Priority Pay- A new program!

The Priority Pay program is a brand new addition to the many other services offered at RethinkingDebt. This program is available to clients who, due to financial restrictions, do not qualify for a traditional debt management program. At your appointment with RethinkingDebt, you will speak with a certified credit advisor and create an in depth budget based on income, living expenses, creditors, and amounts owed to each creditor in order to see your financial situation as a whole. This will allow the advisor to determine the most beneficial way to pay off outstanding debt. Priority Pay allows our clients to start debt repayment while still maintaining their everyday living expenses. Our staff understands each individual has a unique financial situation, and we try to assist each client in determining the best option based upon their own individual needs. Unlike the debt management program, when on Priority Pay, there is not a minimum payment requirement for each creditor. Once a creditor is paid in full, the funds can be reassigned to another creditor with an outstanding balance until all debts are paid in full. There is no time restriction for paying off the debt. This program simply allows you to start the process to obtaining financial health by paying one, two, or a few accounts at a time without disrupting your monthly budget. Our certified advisors would be glad to schedule an appointment in person or over the phone to review your current debt situation. Call us!

Beware: Rent to Own and Payday Loans

by Phil Stratigis

Often, consumers feel the pinch of needing something immediately, whether it be money or a physical item. During these times, consumers need to be very wary, as many of the options available to them are sometimes well disguised traps meant to take advantage of their situation. Two of the biggest traps to avoid are Rent-To-Own stores and payday lenders.

Rent-To-Own stores prey on the consumer's desire to immediately have material possessions. These stores have become popular with people who have poor credit, and heavily target lower-income consumers.

Rent-To-Own stores lure in consumers with promises of providing high-end merchandise, such as flat screen TV's and furniture, at "affordable" payments drawn out over a long timeframe.

The problem with Rent-To-Own stores is that they are able to hide extremely high interest charges and fees over time. Interest charged at these stores can run as high as 50% and end up costing you far more than the item is actually worth.

Alternatives to these stores include making a savings plan to buy the item outright or shopping at second-hand stores like Goodwill for more affordable items.

Consumers who feel the need for a smaller amount of cash in a short timeframe sometimes turn to payday loans. These products are short-term loans that are meant to give people money until their next payday. Although this sounds like a noble, useful product, the interest rates and fees  can make it impossible for the borrower to repay the debt in the anticipated timeframe.

The interest rates are so high that these loan products are currently illegal in the state of New York due to usury laws. The annual percentage rate (APR) of a payday loan can reach into the hundreds, trapping the consumer in a cycle of being unable to repay the loan.

These loan products should be avoided at all cost. The best way to avoid feeling the need to take out a payday loan is to prepare an emergency fund into which you deposit a small amount each month in case of unexpected expenses.

Need help with your debt? You are Not Alone.

By Lynette Baker- Director of Marketing at CCCS of Rochester

If you are struggling each month to pay your bills, and you don't seem to be making any progress, maybe it's time to consider getting some help. A Debt Management Plan (DMP) is a great option if you need professional advice. The goal of any DMP is to help you decrease your debt and allow you to take back your financial future.

A DMP can help with your unsecured debt. Unsecured debt is debt that is not secured by an underlying asset or lien. Examples of unsecured debt are credit cards, personal loans, and attorney or medical bills. A DMP will take all of your unsecured debt and combine it into one affordable monthly payment. It is not a debt consolidation loan though and unlike debt settlement services, there are no upfront fees. A credit counseling agency will provide you with practical budget counseling services and work with you and your creditors to build a budget you can live with. A DMP will help you pay off your debt and improve your credit rating. An agency that offers DMP's can offer helpful suggestions and assist you with:

                •lower interest rates

                •lower payments

                •reduction or removal of late or over limit fees

                •relief from collection calls and letters

Regardless of your specific need, choosing a good credit counselor is extremely important. Some organizations, including some non-profit credit counseling agencies, may be more interested in their bottom line than in helping their clients. A 2005 Senate committee, though, lauded the National Foundation for Credit Counseling (NFCC) for its commitment to ethical credit counseling that is provided at low or even no cost to consumers. The NFCC has member agencies all over the US including Consumer Credit Counseling Service of Rochester. There are some important criteria to keep in mind when choosing an agency to work with.

