI) are deductible. So, if planning non-elective surgery (when possible of course) or getting all the kids and other family members in for medical visits and the like this calendar year is an option, it may be wise to do so. Bunching these expenses in 2011 to take advantage of the medical deduction will cut your tax bill.

Charitable Gifts
Unlike in the past, all charitable deductions must have receipts, no matter how small. If you give old clothing or electronics to the Goodwill, Salvation Army or other charities make sure to get a receipt. And similar to the bunching strategy, if you intend to do give items or make monetary donations, make sure to do so before January of 2012 so it’s all counted for this tax year.

Withholding Amount
It’s not too late to take advantage of this strategy for 2011, and definitely consider it for 2012. Getting a big refund is like a bonus each year for many tax payers. But think about what you could have done with that extra money each month instead of providing the IRS with an interest free loan. Changing your withholding is as easy as submitting a new W-4 to payroll person, and you can do it anytime you want. This calculator will help you determine the right withholding amount.

Final Thoughts
If it makes sense to itemize, in other words if your itemized deductions exceed your standard deduction ($5,800 for individuals, $11,600 for married filing jointly in 2011), take the time to do so. It requires an additional form, but is worth it in the long run. Also, if you haven’t already you may want to try e-filing. The IRS suggests a number of firms, many of which will do your federal taxes for free. They make their money if you choose to have them seamlessly transfer the appropriate information over to your state returns, which they’ll charge for. You aren’t required to use them for completing your state taxes, but the $20 or so they charge may be worth it to you.

As citizens there’s certainly nothing wrong with doing our part, and that includes paying taxes. But not implementing all the tax savings strategies available is akin to taking money right out of your pocket, and nowadays it’s hard enough getting money in there.

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What is a Short Sale – The Long and Short of It

Posted on November 1, 2011 by Debt Dot Com


By: Jennifer L. Lopez, Debt.com Financial Fitness Planner

Most of us have heard the phrase “selling yourself short,” which means that you are settling for less than your full value or potential. But have you heard of a ‘short sale,’ and do you know what it means?

You may be more familiar with the concept than you think. Similar to the phrase mentioned above, it means that you sell a house for less than its value or potential. Since the term is normally used regarding properties that are mortgaged, more specifically it means that you sell the house for less than may be owed on the mortgage. We know that it is very possible to owe more than the current market value of the home, which fluctuates over time, making it an “upside down” or “underwater” mortgage.

If you need to sell your house, particularly because you can no longer afford the mortgage payments, a short sale may be an option for you. Most people know that they can sell a house if they no longer want it, but what if you cannot get a buyer to pay the total price that you need in order to pay off the loan in full?

Due to a variety of reasons, the real estate market has been falling, and housing prices along with it. If you can get an interested buyer, you may not be able to get them to bid according to what you require. Traditionally, such a sale would not be allowed to take place; however, when a property is in distress, the mortgage company may approve a short sale. This allows you to sell the house to prevent a foreclosure from occurring, but it will leave a difference between what the buyer pays for the house and what is needed to pay off your mortgage, which is called a deficiency. Though the sale may be allowed to go through, it does not mean that the remaining deficiency is eliminated. It will depend on the terms of the agreement as to whether or not the seller will still owe the deficiency amount. Regardless, a short sale may be a good alternative to foreclosure in a dire situation.

Here are some other things to know about short sales:
• A short sale mitigates unnecessary fees and costs to the buyer and seller, thereby increasing the chances of a sale occurring.
• A short sale may still show up as a negative mark against your credit, though you will be able to add a statement to your report establishing the proactive steps that you took to resolve the situation that led to the short sale.
• A short sale may take even longer than a traditional home sale from start to finish, and requires multiple approvals on many levels.
• Even if you obtain an interested buyer, the bank will have to approve the sale. They may require financial information from you to determine financial hardship that would prevent you from paying the balance due after the transaction. If you are not eligible, you will be responsible to pay the remainder in order to complete the transaction.
• You should obtain a real estate agent that specializes in distressed properties. Not all agents are familiar with or interested in handling short sale situations.
• It is wise to have a real estate lawyer involved with your sale to protect your interests.
• Normally, any forgiven debt is taxable as income. However, at least until 2012, debt forgiven by a lender may be except from taxes according to the Mortgage Forgiveness Debt Relief Act. Restrictions apply, so contact a tax advisor for full details.
• A short sale is just one of many alternatives to prevent your home from going to auction.

There is much more to learn about short sales, and this is only a brief summary. Before you undertake any action, you should do your research to determine if it is the right step for you. National Foundation for Credit Counseling is offering a free “Avoiding Foreclosure” consumer education DVD or video download to introduce your options. Go to their website for more information on this complimentary offer: http://www.nfcc.org/housing/orderdvd.cfm.

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Credit Score Decoded: The Components That Make Up Your Credit Score

Posted on November 1, 2011 by Debt Dot Com

By: Jennifer L. Lopez, Debt.com Financial Fitness Trainer

Many people know that having good credit is important, and that not paying your bills in a timely manner can cause you to end up with bad credit. But what actually makes up that three-digit number that determines your credit worthiness is more of a mystery. Today we are going to discuss your credit score decoded.

