5 Things You Should Know About Loans, Debt, and Credit

I was recently watching a “the breakfast club” video that caused me to do some research into some of the information they shared. I thought I would share some of what I found to be interesting and, maybe, even beneficial to share with you all.

We have all had to deal with the ramifications of pesky credit scores that was the result of poor financial decisions we made when we were younger. These pesky scores continue to be a thorn and a huge hindrance in accomplishing certain life goals. Although there may be one or two ethical questions attached to some of these info that I haven’t been able to answer or reconcile, I strongly believe that some of these graces are put in place to promote and afford change and allow individuals to become and grow into better versions of themselves. 

It is up to you to use this information wisely and honestly.

So, here are five things you did not know about debt, loans, credit scores, and credit reporting.

There Is A Seven Year Rule For Delinquent Accounts.

If you had a credit card that you made a late payment on or failed to make payments, such failed/late payments are most likely reported on your credit. That information will remain on your credit report and negatively affect your credit score for as long as it remains.

However, that information ages out and the debt vanishes after 7 years.

See what Experian has to say here.

Debt Consolidation Is Not Always A Good Idea.

I’m sure you’ve heard the debt consolidation commercials on the radio multiple times. Apparently those are not always the best idea. 

Debt consolidation is the combination of several debts or loans — payday loans, credit cards, medical bills—into one loan and monthly bill. Although this financial strategy may have some advantages (e.g easier to keep track of), according to many financial advisors, three major cons outweigh the pros – they take longer to pay off; lower interest rate is not guaranteed, in fact you will most likely be locked into a higher interest rate because of the risk; and consolidating will negatively impact your credit score.

See what Dave Ramsey has to say about that here.

Instead, advisors offer alternatives like a balance transfer to a 0% interest rate card (many credit card companies do this for a 12-24 months). If you have several small debts that you absolutely need to combine in order to easily keep up with monthly payments, and have good credit, this may be a less risky option. 

Tax Liens And Civil Judgments May No Longer Be Reported On Your Credit.

As of July 2017, Experian, Equifax, and TransUnion removed and no longer reports tax liens and civil debts on your credit where certain criteria are not met.

See what Forbes had to say about it.

This information negatively impacts your credit score. If you still have these on your credit report, you may be able to have them removed. It does not hurt to Call and find out what can be done! 

 Usury Laws That Cap Interest Rates

Usury laws are regulations that govern the amount of interest rate that can be charged on a loan. Every State has a maximum legal interest rate barring any exceptions. 

When creating a loan agreement, especially with a private and smaller lending organization, most people don’t pay attention to the interest rate that is tacked on to that loan. These lending organizations some times take advantage of the individual’s poor credit score and lack of education on the matter and require an obscene interest rate. Hence, usury laws!

Interest rates beyond what is permissible can and should be disputed because it affects your credit. 

See Usury limit by State here

Consult with an accountant or tax attorney if you have a terrifyingly high interest rate. 

Credit Card Companies Are Open To Negotiating Up to 20-30% Off Your Debt

This is the same as Debt Settlement. 

Many credit card companies that are for profit are willing to negotiate with you in order to settle your credit card debt and allow you to pay a percentage less than your debt. This information, that is the fact that you paid less than owed will most likely be reported on your credit and may affect your credit score.

If you have tried the snowball and snowflake method and just can’t find your bearing, this is an option to consider. 

XoXo S.E

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