•Find out if the agency belongs to a national organization such as the NFCC to ensure it meets quality and ethical standards

                •Ask the Better Business Bureau and other third parties about the agency

                •Watch out for large upfront or monthly fees

                •Be skeptical of BIG promises

                •Make sure the agency will work with all your creditors

                •Be wary of "fly by night" agencies- make sure the agency you choose has many years of experience

Keep in mind that a DMP is not a "quick fix". No one can get rid of your debt overnight. A DMP will get you back on track though and improve your finances for the future. You must be committed though. A credit counseling agency can help you lower payments but you still have to be disciplined to make those payments and not incur any further debt while you are on the DMP. Your patience and hard work will be rewarded with a brighter financial future!

What To Do If Your Information Gets Leaked

By Destiney Fraguada, Counselor

Occasionally, hackers are able to breach the security precautions of companies and access protected consumer information.

However, there are some proactive steps you can take as a consumer to safeguard your personal information.

Monitor your credit report closely.

The best method of monitoring your credit report would be to pull all 3 credit reports annually, ideally spreading them out over a course of a year.

You can acquire your credit report for free through annualcreditreport.com; this site is a free, government-sponsored site with no fees or temporary membership requirements.

Place a "fraud alert" on your credit report.

If you feel that your identity has been compromised, you can place a personal statement on your credit reports.

It is important to place instructions for a creditor to follow if they are trying to issue you credit, including a method for them to contact you.

Change and/or update passwords on accounts that have been compromised.

Make sure to update your passwords and contact the bank or lender immediately.

Request the bank or lender to issue out a new card, and change any PIN‟s associated with the accounts.

Become empowered and take control.

Contact companies that have recently solicited you and ask to be removed from their mailing list.

To avoid e-mail solicitations, you can direct them to the junk or spam folder. Then, each time you‟re sent a solicitation from any company you sent to junk or spam, it will automatically go there.

Guarding Yourself Against Credit Card Skimming

By: Rachel Douglas, NFCC certified Credit Counselor

Card skimming is a method used by thieves to steal credit or debit card information. Skimmers place counterfeit devices on ATMs which record your information when cards are inserted into them.

This practices illustrates that credit and debit card accounts are vulnerable even if the cards themselves are never lost.

In part, that is because credit and debit card numbers are usually stored unencrypted on a magnetic stripe on the reverse of each card, which thieves can easily copy at low cost.

Summer is the highest-risk season for scams and thefts, so make sure you know how to properly protect yourself to avoid becoming an easy target.

To protect yourself from card skimming scams, practice the following:

Avoid ATMs that you do not normally use.
Thieves commonly put out-of-order signs on legitimate ATMs and set up nearby counterfeit ones that skim information from your card. ATMs positioned inside banks within view of watch cameras aren't risk free, but they create more challenges for the thieves who install skimming equipment.

Cover your code.
When entering your PIN into an ATM or card reader, cover the keypad from the observation of hidden cameras or anyone in close proximity.

Use the "credit" option with your debit card.
If you must use a debit card, choose the option to have the purchase processed as a credit transaction rather than entering in your PIN.

This option is available at many point-of sale terminals, and functions the same exact way as using the debit option. This way, your debit PIN is more secure.

Card skimmers particularly target gas stations, especially in vacation areas. Make sure to be extra careful while filling up your gas tank!

The US Debt Ceiling - what is it?

By Phil Stratigis

There's been a lot of talk recently about raising the US debt ceiling, but not a whole lot of context as to what exactly this means and why it's supposedly such a big deal.

Think of the debt ceiling as a credit card or a line of credit for the United States department of the Treasury. If the Treasury does not have enough cash to pay its bills, it can borrow money to cover its expenses. However, just like a line of credit, there is a limit to how much money can be borrowed - this is what is known as the "debt ceiling."

