The Truth of Credit

Debt Collections is Not Booming

Rick Vaughn — Sat, 30 Aug 2008 21:41:00 +0000

by Jeffry B

So how is business?

Granted, there are plenty more delinquent accounts than their used to be. However, they are almost impossible to settle. Credit Bureaus have 25 to 30 delinquencies that are extremely hard to collect on. Also it seems like everyone I talk to lately is in foreclosure or in the beginning stages.
To counter that my company has been hiring people left and right. I literally had to park on curb yesterday so that I would not be late.
The most obvious sign that things are not good is that “clients” (i.e Bank of America, Chase, Discover) are no longer focused on liquidating accounts with in two months of charge off. They now are starting to rate agencies on a 18 month liquidation rate.

So Rick, what does that mean for me?

Simply, the agencies are going to start toning down the “Sense of Urgency” of payment after charge-off. They are going to be more open to long-term settlements and payment options.
On the downside, for the consumer this will mean even more pressure for these agencies to perform. Pressure means more calls and more contacts.

How can that be?

The mortgage crisis is very far reaching. One the the main vehicles that was popular to consolidate debt in the past was home refinance. Now we all know that you now need a 800 FICO score to do that.
Personal debt is higher than ever, meaning the balances on accounts are much higher. How many people could you go to and ask for $10,000 to settle a debt? Probably not many!
So the next time you read an article like Struggle economy is booming business for some trades. Sometimes it’s not all rainbows and candy for the people within that industry. I’m convinced that a recession is not good business for anyone except funeral parlors.

Related Post

Debt After Leaving the Country

Rick Vaughn — Fri, 29 Aug 2008 03:00:45 +0000

by Mehrad.HM

Want to know what the best way to avoid your debt?

For all the things that is wrong with the credit card industry this is the biggest loop hole in the system. I cannot tell you how many debtors that owe in access of over $100K in revolving debt that have left the country. There is nothing these companies can do about it either. Guess who pays for it? (mirror required)
Yep, so the next time you are paying your minimum fee and barely making a dent in the balance make sure to thank Mr. Chow because his business went belly up and he left the country. This is one of the many reasons why we pay so much interest on credit cards.

What’s the worst than can happen?

NOTHING, personally that is, all of your fixed assets left behind will be split amongst your creditors for pennies against what you borrowed. All while you sit in some villa in Tahiti that you bought with the company credit card.
Oh yeah, and all of your loved ones that were left behind will have to field endless phone calls from debt collectors and lawyers alike; and we all know how fun those are.

How do we fix this?

Not really sure you can. I have looked all over the net for an estimate of how much this “problem” costs the industry to no avail.
To see some evidence of this thinking follow this link.

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Debt After You Die

Rick Vaughn — Thu, 28 Aug 2008 03:00:21 +0000

photo by Christopher Chan

Will my family be held responsible?

One of the most common myths floating around these day is that when you die your debts are forgiven. Not so fast! Many individuals assume that when they die their debt is forgiven, but debt does not work that way. The reality is that if you die while still owning debt your surviving family members may be held liable for the money that you still owe.

So my relatives will have to pay my debt?

Simply “NO”; at least not from their pay check. The way that most creditors go after accounts that are legally owed to them is by going after any estate money or property. This will not directly take money from your family; however, it may prevent them from obtaining their full inheritance.
A few states have begun limiting the amount of estate money a creditor can claim, however even with limitations in place most creditors will still try get what is owed to them. The only way that debt can be forgotten after death is if there is no money, property, or other assets left behind.

What you need to do?

PLAN!!!!!- No one likes to plan for their demise. If you love your family I’m sure you would like to save them the uncomfortable meeting with lawyers and creditors.
Remember the creditors will get their money one way or another. You can fight this all you want but you’re only fooling yourself.

Related Post

Choosing a Gas Card

Rick Vaughn — Wed, 27 Aug 2008 00:43:21 +0000

Is it really worth it to get a Gas Credit Card?

