Have many debts – debt consolidation is the best choice

When you have a lot of debts it is difficult to manage them. And very often you cannot afford sum of money you have to pay. In these cases people start to panic. There is a lot of information in the internet that frightens people. If you don’t pay your bills, scary collection agency will come and will take all your money and property. In facts it is dangerous to have debts and you really can lose your property, but only if you do nothing. First of all you should understand that company you owe money, wants to get them back, and they don’t need your house or car because it is difficult to sell it and get necessary amount. There are a lot of programs that were created to help people like you to handle their debts.

How to pay off debt

Let’s explore the most effective:

First of all it is interest rate arbitration. Also this program is known as consolidation, you choose a third party and it negotiate with your creditor to allow you lower interest rate. Also you will be able to combine your bills into one. There are following benefits of using consolidation: you will get low interest rate, you will be able to make single monthly payment, not several, and you will be able to improve your credit score.

Debt management is also very popular solution. It meant that you have to deal with the company which will help you to pay back your debt and create a budget. Advantages are following: you make lower payments; fees that you pay when you can’t meet terms of payment can be waved off; and company will help you to manage your multiple bills.

Debt settlement is the next program. According to it you deal with settlement company. It contacts your creditor in order to lower your pay off amount by 40-60%. Your benefits will be following: lower interest rate and your balance will be cut.

Chapter 13 bankruptcy. Court will control your debts payment plan. In this case creditors will reduce interests on your payments, your principal balance will be cut and you don’t use your assent to pay off the debt.

And at last chapter 7 bankruptcy. If you choose this program, you hand over your assents to the bank representative. They will be sold out and your debt will be paid off with help of this money.

Self repayment plan. You will have to develop a plan how to manage your budget in order to pay off outstanding card balance. You won’t use any professional help. It is difficult to keep this plan but it is rather effective and you don’t spend additional money for mediator.

The last one is ostrich method. Nobody will advise you to use it. You don’t need to do anything, you don’t pay off your bills, just ignore them and hopes that it will disappear. In this case you may deal with collection agency or ruin your credit history.

I want to pay special attention to debt consolidation. This method will allow you to save more. Do you know how this system works? In general words it is a situation when you have several credit account accounts and you have to pay for each of them every month. When you apply for debt consolidation, you combine your accounts into one and your interest rate becomes lower.

Let’s see how it works.

For example you have three credit cards and medical bill.

Outstanding balance on credit card 1 is $25000 and your APR is 15%.

Outstanding balance on credit card 2 is $40000 and your APR is 20%.

Outstanding balance on credit card 3 is $15000 and your APR is 13%.

You owe for your medical bills $10000 and your APR is 12%.

In this case your average percentage rate = (20% + 15% + 13% + 12%)/4 = 15%.

When you take part in consolidation program, your third party can negotiate to:

Credit card 1 APR is 11%

Credit card 2 APR is 16%

Credit card 3 APR is 10%

Medical bills APR is 9%

Now your average interest rate = (11% + 16% + 10% + 9%)/4 = 11.5%

Let’s see how much you can save every year. ($25000 + $40000 + $15000 + $10000)*(15% - 11.5%) = 90000*3.5% = $3150

Debt consolidation benefits

Here you will find more benefits that you get choosing debt consolidation program.

1. Rate reduction. As it was described in previous chapter when you combine all your bills, your mediator can negotiate with a creditor and offer you lower interest rates.

2. Debt repayment plan. Your creditors or collection agency (if your debt had already been sold out) will offer you this plan. According to it when your interest rates are lower, you pay less every month and now you can afford to make at least minimum payment. Or you even will be able to cover your principle balance and maybe some interests.

3. Single monthly payment. Now you will be able to make one payment every month instead of several payments for every bill. That your funds will be distributed between your creditors.

4. Reduction of late fees. If you can’t meet terms of payment, you get penalties, late charges fee that add value to your debt. After negotiation your creditors may reduce this payments or eliminate them.

