Credit Education


Credit– Is the ability of a customer to obtain goods or services before payment, based on TRUST that payment will be made in the future. Each credit account will have a terms and agreement which will indicate the due date and the rate of interest.


Interest– Money paid regularly at a particular rate for the use of money lent, or for the delaying the repayment of a debt. The higher your FICO score the lower the interest rate will be offered. If your FICO score is low you will be considered a risk to the creditor therefore your interest rate will be increased. Having a healthy FICO score can save you thousands of dollars in interest rates paid to creditors.


Debt– Is a financial obligation of money that is owed or due. Use of debt create financial leverage for organizations because a return is made on the money that was lent. Because most debt have interest paid it can be written off as an expense. Please see your accountant for further details.


Delinquency – Is the failure in or neglect of duty of obligation. This means that you have fell behind on your payments and is no longer current. Late payments reported to the credit bureaus will decrease your overall FICO score. In this case take control and contact the creditor. Ask to speak to someone in the collections department and make a payment arrangement that will bring your account current. If late fees have occurred do to late payments do not be afraid to ask for waivers. Some creditors are willing to negotiate late fees if you are will to bring your account current. Once the account becomes current you will be having positive credit reported to the credit bureaus.


Charge off- A charge off account is an unpaid account that the creditor is no longer attempting to collect. A charge off can have a very adverse effect to your credit and credit score. This means the creditor has written this debt off. They have basically went to the government claiming that you have no intentions on paying the debt.  However, federal regulations requires that account have to be at least 120 days delinquent with installment loans and 180 days with revolving credit. In most cases these debts are sold to a collection agency.


Collection Agency– A collection agency is a company that is use to recover funds from accounts that have gone into default. The original creditor have either assigned or sold to the debt to the collection agency. Remember you do not have an agreement with the collection agency. You have an agreement with the original creditor. Typically these debts can be settled for a percentage of the debt. So negotiate and always get the settlement offer in writing.

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