If you fill up at the same gas station every week, then it’s probably a smart move especially if you get a credit card that focuses on one gas station so that you can save more money per gallon. However, if you’re the type that travels all over God’s green earth you may find it tough to find the particular gas station you need. If you fall into the latter category then a rewards gas credit card would better suit your needs (more on that later). You’re not going to be able to save as much money as you would with a sole gas credit card but you’ll still be saving nonetheless. Here is a great site for more information on gas cards findgascards.com

by Dusty 73

Do the Research

What am I agreeing too?

Just like with any other credit card you need to know what fees apply; mainly to protect yourself from being screwed. You will need to know when your rebates will be processed and what fees may apply with that.
One common pitfall of these cards is that people forget to look at the interest rates associated with the purchases. If you have a gas card it is just like a credit card, and therefore you are paying interest on anything that you purchase with it. Many people get excited at the idea that they have a card that has 6% rebates but they don’t stop to consider that the card also has a 29% annual percentage rate; which basically undoes the rebate. Many end up finding out too late that they would have been better with a 3% rebate card that has a 12% annual percentage rate.

The Types of Card/Rewards

What kind of card am I looking for and what are the rewards?

Prepaid and credit are the two types of gas cards. The first requires that you pay upfront while the latter works on credit and you pay after the billing period (one month). There has been a lot of debate as to which type is the best. The answer actually lies in your preferences and habits. If you prefer not to be hassled by due dates, then you go for the prepaid type. However, go for the credit if you are not keen on keeping track of things. The balance on the prepaid card will be irrecoverable. In instances when you loose a credit gas card, all you need to do is call your card company and have it canceled.
When it comes to rewards, cash back card and general rewards are the two types. The first type only offers cash back, which is usually preferred by most gas card users. Cash back can be used for gas purchases and you can earn rebates on them too. However, general rewards cards that offer airline tickets will appeal to you if you travel by plane frequently.

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You Must Be Kidding!

Rick Vaughn — Tue, 26 Aug 2008 04:12:18 +0000

Are you scared to negotiate on your debts?

One thing that I have learned during my time as a debt collector is that someone who knows the process can totally manipulate the situation. When it comes to credit card settlements you are in the “power position” when negotiating mainly because you are the one with the money. The banks do not want you to file bankruptcy no matter what they tell you. Why do you think they pushed so hard for the new 2005 Bankruptcy Abuse Prevention and Consumer Protection Reform Act. You don’t have to be a pro to negotiate for yourself but practice the following tips and you could be on your way to minimizing your debt:

Learn to Flinch

The flinch is one of the oldest negotiation tactics but it is one of the least used. A flinch is a visible reaction to an offer or price. The objective of this negotiation tactic is to make the other person feel uncomfortable (i.e debt collector) about the offer they have presented.

Here is an example of how it works. A collector offers to settle an account for 80% of the balance. Flinching means you respond by exclaiming, “You want how much?!?!” You need to sell the fact that you want to do this and the very best you can do is 50%. Unless the other person is a well seasoned collector, they will respond in one of two ways; a) they will become very uncomfortable and begin to try to rationalize their price, or b) they will offer an immediate concessions. Either, way you will have the upper hand.

Threaten to File Bankruptcy or Settle Another Account

It is better to walk away from a settlement (especially early in the month when the account is new for the collector) rather than make too large a concessions or overpay. You will find that most collection agencies will always work with you it if you offer some kind of lump-sum payment (i.e 10% of the balance).

Quote of the Day

“Never call an accountant a credit to his profession; a good accountant is a debit to his profession.”

Sir Charles Lyell

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Even Mrs. Fields files Bankruptcy

Rick Vaughn — Mon, 25 Aug 2008 03:07:02 +0000

Do you feel that God has forsaken your financial future?

