Financial Advice

Reduce Your Debt With a ‘Sinking Fund’

Whether you use a budget or not, I bet you can name several significant expenses that you know you’re going to be paying in the next six to twelve months.

How about Christmas? Maybe the car needs tires or the roof needs to be re-shingled. How about that auto insurance payment you make every six months?

Even though you know they are coming, you often end up using your credit card to pay for these items. Now, you”re not only paying for the expense, but you’re paying interest too!

So, I hear you saying, what the heck is a sinking fund, and how can it reduce my debt? A sinking fund is basically the opposite of a credit card. In simple terms, a sinking fund is when you save a set amount of money each month, over a period of time, to pay for a future purchase or expense.

How does a sinking fund approach work?

Let’s say you know that you will spend around $1,000 on Christmas, and we’re in March.

Take the $1,000 and divide by nine months (March through November). Set aside $110 each month. Then, come December, you will have $990 saved, specifically for this purpose.

You can even use the sinking fund approach for small expenses.

If you know that you are going to be buying a birthday or graduation gift, you can set aside a small amount each month leading up to the event.

Some people use envelopes to hold the money. Just don’t be tempted to dip into that envelope to go see a movie or when that girl scout comes to your door selling cookies.

Also, be careful keeping money in your house. If the amount is going to be significant at all, a bank account is a safer place to keep it.

You can also use the sinking fund method for discretionary purchases.

In fact, the method works even better for this type of purchase since you have control over when you make the purchase.

If you really want that new big screen television, set aside some money each month until you save up the purchase price instead of using your credit card.

You may already be putting money into your savings account every month for “unexpected expenses.” Isn”t that the same thing? Well, no.

You still need your “emergency fund” for those truly unexpected expenses. A sinking fund is for an expense that you know is coming.

You can use the same savings account for both as long as you are disciplined about knowing how much is “emergency” money and how much is “sinking fund” money. If you decide to use a separate savings or checking account for your sinking fund, just be sure the bank fees don’t eat up your money.

The well-known radio personality and financial author, Dave Ramsey, wrote a recent blog post about this sinking fund approach (see Stop the Panic with a Sinking Fund).

He points out that although the concept is pretty simple, not many people use it. The reason is that it takes a skill that not many people have mastered, namely patience. He notes that we live in a culture where we buy now and bring an item home today.

He also points out that the credit card companies and banks are counting on people not planning ahead so they can collect those interest charges and fees.

Even if you only use the “sinking fund” approach for one or two of your larger expenses that are coming up within the next year, you may significantly lower your debt by not having to charge them. Keeping large purchases off of your credit card can really help you get your debt under control.

This article originally appeared on The Dollar Stretcher.com.

This article by Andy Fink first appeared on The Dollar Stretcher and was distributed by the Personal Finance Syndication Network.

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Financial Advice

The IRS is Using Private Debt Collectors. Here’s What You Should Know.

Do you have a debt with the IRS that’s more than two years old? If so, you might be getting a letter from the IRS about your account being transferred to a private debt collector. This new program only applies to taxpayers who have had an IRS debt for years and who were previously contacted about it by the IRS. Here’s how it will work—and how to spot a scam.

If your debt is put into this program, the IRS says you will get two letters. The first letter will come from the IRS and will say which private debt collection company your account has been assigned to. The companies are: CBE Group of Cedar Falls, Iowa; ConServe of Fairport, N.Y; Perfomant of Livermore, Calif.; or Pioneer of Horseheads, N.Y. The second letter will come from the private debt collection company assigned to your account. Both letters will include the tax amount owed, the name of the private debt collection company assigned, and a taxpayer authentication number that is unique to you.

But here’s how you can tell you’re dealing with the actual debt collector, not a scammer:

  • The private debt collectors working with the IRS will never ask you to pay them directly. Instead, they’ll tell you to pay the IRS electronically, or send a check, made out to the US Treasury, directly to the IRS. Anyone who says they’re collecting for the IRS and asks you to make a payment over the phone is a scammer.  Whether they’re asking you to pay by credit or debit card, electronic check, wiring money, or a prepaid or gift card–don’t do it.  
  • These debt collectors will never use robocalls or pre-recorded messages. You’ll always speak with a live operator.
  • They’ll always use the authentication number that was in your letters.