5. Get debt free faster. If you use average credit program, it takes you about 20 years to pay off your debt. But when you choose debt consolidation, you can do it in 4-6 years. It is possible if you may a little bit more that minimum payment every month. And after consolidation when your fees are lower, you manage to pay back total amount faster.

6. Get rid of collection calls. When you join to debt consolidation program, your creditors and collection agencies are prohibited to contact you.

7. Improve your credit. When it is easier for you to meet payment terms, you will be able to re-establish your credit history. Timely payments and paying off your debt in time will show how responsible you are.

8. Free debt counseling. Every company that provides you with debt consolidation service offers free debt counseling. They will explain you your situation and will describe all available methods to correct it. And you will choose the most appropriate one.

It is difficult to manage your debts, but you always can contact specialists that will help you in this situation.

What happens to people who do not pay their credit card debts?

“What will happen to me if I do not pay my credit card debts?” This is a very widespread question that a card holder can ask. Usually such questions arise during hard economic circumstances. Many people have used credit cards at least one time in their lives and continue using them very often. Some people have at least 3 or 5 credit cards in their wallets. Credit cards are very convenient to use. They guarantee financial freedom and safety. These cards allow us not to carry too much cash everywhere. But very often people are faced with a number of problems that can occur while using these cards. Unpaid balances continue rising constantly even if you have some problems with your income. It is very important to take some reasonable steps towards paying off your credit card debts. Usually credit card companies can make a settlement and agree to a repayment arrangement. It is very important to show them that you are trying to do something with the occurred situation and do not ignore the problem.

Let us discuss the main consequences you can face if you are not able to pay your credit card debts in time. You have to develop your own plan in order to deal with your debts. You should take this problem very seriously as it is very hard to get out of this delicate situation. Do not think that this problem will simply disappear of its own accord. Be ready that a credit card company will do its best to get money back by all possible means. Remember that if you continue ignoring credit cards payments, it can lead you to serious long-term financial consequences. You can take advantage of the following pieces of advice, but also pay attention to the recommendations of financial advisers or legal councilors.

1. You will get reminders from your creditor. Usually when you stop paying your credit card, you will receive different kinds of reminders from your creditors. Firstly, you will get continuous phone calls. These calls will become more frequent, if you have not still made any payments. Usually collectors make their phone calls 5 to 10 times a day on your mobile phone, home phone or at work. They can find telephone numbers of your neighbors, colleagues and members of the family although it is illegal to act like this. At the same time you will probably get letters by mail reminding you to repay the debt and maybe suggesting some settlement offers. These are the ways of psychological pressure in order to make you pay them the money back.

2. Your delinquent account can be sold to a collection agency. If you continue ignoring the payments for over half a year, then you will get calls from debt collection agencies. This happens because after this period of time some banks usually sell your accounts to a third party which is a collection agency. Such agencies have rights to call you any time of the day in order to demand for the payment. Now it is their responsibility and interest of convincing you to pay the credit card debt you are owned. The collection agency is not a part of the bank and from now on everything they collect from you becomes their profit.

3. Legal actions. Those banks who do not sell your accounts to any collection agency can take legal actions against you. It is a last chance for creditors when your debt becomes too delinquent. They can blacklist your account that will affect your future financial status. When your debt is not excessive, you probably may not be sued for this. The only thing that can be done by this particular bank is that you are not allowed to take advantage of any other facilities of this bank. But if your balance is excessive, the bank has all rights to take legal actions against you to get their money back. If a credit card company or a bank wins the case, they can proceed for wage garnishment or put a lien on your house or other property in order to get their money back. However, many companies try to avoid this process as it usually takes too much time. Besides, court action is a bad publicity for a credit card company. But if the case is at a critical stage, this is the most obvious scenario for the bank or a credit company to recover their money.

