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Debt Consolidation Facts

1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair Isaac).

2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% - 30%!

3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.

9 Mistakes to Avoid when Dealing with Collection Agencies

Debt collectors are nasty when it comes to collection of debts. They will call you late at night or at work, will send you unpleasant letters and make your life a living hell.

You can make the situation even worse by committing any of the following mistakes:

1) Avoiding Their Phone Calls: If you avoid picking up the phone, they will call you even more. Be man enough to answer your calls or ask them to stop calling you. You can legally ask them to stop calling you by sending them a Stop Calling Me Letter. We discuss this more at: Stop Calling Me Letter to Harassing Debt Companies

2) I Already Sent the Payment: Do not lie! If you tell them that you already sent the payment or the payment is in the mail while it really is not, this will make matters even worse. They even have the right to sue you for lying, so don't!

3) Automatic Bank Debit: Sometimes the debt collection agencies will intimidate you into giving away your checkings or savings account # with your bank. Never give out your checking/savings bank account #!

4) Don't Be Afraid: Do not allow the debt collector to intimidate you. Like Eleanor Roosevelt says, "No one can make you feel inferior without your consent."

5) Issue Bounced/Dishonored Checks: If you do not have money to pay the debt collectors, ask for an alternate debt settlement plan. However, do NOT issue bounced checks that could be dishonored. First, you will be charged a Non Sufficient Funds fee by your bank. Furthermore, the debt collectors will get so angry at you that they will most likely sue you for both lying and issuing bounced checks.

6) Ignoring Your Debt: Most people owing credit card or any other form of debt will try to avoid it as much as they can by not checking their credit card statements, procrastinating their analysis of debt burdens, etc. Speaking from personal experience, I once owed $8500 in student loan debt and 6 months after graduation, I had to begin making payments on these loans. Sure enough, I tried to ignore looking at my student loan debt statement as much as I could. But, you can NOT ignore your debt. The longer you ignore your debt burdens, the worse it will become. So be man enough, and tackle your debts.

7) Selling Your Property/Asset: If you borrowed money from a creditor and used it to buy an asset, do NOT sell that asset while the debt collectors are calling you. If you do, the debt collector will have a much better case against you in court and could reposses that property from you, if you do not have the cash.

8) Untimely Debt Dispute: If you think you don't owe the debts that the collectors are demanding, you have a right to dispute those debts. However, do not wait too long to dispute your debts. To read more about this, see our section on Statute of Limitations on Debt Collection.

9) Unconfirmed Debt Settlement: If you do make payments towards your debts, make sure you ask for a confirmation letter confirming that the debt collection agencies received your payment and your account is officially closed. Furthermore, check your credit report 2 months later to see if that debt is classified as "Paid" or "Settled."