Not sure you owe the IRS money? Ask the collector for a written “validation notice,” which says what you owe and to whom. You can also check your IRS account balance.   If your account balance says zero, you don’t owe money and should not be getting calls.

To learn more about this new process, visit the IRS’s website . And remember: All debt collectors have to follow the law.

The Federal Trade Commission (FTC) and the CFPB have resources to help you learn more about your rights when dealing with debt collectors. If you’re having issues with a debt collector, you can submit a complaint with the CFPB.

Colleen Tressler is a Consumer Education Specialist with the FTC.

This article by was distributed by the Personal Finance Syndication Network.

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Financial Advice

Fake Emails Could Cost You Thousands

Think you got an email from a business you know? Scammers sometimes use emails that look legit to trick you into sending money to them.

The email might say it’s from a real estate professional you’re working with, telling you there’s a last-minute change and you should now wire your closing costs to a different account. Or it could seem to be an email – with an invoice – from your utility company, telling you to wire payment. Whatever the story, if you wire that money, it goes to the scammer – and you may never see your money again.

These scammers might get your information by hacking into a business. Once they know about you, they send an email that seems to come from the business, telling you where to send money.  So, how can you spot these scams? 

  • Never wire money to anyone who emails – or calls – and asks you to. Instead, check it out.
  • Contact the company through a number or email address you know is real. Don’t use phone numbers or links in the email.
  • Don’t open email attachments, even from someone you know, unless you’re expecting it. Opening attachments can put malware on your computer.

If you’ve already sent in money to a scammer, act quickly.    

  • If you wired money through your bank, ask them right away for a wire recall. If you used a money transfer company, like Western Union or MoneyGram, call their complaint lines immediately.
  • Report your experience to the FTC and to the FBI’s Internet Crime Complaint Center at ic3.gov. Give as much information as you can, including all requested banking information. The sooner you get this report in to ic3, the more likely they can help you.
  • If your bank asks for a police report, give them a copy of your report to ic3.gov.

Also, learn more about protecting yourself from phishing

This article by the FTC was distributed by the Personal Finance Syndication Network.

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Financial Advice

Help Your Credit – DIY Credit Repair

Is your credit score helping or hurting you? When it comes to your credit score, bigger is better. Lower credit scores translate to higher interest rates, less appealing qualified offers, and even missed opportunities. The good news is, there are steps you can take on your own to repair your credit and improve your score.

Face the Facts. The first step is to request free copies of your credit reports. You are entitled to receive one free report annually from each of the three major credit bureaus: Experian, Equifax, and Trans-Union. Visit annualcreditreport.com to order your free reports. Once you have them, closely review and compare them for accuracy. (Please note: these free reports do not include your credit score. There are ad-supported websites such as CreditRepairExpert.org that allow you to obtain your free credit score, but be sure to read the sites’ terms and conditions first.)

Fight the Errors. Dispute all incorrect information you find on your reports. Start by looking for discrepancies in your name, Social Security Number, addresses, etc., and then tackle your credit history. Make sure you recognize all accounts listed as yours, that your payment history is accurate, and that open/closed accounts are correct. If you find any errors, contact that reporting agency directly by sending a letter via certified mail that specifies the error(s) along with your explanation and any documents to support your claims.

Plan and Prioritize. Now that you know where you stand, it’s time to create your plan. Start by developing a budget that allows you to pay your current obligations on time each month. Paying on time is the quickest way to move your credit score needle in the right direction. Next, prioritize your obligations. Are you going to pay off your smallest balances or your highest interest rate balances first? The first approach may offer better motivation, but the latter will save you more money in the long-run. The approach is up to you; the key is choosing a plan of attack and sticking to it!