Please note that the longer you postpone payments, the more debts you have. As a result you have to pay more and more additional charges such as over credit limit charge and late payment charges. Remember that all these charges will grow fast on your balance on top of all your existing fees and interest rates. Also, not paying credit card debts can really badly reflect on your credit history. Because of this you will probably have some difficulties to get a mortgage, car loan, study loan or any other personal loan when you need it. Also be aware that some companies used to check the credit history of their applicants for a job. So not paying your credit cards debts can play a low-down trick on you if you are looking for an employment. Nowadays you can get an easy and quick access to your credit history. You can take an advantage of the www.freecreditreport.com site that is considered to be a part of a family of online consumer credit reporting sites that belong to Experian Company. You can check your credit report and credit score and also to protect yourself against identity theft.

Please remember that you can face all the above mentioned consequences if you do not pay your credit card debts. It is always better to find some solutions to solve your problems than to run away from them. Be smart in arranging your credit card spending in order to avoid financial problems in future. But if you have found yourself in a credit card debt, you should stay calm and get yourself in hand. Your family and your friends must be well informed about the occurred situation so that they can offer you some help. Do not forget to consult experienced financial planner to help you to resolve your temporary financial problems.

Improve your credit score!

Nowadays it is very important to know everything about your credit history and credit score. Let us find out what do these terms mean and how to build a better credit history. Be aware that if you have ever had a credit card or taken a loan or insurance, then there is a file about you. This file is usually called a credit report. This report contains all personal information about you, how you manage to pay your bills, whether you have been arrested or sued for something, your past borrowing, repaying, late payments and bankruptcy. It is a good way for creditors, lenders and others to find out about individual’s credit worthiness, in other words, individual’s capability to repay a debt. It is important to provide exact personal data for credit bureaus. When you need a credit, lenders usually tend to review credit reports in order to find out how timely past debt obligations have been made. Lenders want to see that past payments are made on a monthly basis. In other words, a credit report is a detailed summary of all your recent financial transactions - all this makes up your credit score.

Remember that if you have a good and accurate credit report, it will be easier for you to get different kinds of loans and the lowest interest rates. The lower interest rate is the smaller are monthly payments.

Nowadays you can see a lot of advertisements that promise to erase negative information on your credit report. Please note that the companies who advertise these services simply cannot deliver such services. Only you, your efforts and an accurate plan to repay all your bills and debts can improve your credit score.

You should take this information very seriously as a lot of things nowadays depend on your credit history. The first thing you should do is to get a copy of your credit report and to study it very carefully. The question arises where can a person get his credit report and credit score. There are three major credit bureaus that can provide you with this information such as Equifax, Experian and TransUnion. These three bureaus generally use the same information, but you will probably get slightly different reports. Remember that your credit score changes basing on the information that is reported each month about your financial transactions. You can improve your score if you know exactly what factors one or another bureau uses to determine your score.

As you have already understood your credit history and your credit score play great part in your personal financial situation. It is not enough just to know your credit rating, you need to know how to increase your credit score. Let us discuss the main things you should do in order to increase your personal credit score. But be aware that this process is rather continuous and you should apply some efforts to achieve positive results.

Review your credit report and check it regularly. It is better to get several credit reports in order to compare them. Use the services of three major reporting agencies mentioned above. Then you should correct all the visible errors: late payments, incorrect credit limits, etc. There could be some errors in these reports, so you should be very careful.

You should try to pay all your bills and clear all your debts on time. Remember that it is necessary not only to make all your credit card payments, but also other pending bills on time. For example, if you are too often late with your utilities bills, a company that provides you with utilities services can report you to the credit bureaus. Do not forget about your obligations and you will have no problems with your credit score. Note that delinquent payments can have a negative influence upon your score and on your financial status in general.

Try to make the minimum payments. If you have debts, it is better to make at least the required minimum payments. Remember that if you do not even pay the minimum sum of your debt, it is considered to be a late payment.