1. Payment History—This is an easy one. Credit is described as “the ability to obtain goods or services before payment, based on the trust that payment will be made in the future.” How do you find out if someone is trustworthy? You check out their previous history. Have they taken out previous loans and paid them? Do they make their payments on time? Have they ever been late 30, 60, 90+ days? Have they ever defaulted and failed to pay a debt? Your payment history is the #1 factor that affects your credit score, between 31- 35% depending on whom you ask. This explains why those who are new to using credit can have a low score, as they have not developed any payment history yet.

2. Credit Usage—This one involves seeing how you use your established credit. It can also be considered your debt ratio. They look at the credit lines that you have and how you use them. Do you not use them at all? Considered a negative. Do you use them and get close to or exceed the limits? A sign of irresponsible behavior. Do you have credit, use it sensibly, and then pay it back? This will contribute to a positive in this department. It is recommended that you never exceed 30% of your individual credit card limits, as well as no more than 30% of your total available credit on all accounts. Likewise, do not close accounts that you rarely use, as the change will lower your available credit, and affect your ratio adversely. Credit usage counts for about 30% of your total credit score, so always use responsibly.

3. Credit History—This involves the length of time that you have had open credit accounts. The longer that you have had an account open, the better. It also concerns the length of time since the account’s most recent activity. This unfortunate aspect makes it impossible for new credit users to have a perfect credit score, as they have not established a long-term credit history. Additionally, too many new accounts opened at the same time can issue a red flag, as it can suggest signs of financial distress or that you may be likely to overuse this newfound credit. Once again, do not close old credit card accounts that are in good standing; this will only wipe away part of your established positive credit history and lower your score. Credit history makes up 15% of your score.

4. Type of Accounts—This category looks at the type of credit lines that you have. It can also be called your “credit mix.” Revolving accounts allow consumers to borrow up to a limit, like credit cards. These are looked at more closely than other types of credit. It can also include installment accounts, like a mortgage, auto, or student loan, as well as monthly bills that you pay, like your gas and electric utility bills. They look at what different types of credit that you have, and how you manage them. The ability to handle a combination of different credit types is looked upon favorably. Your credit mix makes up about 14% of your total score.

5. Inquiries—This factor is the least considered, and can be rather tricky. Inquiries are simply times when your credit is pulled for review. It can be done by the credit reporting agency, yourself, potential lenders, current companies that you do business with, or for the purposes of employment. Some of these affect your credit, and some do not. A soft inquiry (or soft pull) does not affect your credit—this is what happens when you check your credit, a solicitor sends you a potential offer of credit, or an employer reviews your credit as part of a background check. However, a hard inquiry (or hard pull) does affect your credit adversely. When you apply for a new credit card or bank loan, they pull your credit, it gets listed on your credit report, and too many hard inquiries within a short length of time can pull down your credit score. Due to this, it is wise to avoid applying for numerous forms of credit at one time. Inquiries make up 10% of your credit score.

Decoding your credit score can help you to avoid taking actions that will negatively influence your score. The background knowledge can also provide you with a game plan of steps to take to actively increase your credit score. For tips on improving your credit score, check out this Debt.com article: “Practical Ways to Improve your Credit Score.”

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Joint Debt

Posted on November 1, 2011 by Debt Dot Com

By: Jessica Zimmer, Debt.com Financial Fitness Planner

When two people are married or have entered into a civil union/domestic partnership, one or both of the parties can incur a debt that becomes held by both parties. This type of debt is called joint debt. In joint debt, both parties are jointly (together) and severally (separately) liable for the total amount. If both parties sign a contract to pay back funds, both parties are liable for the debt. This is true even if the parties were not married when they signed the contract. Debt that is incurred from filing a joint federal income tax return, as well as any additions to tax, interest, or penalties resulting from a joint return, is considered joint debt.

Joint debts can range from student loans to credit card debt to mortgages. In considering whether a debt is a joint debt, a creditor considers the law of the state of residence of the married parties. There are two types of states: community property states and common law states. In community property states, if only one party signs for a debt, the second party is liable for the signing party’s debt. The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Spouses in community property states can sign a pre- or postnuptial agreement to have their income and debts treated separately. This may protect some of one spouse’s property from the other’s creditors.

In common law states, if only one party signs for a debt, the second party is not liable for the signing party’s debt. There is an exception. A family court judge can assign a debt to the non-signing party when the debt is incurred for the benefit of the marriage. This typically occurs when two parties are divorced and a debt is for a family necessity, such as food or tuition for the children. The allocation of a debt to both parties does not relieve the signing party from the debt. Creditors can pursue both spouses equally.

In community property states, creditors are allowed to recover the assets and income of both parties. In common law states, creditors are only allowed to pursue the assets and income of the signing party.

Again, there are some exceptions. In a common law state, if one party puts income or property into a joint bank account, that income or property becomes joint property. Typically, a creditor of a signing party can only attempt to recover half of the money in a joint account. If funds from a joint bank account are used to buy property, including stocks, the property becomes joint property. Common types of joint property are home furnishings, vehicles, retirement accounts, and mortgages. The exception to this rule is if title in the property is only held by the non-signing party.

In attempting to recover joint debt, a lender cannot recover more than 100% of the debt from either or both parties. Courts consider this an illegal action because the creditor would get a double recovery.

© October 22, 2011 // All material copyright 10/22/2011 by Jessica Zimmer

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