Know Your Limits. Pay attention to your credit limits and try to stay well under your maximum. Debt is evaluated in terms of ratios: if you owe $500 on a card with a $2,000 limit, you’ve used 25%, which is better for your score than owing the same amount on a card with a $1,000 limit (50%), both of which are better than being “maxed out” at 100%. Pay your credit cards down, but don’t cancel them. The total amount of your available credit helps your score, even if your balance is zero.

Keep Inquiries to a Minimum. Avoid temptations to open new credit cards just for discounts. Each time you apply for credit it’s recorded as a “hard inquiry” on your report; too many within a 2-year period can hurt your credit score. However, “soft inquiries,” which include checking your own credit, do not count against you.

Once you’ve taken the steps above, the hardest part is being patient. Depending on your situation, it can take months or even a year or more for your credit score to improve substantially. However if your plans include a new home or starting your own business, the time and effort is worth the wait!

This article by Wayne J. Delk first appeared on Fort Madison Daily Democrat and was distributed by the Personal Finance Syndication Network.

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Financial Advice

Another Attorney Mortgage Relief Network Runs Into Legal Trouble

Legal News Line published a piece today on the action taken by the New Mexico Attorney General against Real Estate Law Center, Erikson Davis, Deepak Parwatikar, Balanced Legal Group, Pinnacle Law Center, Chad Pratt, and Balanced Legal Group.

The Defendants in this case share some overlap with the Brookstone Law debacle that was targeted by the Federal Trade Commission.

The New Mexico Attorney General, Hector Badass (Balderas, said “Preying on New Mexicans at their most vulnerable financial time is disgusting and I will aggressively pursue justice for the families in New Mexico who have been victimized by these California attorneys. I urge anyone in New Mexico who is having trouble making their mortgage payment to contact the Office of the Attorney General for assistance from our Keep Your Home New Mexico program.” – Source

Not much has happened in this case since it was filed. It takes time for actions to work through an already busy court calendar.

In the suit filed by the Attorney General, no words were minced. The complaint says, “Defendants have intentionally misrepresented and deceived New Mexico homeowners by soliciting their participation in frivolous and meritless mass joinder actions, filed in state and federal courts located in California. Defendants take advantage of consumers’ lack of knowledge and experience in foreclosure and loss mitigation. Defendants have charged New Mexico homeowners advance fees in violation of New Mexico law, using the sham mass joinder law suits as a front for the mortgage loan modification services actually provided. Defendant attorneys are not licensed to practice law in New Mexico, and have violated the New Mexico Mortgage Foreclosure Consultant Fraud Prevention Act.”

Just to show you how intertwined these operations are, see if you can follow along the allegations made in the lawsuit.

“Defendant Erikson Davis worked in 2010 to 2012 with Mitchell J. Stein (“Stein”) in a scheme involving a mass joinder case remarkably similar to the mass joinder cases for which Davis subsequently solicited New Mexico homeowners.

Davis assumed ownership of RELC in 2013, on or about the time that Pratt was disciplined by the State Bar of California for filing meritless lawsuits, failing to account for fees claimed earned and failing to refund unearned fees.

Upon information and belief, Pratt and Davis pay 80% of the fees received by RELC to Pinnacle, owned by Parwitakar.

In 2010 Parwitakar was the subject of a law suit by the Attorney General of the State of Minnesota, in which Balanced Legal Group and Parwitakar were charged with illegally charging upfront, or advance, fees for loan modification services. State of Minnesota v. Deepak Parwitikar and The Balanced Legal Group, Case No. 27-CV-10-27052 (Hennepin County, Fourth Judicial District Court, Minnesota).

RELC offers its “Foreclosure Defense Department” to New Mexico consumers despite employing no attorneys licensed to practice law in New Mexico.

The United States District Court in California ordered Davis to personally pay a lender/defendant over $126,000.00 in sanctions because the mass joinder suit was brought “in bad faith” and was clearly “frivolous.”

Chad Thomas Pratt (“Pratt”), was the owner and manager of RELC from approximately September 2011 to September 2013 when he allegedly sold RELC to Davis.

Upon information and believe, RELC has an operating agreement or partnership agreement with Parwatikar and Pinnacle.