Mrs. Field’s, the ever so lovable cookie-maker, despite most likely having Ivy League financial whizzes running its finance department couldn’t prevent the company from going up in smoke. So the next time someone asks if you filed bankruptcy just refer to it like major companies as a “Prepackaged Plan of Reorganization.” So many people fear bankruptcy like it’s the “plague” when in reality sometimes it really is the best option.

by jleighb

Signs it’s time to go Bankrupt

If you were making $100,000 2 years ago and lived like the Real Estate market would never drop; you most likely aren’t making $20,000 now and are probably looking for other work (This unfortunately is the situation my realtor and mortgage broker friends have found themselves in).
You’ve been forced cut back on every essential (i.e groceries) and paying your creditors causes you’ve fallen behind on your essential payments, such as your mortgage/rent, car payment, insurance or utilities.

Mental Signs it’s time for Bankruptcy

You are losing sleep, constantly arguing with your spouse, considering divorce or contemplating suicide because of financial pressures.
You are considering doing something illegal or thinking of pursuing shady credit repair strategies in order to relieve the pressure of dealing with your creditors.

Quote of the Day

It is said that the world is in a state of bankruptcy, that the world owes the world more than the world can pay. - Ralph Waldo Emerson

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Loan in 30 seconds, No credit required!

Rick Vaughn — Sun, 24 Aug 2008 04:19:04 +0000

Photo by Eddie S

Do you ever wonder why there are no Payday Loans in Beverly Hills or on Park Ave in New York? Would a Rich Guy/Gal ever need the services of a Payday Loan (or equivalent)? Simply no, because to them that would be financially stupid; as stupid as not paying you heating bills or utilities

“It’s not my Fault“
Are you constantly blaming others for your problems? What are you going to do to change your predicament?

These are the two hardest questions for people in debt to answer. One because they must take responsibility and the second because it requires them to educate their mind to find a solution.
Stop playing the victim (unless that helps you in some weird way).

The Definition of Insanity
Are you borrowing money every month hoping things will change?

According to Einstein the “definition of insanity is doing the same things over and over again and expecting a different result”.
Saying that you will have money next month or next year sounds good in theory but being is a constant state of “catch-up” is not a plan for action.

Reap What you Sow

Do you deserve to be out of debt?

Find what you can do without. Life may be short but the debt free life is so worth it. Think about how easy it would to sleep at night if you weren’t dodging phone calls or worrying about where you are going to find the money to buy groceries.
Cash is King and when you have it the world opens up to you; no matter what race or sex you are.

Quote of the Day

“ Creditors have better memories than debtors.” ~Benjamin Franklin

Related Post

The Dark Side of Payday Loans
Turning Up the Heat

I’m Back

Rick Vaughn — Sat, 23 Aug 2008 03:05:34 +0000

Wheeeeewwwww Buddy! It’s been along time since I have written a post. To be honest there has not much to be write about lately on the collection front for myself. The month of August has been absolutely abysmal for me personally. Possibly the worst month in my career. Everyone who answers can get on the phone has attorneyed up (collection term meaning filing bankruptcy) or is on the verge of losing there home and has no way of paying anything.

Obviously, this should come as no surprise to anyone who has watched the news lately. What’s really sad is that I have more accounts than ever to work but the Credit Reports have been horrible. I had a 23 year old from Indiana whose FICO score was 379. That’s right 379 but still has 2 cell phones! Can anyone explain that one?

So, I plan to get back to my daily posting schedule and hopefully we can collect some money before this month is over.

Day in the Life - DAY 5

Rick Vaughn — Sat, 09 Aug 2008 02:35:24 +0000

It has been a long while sense I have written about a “Day in the Life” of a Debt Collector. I’m kind of getting tired of writing about facts that most people really don’t care about or read for that matter. So I’m going to start writing about my days and if its boring to you so be it. I’m sure your job is boring too unless your a Navy Seal or Brett Farve. So here was my day August 8thth. Hope you enjoy:

Mid-Age Male from Pennsylvania calls in-A few days previous we had a pretty heated discussion regarding some bounce checks that he setup from 2 months ago. Now, after 2 months of bad checks and playing phone games he is calling in to apologize. This almost never happens so I take it easy on him this time. He wants to reset his checks but, not for the amount we agreed to 2 months ago. So in the interest putting the account to rest I take the new checks for $250 for 2 months and then $150 there after until the balance is paid. I’m glad to get this guy off my desk.

