Credit Management
For people with disabilities who have low incomes and are unable to work, debt can become unmanageable. When this happens, it can create a lot of stress because it may mean:
- No safety net of savings for unexpected expenses
- No financial support for future plans
- Problems with creditors in spite of good intentions
On this page
Creditors
Creditors are businesses that people owe money to, including:- Credit unions and banks
- Retail stores
- Credit card companies
- Utility companies
- Landlords
When working with creditors:
- Keep a written record of who you spoke to, when you spoke, and what was discussed or agreed.
- Write to the creditor to confirm any agreement that was reached during a phone conversation.
- Stick to the agreement and inform your creditor if a problem arises.
Creditor Worksheet
To get an overall picture of how much money you owe to creditors, use this worksheet to record information on creditors and then total the Amount Owed and Monthly Payment columns.
After you complete the worksheet, take a moment to reflect upon the following:Creditor Worksheet
To get an overall picture of how much money you owe to creditors, use this worksheet to record information on creditors and then total the Amount Owed and Monthly Payment columns.
| Name of Creditor | Mailing Address | Account Number | Amount Owed | Monthly Payment | Months Not Paid |
|---|---|---|---|---|---|
| $ | $ | ||||
| $ | $ | ||||
| $ | $ | ||||
| $ | $ | ||||
| $ | $ | ||||
| $ | $ | ||||
| $ | $ | ||||
| $ | $ | ||||
| $ | $ | ||||
| $ | $ | ||||
| Total | $ | $ |
To email, first print or save to pdf then email that document to the desired address.
• How do the amounts you owe and monthly payments compare to your income?
• What are you able to pay each month?
• Which debts are most important to be paid?
This information can help you prioritize which debts to pay and help you estimate what you can offer if you negotiate new terms and conditions on outstanding debt.
Collection Agencies
A creditor may turn your account over to a debt-collection agency if you fall behind or stop making debt payments on your account. This is a sign that the creditor has given up on you making payment. At this point, you will no longer receive past due notices in the mail. Instead, the collection agency will contact you and try to get payment from you.The Federal Fair Debt Collection Practices Act regulates the actions a collection agency can take.
Under the federal Fair Debt Collection Practices Act, a collection agency:
- Must send you written notice of the amount you owe, the name of the creditor to whom you owe the money, and what action to take if you believe you do not owe it.
- May contact you in person, by mail, by telephone, or by telegram between the hours of 8AM and 9PM.
- May not contact you at work if you tell them that your employer does not allow such phone calls to be received.
- May not address you in an abusive manner.
- May not call other people (i.e., family and friends) in an effort to collect your debt.
- If a collection agency violates those conditions, you may file a complaint with the Federal Trade Commission, your state attorney general's office and/or the Better Business Bureau. If you do this, you must send the collection agency a written notice to stop harassing you and advise them that you have filed a complaint against them.
- You can also advise a creditor or collection agency in writing that you refuse to pay a debt or that you wish for them to stop all communication with you. While this doesn't cancel the debt it prevents the collection agency from contacting you until it proceeds with a legal remedy such as a lawsuit, judgments, or lien.
Federal Trade Commission
www.ftc.gov/bcp/consumer.shtm
State's Attorney General listed in the telephone book under government listings.
Better Business Bureau listed in the telephone book.
Credit Rating Agencies
Credit rating agencies make a profit by collecting information on people's credit history and selling it as credit reports to businesses, employers, and landlords. Credit reports are used by businesses to predict how a person will pay their bills in the future and to measure the risk in lending money to an individual. Under the Fair Credit Reporting Act, a credit report cannot be sold to an employer without your written consent.Credit reports contain records of:
- Loans, payments, and credit limits during the past 7 years
- Bankruptcy, judgments, liens, and overdue taxes
- Overdue child support payments
- Names of creditors that have recently asked for a report.
High credit ratings indicate:
- Timely repayment of debt, including monthly bills, credit cards, and loans
- Payment of taxes in full
- Not dependent upon credit, i.e., not at the maximum of credit card limits
- No outstanding bad checks
Step 1 - Get a copy of your credit report
Credit agencies don't collect the same information; so get reports from all three national credit agencies to catch errors and safeguard against fraud..You are entitled to a free report if:
- you have been denied credit, employment, or insurance on the basis of a credit report
- you are unemployed and looking for a job
- you are on welfare
- inactive credit accounts are closed
Step 2 - Review Your Report
Check that information in the credit report is current and accurate.- Review the credit limit, recent balance and payment information for each account.
- If you have separated or divorced, check that all accounts are now listed as “individual” and not “joint with.”
- Confirm that accounts you closed are reported as “Account closed at consumer's request.”
- If you have changed your name, make sure that your previous credit history has transferred over.
Step 3 - Correct Errors
Call or write to the credit agency and include as much information as possible about each error. The agency should respond to you within 30 days. If it is determined that the agency records are correct, then the debt item will remain, although you can have a statement of explanation included on the report.Tip: Stay away from agencies that promise to change or erase negative information from your credit report for a fee. Only time or repayment of debts can remove true information. At best, those agencies can do what you can do for free; at worst, they will take your money with no change to your credit rating.
Step 4 - Verify
Request your credit report again in 30 to 60 days to be sure that errors were corrected, deleted, or that your statement of explanation was included. Further resources:Equifax
www.equifax.com/home/en_us
Experian
www.experian.com/
Trans Union Corporation
www.transunion.com/
Tips for Working with Outstanding Debt
- Know how much you owe and what you are able to pay each month.
- Prioritize your debts and pay what is most important or has the highest interest rate.
- Don't ignore creditors or unpaid bills.
- Work with creditors to reduce your monthly payments to a more manageable level.
- Consolidate all your debts into one loan.
Improving Your Credit Rating
Businesses evaluate individual credit applications by rating or measuring how a person has handled credit over the past seven years, but often consider information from the past one to three years more important than older information. If you have a low credit rating, you can improve it by adding new, positive information to your credit report, which will help you qualify for additional credit in the future.Repaying debt and/or obtaining and using a secured credit card are effective ways to start rebuilding your credit rating. A secured credit card is backed by money that you leave on deposit so that if you don't make a payment each month, the creditor or bank is paid from the deposit.
Before you apply for a secured credit card, shop around to find the best deal by asking the following questions:
- What are the basic terms and conditions, i.e., annual interest rate, annual fee, late and cash advance fees?
- Is credit extended to people with low credit ratings?
- Can you qualify if you have declared bankruptcy in the past?
- Will your payment history be reported to all three credit-rating agencies?
- What interest rate will be paid on your deposit?
- What will your credit limit be?
- How long will it take to qualify for an unsecured credit card?
Credit Counseling
Consumer credit counseling agencies can work with you to evaluate your financial situation, develop a plan to pay all your bills on time, and lower the total amount of debt that you owe. This may be especially helpful if you have been on disability for many years and have been unable to pay your debts in full.Services can include:
- Counseling--evaluate your financial situation and develop a budget.
- Debt Repayment--lower your monthly payments and/or consolidate all your debt into one monthly payment.
- Education--learn how to budget, track expenses, improve your credit rating and use credit so you are not overextended.
Credit Counseling agencies listed in the telephone book.
Debt Counselors of America
getoutofdebt.org/
Debtors Anonymous
debtorsanonymous.org
National Foundation for Consumer Credit
www.nfcc.org/