Contact your creditors. Do not forget to contact your creditors in order to inform them about the occurred financial difficulties. Usually they try to help you in some ways, or at least they can put off the final payment or set a new paying agreement. If you continue paying according to this new paying schedule, you will have no problems with your creditors and very soon you will settle with them. This will not improve your situation immediately, but the efforts to pay all your debts on time will have the necessary effect.

Pay close attention to your credit cards. A good credit score greatly depends on paying down all your credit card debts. A lot of credit card companies usually report your limits to the credit bureaus. Keep your balance as far as possible from the limit and you will never have problems with your credit score.

Do not open new accounts. If you have certain problems with your credit score, it is better to keep away from opening new accounts. This can affect greatly on your score. But at the same time opening new accounts and paying them on time can greatly raise your credit score in the long term. So if you are self-confident, you can try to reestablish your credit history and open new accounts.

Using the above mentioned tips, you can easily increase your score in a month or two. As you have already understood it is not an easy task to do, but it is quite possible. There are no general rules that can suit to everyone, but there are different steps you can take in order to resolve all your financial problems. You should also not be afraid to apply for any help. Remember that you are not alone and there are people who are ready to help you with your financial difficulties.

How to have a good credit score?

When you applied for a credit or a loan, you consciously agreed to have a debt. And there is a chance that you won’t be able to pay this sum off. That’s why lenders want to check you before giving you money. They want to be sure they will get their money back. On the one hand they earn because you pay interests on money borrowed. On the other hand they can lose money if you won’t be able to pay off the debt. Nowadays it is very easy to check your payment capacity. They request for your credit report and see your credit scores. This figure is one of the most important aspects of your credit.

How does credit score work? Why is it becaming more and more important these days? The fact is that your credit score can cost you lots of money. Credit score becomes more and more important because in the digital age that moves with a speed of light just about every major lender often has to make very fast credit decisions in order to keep up the competition and that’s what they have to do. If they don’t provide relatively quick lending decisions, they may lose a lot. So how do they make decisions and not put themselves into a great risk? Lenders rely more and more on the consumers three digit scores. Based on your three digit credit scores and the related information in your credit report lenders decide whether not to approve your applications and how much interest to charge you.

How does credit score work?

So let’s take a look how credit scores work. There are three major credit bureaus in the U.S. each of them assigns you when you need it. A credit scores have their own name for what is generally known as a FICO score, this name is originating from the Fair Isaac Corporation. Now Equifax calls its FICO score Beacon Score. Experian refers to Fair Isaac Risk Model Score. And TransUnion calls your FICO score the EMPIRICA Score. All the three bureaus use the slightly different formulas to calculate your credit score. That’s why your credit score will vary from bureau to bureau. Over all credit score is generally ranged between 300 and 900. The average credit score in the United States is about 678. If you are above average, you have a better chance to get lower interest rates and save your money. Lower than average, your chances are worse and you’ll have to pay more for credit.

Good news is that it doesn’t matter what your credit score is, you can always improve it. Your credit score is constantly changing as new credit information is added to files. Understanding how the information in your credit report is weighted can give you a good idea of what you can do to help you improve your credit score.

What does your credit score consist of?

So quickly let’s review how the information in your credit report is weighted to determine your credit score:

Your payment history accounts for roughly 35% of your overall score. This category will include account payment and status of your credit cards, retail and department store cards, stored loans, mortgages, finance companies and many more. Paying your bills on time is the number one way you can help to improve your credit score. History of recent payments has most weight. For example, one late payment over the past few months can lower your score more than ninety days late payment several years ago.

Your amounts owed (the amount of outstanding debt) accounts for roughly 30% of your overall score. This includes the amount of money you owe on specific accounts. The number of accounts you have with balances you debt to available credit ration or what proportion of your total credit limit is currently being in use. As a rule, higher credit ratings are achieved by individuals who have a lot of available credits but use not all money that was lended. Lenders like to see consumers who use about 25% to 35% of their available credit.