In November 2013, the State Bar of California filed disciplinary charges against Pratt in connection with the operation of RELC for (among other things) allowing non-attorney staff to practice law, making false statements to entice clients to retain RELC, failing to return un-earned fees, and for bringing “meritless” lawsuits for consumers.

In 2013, Defendant Davis assumed management of Real Estate Law Center.

On July 21, 2016, the California State Bar Court disciplined Davis for multiple acts of misconduct which significantly harmed a client, the public and/or the administration of justice. See Stipulation re: Facts, Conclusions of Law and Disposition and Order Approving Actual Suspension, In the Matter of: ERIKSON McDONNELL DAVIS, Case Nos. 15-O-14599, 15-O-14705, 15-O-14821, 15-O-15481 etc.

The Stipulation found that Davis “exploited the complainants’ financial difficulties and his fiduciary position by charging and collecting pre-performance fees… and by not providing refunds.” Id.

The conduct for which Davis was disciplined also included failing to supervise non-attorney staff, having the homeowners enter into fee agreements for lender litigation when the homeowners were seeking loan modifications, bringing lawsuits with the ultimate purpose of obtaining loan modifications and charging and collecting pre-performance fees for those lawsuits, thereby committing acts of moral turpitude. Id.

On December 22, 2016, the California State Bar Court filed a Notice of Disciplinary Charges against Erikson Davis for activities related to the mortgage loan modification scheme. In re Erikson McDonnell Davis, No. 197841, Case Nos. 16-O-13378 et al. As of January 6, 2017, Mr. Davis is listed on the State Bar of California website as “Not Eligible to Practice Law in California.”

You can read the entire complaint here.

Steve Rhode

Get Out of Debt GuyTwitter, G+, Facebook

If you have a credit or debt question you’d like to ask, just click here and ask away.

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

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Financial Advice

Busting 5 Popular Myths About Credit Repair

It’s no secret that the days of trusting banks, churches and judges implicitly are forever gone. With banks having had to pay huge fines for blatant misconduct including fraud, it’s pretty clear that you can no longer afford to turn your back on a financial service provider.

So when other financial companies start expressing concern about how one related industry is behaving, it’s really time to worry. That industry is called “credit repair”. While a large part of it is legitimate, a few truly shady operators have managed to put the whole category in a bad light.

Few people can afford to live on a cash-only basis (ironically, these presumably rich individuals might have very bad credit, having no history).

Myth 1: Bad Credit is a Result of Irresponsibility

Of course it frequently is, but, as often as not, other factors play a bigger role. Deceptive financial marketing, such as describing a mortgaged house as an “asset”, or implying that debt repayments will be much lower than actually turn out to be the case, has put many well-meaning people on the blacklist. Banks and their agents will tend to defend themselves by saying “it was in the contract”, but given the page count and complexity of these contracts, this is disingenuous. Most non-bankers tend not to be financial specialists, trust(ed) their bank’s honesty or could not afford a lawyer, and were later punished for these attributes.

Unexpected financial setbacks can also ruin a decent taxpayer’s financial reputation. Medical bills come to mind, or being caught out under-insured when a minor disaster strikes. A debt or tort disputed in court might affect your credit rating, whether you are in the wrong or not.

The way banks handle identity theft has caused lifelong problems for many people. When your credit is suddenly ruined by an unpaid $50,000 loan in your name, which you never saw a penny of, the bank will typically declare that it had to be all your fault, and that they expect payment promptly. This is despite their own systems being demonstrably vulnerable to fraud.

Finally, the algorithm for calculating a credit score is poorly understood by most people. For instance, when you apply for a credit card, the issuing company will look at your rating in order to decide. But when you are approved or declined, this influences that same credit rating! Many otherwise responsible practices can actually hurt your rating, just because of the way it is calculated.

Myth 2: The Guy who Promises the Most, Knows the Most

Lies, damned lies and advertising: if you see a phrase like “100% guaranteed!” take a moment to ask why the tautology and exclamation mark is necessary. If the company has a television advert featuring girls in bikinis and actors dressed like animals, alarm bells should be ringing.

