Understanding Debt
In general, society has basic knowledge of what debt is and how it works but not everyone knows how to manage their personal finances in an efficient way. Many have no idea how to prevent unsustainable credit card balances or how debt can have a huge negative impact on their credit report. In addition, debt and credit can have a significant impact on the quality and standard of living. Our credit counselors are prepared to provide you with relevant, practical and important information to help you gain control of your financial life.
CREDIT HISTORY
The concept of credit was born from the idea that a monthly payment plan would allow consumers to obtain goods that were otherwise unaffordable. Companies like Singer and Ford were the first to introduce buying on credit to U.S. consumers.
Imagining today’s world, without the use of credit, is certainly difficult. Credit has made it possible for consumers to acquire large ticket items. This has resulted in a cashless society where loans and credit have become a part of everyday life.
It is not surprising that debt has increased rapidly during the past decade. According to statistics mortgage debt has grown more than 50% since the beginning of the decade and what is known as revolving credit has grown to a whopping 127%.
Although large amounts of debt are not unusual, the ratio of consumer debt to personal income has risen dramatically in the past several years. High DTI ratios can easily predict future defaults and delinquencies.
Credit card history and industry
Credit Card history
Credit Card Industry
The Federal Reserve Statistical Release reported that US consumer credit reached $2.564 trillion last year, with a total of 511.61 million credit card accounts.
According to the the Nilson Report, the top 10 issuers of general-purpose credit cards, based on outstanding balances, are:
$183.32 billion
$49.69 billion
$166.32 billion
$36.36 billion
$106.74 billion
$29.36 billion*
$88.02 billion
$60.08 billion
$60.08 billion
$49.69 billion
credit bureaus
The term credit bureau is one the most commonly used terms when talking about debt and credit. What is the credit bureau really? Credit bureaus are private firms known as credit reporting agencies that keep track of your present and past records related to your credit and financial situation.
Information collected in the credit bureaus is used by those who are considering giving you credit. In the U.S., there is a top three credit bureaus: Experian, Equifax, and TransUnion. This the firms received information from banks, credit cards, stores, etc. regarding your credit behavior, as well as legal issues you may have had related to payment and credit.
As stated, credit reports contain the most significant information related to your credit behavior and legal issues in reference to your finances. Credit granters can also access:
- Credit history.
- Public records.
- Inquiries Personal Information.
- Current and previous addresses.
- Current and previous employers.
- List of the credit accounts from the last ten years.
- Tax liens.
- Bankruptcies.
- Court judgments(including child support judgments).
- List of creditors or authorized users who have requested a copy of your credit report.
- List of inquiries made by the user when seeking loan or credit.
The most used scoring system is FICO which stands for The Fair Isaac Company. The FICO system has five major categories that make up a credit score.
Credit rating is the numerical translation of your credit report. A number between 850 to 300 is used as a score to rates all your credit information, the higher number, the better.
This “number” known as a FICO score can easily impact or prevent you from getting a job, an apartment, or even increase the cost of your insurance. So, keeping a good score is something you must pay attention to.
(850 – 800)
This is an excellent credit score range and will give you an open window to credit with good interest rates.
(799 – 740)
This range is very good and makes it easier to qualify for favorable credit terms.
(739 – 670)
Falling in this category will still give you options for credit but you may not qualify for the lowest interest rates.
(669 – 580)
Borrowers may get approval for certain and limited credit products
(579 – 300)
Applicants with this score could deal with many rejections or turns down when looking for credit.
MYTHS AND TRUTHS ABOUT CREDIT
WHY GETTING OUT OF DEBT CAN BE SO DIFFICULT?
Unexpected expenses, emergencies or reduction of income may be difficulties that debtors have to deal with when paying debts. The key to resolving issues is to anticipate problems. Whether you have large or small debts, high or low income or if you are just looking to improve your lifestyle, we are here to help. Weigh your options.
Types of consumer credit
There are different types of consumer credit. Knowing the differences will help you managing debt in a more efficient way.
A loan that gives borrowers an amount of funds and that gets paid back over a determined period of time. This allows borrowers to know exactly how many monthly payments they will have to make, and the amount for each payment
Revolving credit is a loan that allows a borrower to access credit as the need arises instead of a fixed amount. There is an open credit line that the consumer can borrow at any time. The monthly payment will vary according to amount of credit used.
Unsecured credit has no collateral. If you fail to repay, the creditor can only obtain a court order against you for repayment.
The basic distinction for this type of credit is that it requires collateral to secure payment of debt. If the borrower does not repay, the collateral can be legally seized by the lender.
LIFE WITHOUT DEBT IS POSSIBLE
what is credit counseling?
Credit counseling is guidance that helps consumers with money management, debt management, and budgeting. The main goal of credit counseling is to help a person in debt to avoid bankruptcy.
With the use of proven and effective strategies based on financial education, we ensure debtors will face their financial struggles with confidence and success. More importantly, they will recover total control of their finances and improve their lifestyle.
At Innova Credit Counseling, you will receive support from our certified counselors.
As experienced counselors, we are aware that every customer has their own unique situation and that the solution to each difficulty will vary. Analyzing, guiding you and exploring every option to ensure successful debt relief is not only our strong commitment but our area of expertise.
The first step into is contacting us. Remember that our service has no cost and no restriction regarding the amount of debt, annual income or credit score.
After speaking with one of our certified counselors, you will be asked general questions regarding your financial situation. There will be a step-by-step review of your debts, income and expenses, and you will receive a budget that fits your specific situation.
Our everyday lives involve personal decisions that are made, in large part, from our understanding of budgeting and forecasting, credit ratings, personal debt and regular income. More knowledge in these areas sharpens financial decision making skills and hopefully prevents personal economic crisis. It simply takes the willingness to make a phone call. The time spent will be an investment in your financial future.
AND REMEMBER WE ARE HERE TO HELP!
3 EASY STEPS TO GET DEBT RELIEF
1. Speak with a counselor for free
Communicate your objectives to an experienced professional. We will ask you the relevant questions in order to determine the proper course of action you should take.
2. Explore the different options
Using the unique data provided, we will generate a budget, review your income and expenses and together, you and your counselor will weigh your options.
3. Choose a new course of action
A more informed financial future begins today. Remember everything is possible with knowledge and the support.
THREE MAJOR CONCERNS WHEN FACING DEBT PROBLEMS
Monthly Payment
The average consumer approaches the decision to join a debt solutions program by solely looking at the monthly payment amount. However, the monthly payment amount is not the only factor to consider. There is also the debt management level payment benefit which accelerates the payoff term and gets consumers off the pay forever plan.
Credit Rating Impact
There are some debt solutions programs that actually have zero negative impact on a consumer’s credit report as long as payments remain current. It is important to address decisions that lead to financial crisis.
Total Cost
Our consultation is totally free. Being uninformed about the options available is costly. Educational tips about personal income and expenses are the key to reducing the cost of your standard of living.