Your length of credit history accounts for about 15% of your total credit score. This includes the period of time since your accounts have been opened. The longer your history of maintaining of good credit habits is, the higher your credit scores will be. This means you should think twice before closing your old account. Because you could reduce the amount of credit history you are presenting to lenders.

Your amount of new credit or number of credit inquiries accounts for roughly 10% of your credit score. For instance how many applications for credit cards and loans you had recently. When you check your own credit report, this will not affect your credit score. But when lenders check it, your credit score will be reduced slightly for each application. Too many applications for credit over a short period of time will lower your score. Lenders often see this as an indication you may be having rough times with your finances and you are taking too much debts.

The next category is a type of credit used. It accounts for approximately 10% of your credit score. This category includes different mixes of accounts you have: credit card, mortgages, finance companies accounts etc. But there is no secret formula for the mix of credit which produces the higher score. Generally creditors like to see a healthy balance of credit.

It’s important to understand that credit scoring involves all factors are really meaningful, not just two or three of them. And all of them are quite equal for each consumer. And lenders usually will not rely only on a credit score. But other factors as well including income, employment status, using your present address and the type of credit for which you were applying. Over all credit scores can be a very valuable asset for consumer. You should pay attention to know your score, know how to manage and protect it.

How to get money from people who owe you?

A debtor is a person or a company that owes you specified sum of money. If you have a debtor, it is time to think about recovering your money. Your steps will definitely depend on the size of the debt you are owed. The bigger the debt is the more serious steps you should take to get your money back. You should also have enough information about your debtor in order to be able to prove that you are owed a settled amount of money.

If you are in business, you are likely to face with debtors. You must be ready to these problems and you should do something about people or companies who owe you money but always find excuses for non-payment. This situation can lead to further delays and as a result it will end up with no payment at all. You should be ready to any kind of debt collection practices (http://www.doesnotpaybills.com/).

Below you can find some useful tips that will help you to get back the money you are owed:

1. Stay calm and polite

When you are obliged to negotiate with your debtors, it is hard to stay calm, but it is a necessary thing to do. Always talk to your debtors in a professional manner. Such behavior will protect your company’s reputation and attract customers to your business. If you stay calm and polite, this will help your debtors to understand your financial situation and they will apply efforts to pay as much as they can as soon as possible.

2. Contact your debtor

When you are in a process of recovering a debt, the first thing you should do is to contact your debtor directly and clarify all facts. You can send an email or make a phone call and ask the debtor if he is ready to arrange money for a payment. Some people just forget about the money they are owed, so it is some kind of a reminder from your side. So now you have your money and a satisfied customer is happy to conduct a business with you again.

3. Write a formal letter

If you have not got any payment from the debtor, even after making a phone call or writing an email, it is time to send a formal letter. You should send a letter to the debtor’s address and indicate that there is an overdue payment that is needed to be paid. This letter should contain all the information related to the payment. Write about the parties that are involved in this matter. Send copies of all the documents that are related with the debt. Specify the date by which you expect to receive the payment. Remind your debtor to contact you in writing or by phone, if he has any remarks, disputes or questions concerning this matter. Describe all the details and future steps you will take if the payment is not received on time. But remember about the first tip, that you should always stay calm and polite. Try to avoid being drawn into disputes and do not allow your debtors to drag out the correspondence. Never threaten any legal actions that you are not ready to follow up in case of non-payment.

4. Contact your solicitor

If you do not get any response to your letters and the debtor continues to ignore your requests for a payment, it is better to discuss the situation with a solicitor who has experience in debt recovery cases. He can write a formal letter to your debtor and inform him about the legal actions that can be applied to him if he continues ignoring the payment. Usually solicitor’s letters produce positive results.