If, on the other hand, you find an adviser working out of a small storefront office with a few framed diplomas on the wall, who starts out by talking about your problems instead of how great he is and how much he can do for you, you are very likely dealing with a professional who’s more interested in doing his work than attracting new customers.

Myth 3: Credit Ratings are Inflexible and Infallible

Actually, no. Mistakes do happen, and you can contest them; the same thing is true of credit card statements. Everybody should check their credit reports once a year. If you notice an item from some company you’ve never heard of in your life, you can and should query it. To err is human: I know one guy (not in the US) who was threatened with bankruptcy and possible jail time by the tax collector, which bewildered him completely. It was only on his first court appearance that the mistake became clear: same name, different social security number than the person they were after.

Myth 4: There’s a Secret Shortcut

If you’ve defaulted on a debt, only time (7 – 10 years) will remove that information from your record. Any legitimate credit repair company will be upfront about this fact, but that doesn’t mean there aren’t many other things they can assist you with. Helping you to restructure debt, advising you on which creditors to pay first for best results and so forth, will improve your credit score substantially if not immediately.

Myth 5: They all Fly by Night

Fueled by the bubble, the effects of which are still being felt, credit repair agencies sprang up like toadstools in the night. Some will just take your money, after which they’ll send you a weekly packet of generic excuses about why nothing is being done. However, there are also many respectable operators who will be clear about what is and is not possible (legally), how long you can expect it to take, and what will be required of you.

The Credit Repair Organizations Act (“CROA”) regulates this industry, and although many operators don’t pay much attention to it, many others are completely scrupulous in following the rules. Remember that, however bad your credit may be, you still have rights, and should insist on them.

This article by Steven Millstein first appeared on CreditRepairExpert.org and was distributed by the Personal Finance Syndication Network.

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Financial Advice

Watch Out for These Credit Repair Red Flags

While the economy has been improving overall many Americans still struggle with their credit history. Currently, over 68 million have a bad or poor credit score (lower than 601) and are looking for fast, easy ways to fix or even erase damage to their credit history. With this demand, the credit repair industry has boomed. Offers for miraculous credit repair are common in radio, television, newspaper and direct mail advertising. Some unscrupulous companies require consumers pay large fees upfront to erase any blemishes on credit records. Most of what they charge for can be done at little to know cost by a consumer.

Legitimate credit and debt counseling services are available for a low fee or, in some cases, for free. This counseling service will work out a payment plan with lenders, as well as provide guidance and advice to help consumers make more financially sound decisions in the future.

Beware of companies that:

  • Guarantee that they can erase bad credit. No one can legally remove accurate and timely negative information from a credit report
  • Do not tell you your legal rights and what you can do for free. By law, credit repair organizations must provide a copy of the “Consumer Credit File Rights Under State and Federal Law.” This one-page document outlines the consumer’s rights in disputing inaccurate information on their credit report, and also addresses consumers’ rights in dealing with credit repair companies.
  • Three Day Cooling Off Period. Consumers have the right to cancel a contract with any credit repair organization for any reason within three business days from the date the contract was signed.
  • Recommend that you not contact a credit bureau directly.
  • Want you to pay up front for credit repair services.
  • Advise you to dispute all information in your credit report
  • Offer to help you secure a new Social Security Number (SSN). It’s nearly impossible to get a new SSN.
  • Create a new credit identity for you by obtaining a federal employer identification number to use instead of a social security number. This is illegal.
  • Offer to let you piggyback on other consumer’s good credit. Doing so can actually make you liable for loan fraud. Source: bbb.org.

Be sure that the company provides a written contract that clearly states the terms of the contract, plus your rights and obligations. Read it carefully before signing.

Remember, everyone is entitled to a free copy of their report from all three credit reporting bureaus every year or if they have been denied credit within the last 30 days. To check your credit report go to: www.AnnualCreditReport.com. Consumers can also request a review of information in their file that they feel is inaccurate or incomplete, for which there is no charge.

This article by Elizabeth Garcia first appeared on BBB and was distributed by the Personal Finance Syndication Network.

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