The limit to the ceiling can be raised through an act of Congress, and in fact has been raised 74 times since 1962.

The problem has recently become the fact that the limit to the debt ceiling ($14.3 trillion at the time of this writing) is lower than will be needed for the government to continue paying its expenses. The estimated day on which the United States will no longer be able to borrow in order to meet its financial obligations is August 2, 2011.

So the big question becomes - what happens if the problem doesn't get solved?

This is where it gets rather tricky. The truth is that nobody is completely sure what will happen. Just like how the stock markets are inherently unpredictable, the US not meeting its obligations will have unpredictable outcomes.

One of the major concerns is that the United States will get a decrease in its debt security ranking. Currently, the ranking of US debt is AAA, which means that according to the expert financial agencies, US debt is among the most secure debt to own (with the highest likelihood of getting paid back with interest).

If the government is unable to pay interest dividends (just like interest fees based on an APR to a credit card agency), the security ranking might get downgraded. But, again, nobody is completely sure what effect, if any, that will practically have.

Ultimately, raising the debt ceiling is only applying a band-aid to a large wound. As much of a quagmire the debt ceiling debate has been, the only real solutions are even more difficult to swallow.

The government needs to eventually either cut spending or raise taxes (or a combination of both). These, of course, are not easy options to swallow for anybody.

It looks like the Treasury could stand to contact RethinkingDebt.

If You Want to Improve Your FICO Scores…Paying Off Credit Debt Reigns Supreme

Guest article by John Ulzheimer of SmartCredit.com

When it comes to boosting your FICO credit scores there are a variety of strategies that will yield varying amounts of improvement.  Many people believe that getting negative information removed from your credit reports is the number one way to increase your scores.  This is correct but only if the consumer is successful at getting most, if not all, of the negative information removed.  Getting one of your twelve collections removed isn't going to do anything for your scores.

A much more actionable (and realistic) way to increase your scores is to pay off debt.  Not only is this a proven way to earn better scores but also it's practically immediate. Paying down debt can result in a better score in less than 30 days, which is lightening fast in the slow moving credit-reporting environment.

But before you crack open your checkbook you'll want to consider WHICH debt you're going to eliminate.  Why?  Because when it comes to improving your credit scores not all "debt elimination" is created equal.  In fact, paying some huge debts will yield little to no score improvement while paying smaller debts can result in meaningful score boost.

Using a scoring tool built by FICO, I recently simulated the following "pay off" scenarios and measured their impact to a FICO score of 630, which is clearly one that you'd like to improve.  Nothing other than the following actions changed on the credit report.

1) Paying off a $250,000 mortgage

2) Paying off a $35,000 auto loan

3) Paying off a $5,000 credit card

The results are as follows…

Paying off a mortgage loan of $250,000 improved FICO 630 to FICO 635

I've been telling people for many years that installment debt, even in large amounts, doesn't have much of an impact to your scores.  This is the quantification of that advice.  And while this is just a simulation, in 2010 I sold a house and eliminated a $249,000 mortgage and my FICO scores went up four points.

Paying off an auto loan of $35,000 improved FICO 630 to FICO 635

An auto loan is an installment loan (like a mortgage) and the effect of paying it off is equally unimpressive from a scoring perspective.  Don't get me wrong; it's nice not having a monthly car payment.  And, it'll save you big bucks not paying interest on a $35,000 loan any longer.

Paying off a credit card balance of $5,000 improved FICO 630 to FICO 665

Eliminating the credit card debt resulted in the largest improvement to the credit score, and really it wasn't even a close race.  Credit card debt is scientifically proven to be a riskier type of credit for lenders to extend, which means even smaller amounts like what was used in the simulation can have a significant impact to your FICO scores.  It also means if you can pay it off your scores will improve a lot, and very quickly.  And even if you can't pay off your credit cards 100%, your scores will still improve by paying it down as much as possible.

Now, where's my checkbook?

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.