Frustrations of a Credit Counsellor

Call centres and TransUnion

2009-11-18T12:30:00.001-08:00

Ok, so I needed to call TransUnion to confirm something for a client today. Guess what...the two people didn't know what an R7 is. One woman had to look it up, and her manager couldn't tell me what it would do to your credit score when I stated playing with him and asking him questions to find out about his level of knowledge.

Currently, there is a lot of bad information online about how an R7 will effect your credit score and how long it lasts on your credit report. Going to both Equifax and TransUnion websites you can see that they last for 3 and 2 years after you have completed payment of a debt whilst on a debt management program.

Some people though are getting mixed up with information bleeding up from the states, and companies pushing bankruptcy are telling clients that R7s are just as bad as an R9... which is totally not true. How can paying your debt off be the same as writing most of it off?

Anyway, back to my original point, getting to speak to someone at these offices is a nightmare. The number I called for TransUnion ended up in a call center located in India. This really isn't a problem for me as long as they have two key things:

Can they speak English or French to a good standard?
Have excellent product knowledge.

This particularly call center had none of the above and the fact that the first person I spoke with had to look up what an R7 is tells me that they are probably supporting multiple companies and have a digital knowledge base that gives them the basic level of information they need.

Finally after we figured out that the guy could not answer my questions and confessed to being in India he transferred my call to Ontario..... where I had to leave a message in the hope that someone will get back to me.

I'll post an update soon.

Check out these links for debt consolidation and general debt management.

The payday loan cycle and the solution....

2009-10-06T14:16:00.001-07:00

Numerous times now, we have seen carbon copy clients coming to us... usually when it is too late to help with low impact means. A client gets into trouble, and looks for a quick fix. They go to a payday loans company to borrow a few hundred dollars. Next payday, they don't quite make enough to pay off the loan and so go to another payday loans company.

The term, 'Robbing Peter to pay Paul' comes to mind.

One of the hardest things in counselling is letting the client know, it really is ok to ask for help. Clients come to us after using up all the payday loans companies they can, and find the interest from all the loans in spiraling out of control.

Do I agree with payday loans (or short term loans)? I do. Suprised? Well firstly, the loan should only ever be short term. Short term anything comes with high cost. But on occasions I have no problem with people using them.

One gentleman I speak with on a regular occasion runs about 10 payday loan offices. He told me that customers will try to borrow money from him before a previous loan is repaid from his office. He will allow it once, but then makes the client pay the loans before he allows them to borrow more. Sure enough, when the loans are paid off, the same client walks back into the office asking for more cash.

My collegue openly admits, that he stops loaning the client money because they are not learning how to deal with their fincances effectively. Short term loans should not be a way of living your life on a regular basis.

We are now working together to inject the offer of credit counselling to the clients when they are repeat customers or start falling behind on their payments.

I really hope we can get to some people before they hit the slippery slope of relying on short term cash. People that are in trouble should really be looking for debt consolidation using a credit counselling service to get them out of deep water.

...wish us luck.

Got high interest debt and savings in the bank?

2009-09-18T16:25:00.000-07:00

If you have savings in the bank as well as high interest debt (credit cards and the ever popular payday loans), get that money out and get the loans paid off!

Work it out for yourself. Typically a high interest savings account is around 3%. What is your credit card interest level at? 11% or more probably.

The interest on credit cards is just too high. Pay them off before you start trying to build that nest egg.

This is tough for some people to swallow. They spend years adding to their savings and then suddenly get told to get rid of it all in one go. The truth hurts, but so does debt. Your debt level will always climb faster than your savings.

Credit is a luxury, not a right.

2009-09-18T13:32:00.000-07:00

The days of easy credit are on us. Don’t think so? Well how many times have you received an increase to your credit card limit that is more that your monthly take home pay without asking for it?

I have several times. The first thing I do is call the credit card company and ask them to restore the previous limit.

Why do they do this? Well, that should be obvious. Getting the client to spend more money that they make means the credit card company is allowed to start charging you interest on the unpaid balance at the end of the month.

When the client eventually falls behind on their payments, they start paying interest on their interest. Almost like a self-perpetual engine.

The most annoying thing about this as a credit counsellor is that the credit card companies are the first to complain about unpaid fees, and yet they made it so easy for the client to get into trouble in the first place.

Don’t get me wrong, I know the ultimate responsibility rests on the debtor shoulders, but if getting the credit in the first place was made more stringent then would we really have an issue in the first place?

I think not.

In my own humble opinion, a person really only needs a single credit card with a limit equal to their monthly take home pay. Understandably, if someone wants to have a second in case a vendor does not take one card then that is a reasonable exception.

Temporary Limit Increase.

What happens when you want to make a large purchase that is more than your take home pay?

A while ago my partner and I saved up enough cash to go on a really nice holiday. Nice enough that it did indeed exceed my take home pay. I like to pay for things on my credit card as I get travel points, and so did not want to pay by personal cheque.

Something people are not generally aware of is that you can arrange for a temporary increase to your limit. When we decided which holiday we wanted, I called the credit card guys and explained exactly how much I needed and that I would deposit the funds the next day. Almost immediately the temporary increase was granted and also they offered to give me a permanent increase that I politely refused.

Summary

If you find yourself with multiple credit cards in your wallet ask yourself if you really need them. Remember, each card you have with a balance owed means that you have to keep track of the payments yourself. Having only one or two cards means that your life will also be simpler.

Credit really is something that should be treated with care. Never live outside your means was a lesson my parents ‘drummed’ into me from being a small child.

Frustrations of a Credit Counsellor

2009-09-18T12:14:00.000-07:00

Working for a credit counselling service we see the same thing all the time. Clients phone up with credit card debt and payday loans that they just can’t afford. Our first response as usual is asking them if they have tried for a consolidation loan from the bank. For those that have under optimum credit reports a loan isn’t an option. We explain other alternatives such as a Debt Management Plan (DMP).

DMPs simply are a great option. Counsellors such as myself create a proposal to all creditors’ of the debtor outlining their financial hardship and aggressively obtain interest relief. The result is that the compound interest is stopped, the debtor knows exactly how long they have to pay, and the debtor saves potentially thousands of dollars.

One stipulation of entering a DMP though is they have to give up their unsecured credit cards. It is at this time most of the clients becomes uneasy with the prospect.

For some reason, the easy access to credit, which is the reason why the debtor gets into trouble, is something they don’t want to give up. Asking why they are not prepared to give up the cards yields a few different responses. The more frustrating I will leave out. But in honesty there are two that I understand: emergencies and making purchases over the Internet.

So, what is the solution?

Secured credit cards are a great option for people on a Debt Management Plan for the following reasons:
Secured Credit Cards help build up your credit score, which does take a small hit when competing a program.
They do actually have a credit limit on them; unequal to the amount the client puts down on them as collateral. Thus, they are not the same as pre-paid cards.

There are cards out there too, which have surprising little start up fees. One we recommend is Capital One (in Canada). Their fees currently are $75 or $300 and the credit limit is $300 or more.

Giving up your credit cards is not the end of the world. Sure, if you are a client about to go onto a DMP, then life is going to get tougher. We understand this and will advise you on how to allocate your monthly budget, deal with your creditors on your behalf and consolidate your monthly payments to try and make things easier.