Business Owner from Arizona-This poor guys credit was completely shot and had 2 foreclosures. He picked up the phone right away and I could tell he knew the routine. He goes on to explain that this debt $10,000 is not a priority to him and that he is basically there nothing he could do. Now, most of the time I would push the issue but he has literally “NOTHING” and no way of getting a loan. It’s still early in the month I’m positive I can get him on the phone again but, I’m not going to waste my time now.

Government Employment for California- This lady was a real fireball. She was with Campos Law Firm (Debt Settlement Company) and was making payments religiously to them over the last 5 months. However, she found out they were not contacting her creditors or doing any of the another things that she was promised (usually the case). So she wants to make payments but those aren’t an option anymore. Obviously, she works with government and has retirement which she vigorously denies but then later fesses up. Personally, I hate to see people dip into retirement to pay these off kinds of debts but she got some bad advice and my client should not have to pay the price for that. I give her a 75% settlement in the range of $5,000 she will get back to me tomorrow.

Housewife in Colorado- Here is classic case of someone hanging up right as you identify yourself. These are the people that give you the “thrill of chase” because now she knows why I’m calling. Maybe her neighbor could get her a message or maybe a relative? I’ll keep you updated on her.

Experienced Entrepreneur in Georgia- This lady really was so nice but her story so sad. She had a thriving retail business that recently went belly-up. Getting up in years she handed the business over to a granddaughter who obviously had no clue. Unfortunately, for her the company cards were still in her name leaving her legally obligated which she admitted. As you can imagine this is a relatively large debt ($30,000) she is offering nothing. After a good conversation she is going to try to sell some old inventory to at least make some form of payment. My guess however, is this has judgment written all over it she has assets and a home that is paid off.

Money collected today: $250 (BOOO!!!!)

YouTube video of the day!

No I don’t endorse this crap!

28/36 Ratio Explained

Rick Vaughn — Wed, 06 Aug 2008 04:05:58 +0000

The 28/36 ratio is the standard formula used by mortgage lenders to calculate your mortgage affordability. It consists of your debt to income ratio, and is a figurative way of determining how much of your income should go toward your monthly mortgage payment after all your other monthly debts are paid. There is generally a debt limit associated with different types of mortgages, such as the 28/36 qualifying ratio associated with conventional loans.

The first number in a qualifying ratio is the maximum percentage of your monthly income that should be applied to your housing payment. When we say monthly income, we mean your gross monthly income before any withholding taxes are removed. Your housing payment includes the loan principal and interest, hazard insurance, and property taxes. Your housing payment does not include utility bills like telephone, natural gas/electrical service, or cable TV.

The second number in the ratio is the maximum percentage of your gross monthly income that underwriters will allow to be applied to your housing payment plus your “recurring debt.” Recurring debt includes any debt (not utility bills) that you’re are required to pay each and every month. This includes installment loans like car loans or student loans. It also includes alimony, child support and revolving credit card payments. Even if you pay off your credit card statement every month, the underwriter will include a minimum payment in the ratios whether you like it or not.

The TRUTH is that qualifying ratios are guidelines that mortgage lenders have used for years to calculate the loan amount you can receive. Although current underwriting software has modified the need for these ratios a great deal, every underwriter eventually approves your loan based on what percentage of your income is going toward your house payment.

Quick Example:

Gross monthly income of $2,500 x .28 = $700 can be applied to your housing payment.

Gross monthly income of $2,500 x .36 = $900 can be applied to housing payment plus recurring debt.