5. Claim for a payment

Even after passing all the above steps you are sill unable to receive the payment, the time has come to file a claim to receive your money. You can prepare your claim on your own or contact a lawyer to get a professional help in this matter. Do not forget to save all the correspondence or anything else that you have used during the negotiation with your debtor. This will help you to prove all your claims.

6. Debt collection

If you are still unable to get you money back and all your debtor’s promises to pay are not kept, you should start serious collection activities. You can contact debt collection agencies who provide you with different services in order to collect your debts. When a certain debt is overdue for a long period of time, pass all the bills to any debt collection agency. Do not wait for too long, as the more you wait, the less chances you have to get your money back.

7. Taking a debtor to court

If a debtor continues refusing to pay or even disputes the debt, the time has come to take court actions. Usually taking debtors to court consumes a lot of time and it can cost lots of money. Remember that this action is usually used as a last measure. However, before making any steps towards this direction, you are recommended to contact competent authorities and seek for a legal advice. It is very important to remember that before going to a court, you must be sure in your rightness. If the court rules against you, you will be obliged to cover not only your costs but your debtor’s as well. It is also very difficult to recover a debt, if your debtor declared himself as a bankrupt. The outcome of the affair depends mostly on how much money is involved into the debt. Any legal consultant will not advise you to go to a court if your claim is rather small. You can represent yourself on your own at small local claims courts. Other claims are usually heard in the high courts and you need a lawyer to represent you.

You must not feel guilty about collecting the money you are owed from your debtors. The debtor should feel guilty, because he did not meet his obligations. The truth is on your side and you have all rights to collect your money.

Check your credit report

In this series of articles we are talking about debts, what happens to people who don’t pay debts, how to manage situation if you have debts and how to avoid debts. I want to discuss consequences of your debts. Do you know that if you have different types of debts, or you had them before, they don’t disappear anywhere? And even if you paid them off and made it on time or missed terms, all these information will be shown in your credit report and will have influence on your credit rating.

Credit rating is very important thing if you are going to apply for mortgage, loan, home loan, car loan or just take a credit. Your credit rating depends on your credit score. The higher your credit score is, the lower interests you will pay and more chances you will have to be approved for credit.

But, let’s go back to credit rating. It is very important to understand what your credit rating is and how you can improve it. The best way to check it is to order credit report.

How credit report works

If you want to understand what role credit report plays in your life you should think about it like a sort of financial report card. This information determines not only whether you will be approved by lenders but also how much will you pay and interest for the privilege of borrowing money. The information in your credit report determines your credit score. Your credit score can cost you saving a lot of money over your lifetime.

Where your credit report comes from

If you need to get your credit report, you need credit bureaus which maintain your credit history. They relish your credit report when you request it. Your credit report may need organizations which are reviewing your applications for credit.

There are three the most popular credit bureaus in the United States and sometimes they are called credit reporting agencies. These bureaus are Experian, TransUnion and Equifax. Each of these credit bureaus has massive credit files on consumers. You should understand that credit bureaus don’t generate information for your credit reports. They just report information which was transmitted to them. All information is stores in huge databases.

Services of these companies usually have similar cost. For example Equifax takes $14.95 per month for Equifax Complete report. It contains reports from all three credit agencies, convenient tools to understand, protect, and track your credit and scores. With Score Estimator you can simulate what will happen when you will make changes. You will have access to information how lenders may evaluate a risk of giving you a credit. Additional protection THROUGH Automatic Fraud Alert. And 24/7 access to excellent customer service.

The information in your report is represented to the bureaus by:

Correctness of information

The most of the information in your file will be correct but in some instances your credit report may contain inaccurateness and negative information that can lower your credit score and cost you money. That’s why it is so important to check for consumers their reports on a regular basis to make sure that they are accurate.

If you discover information in your credit report that you believe to be incorrect, you have the right according to the law to dispute this question with credit bureau. In this case bureau will make the investigation under this question within 30 days. And they have to verify or remove this information from your credit files. All three credit bureaus now allow consumers to file online disputes.

Information contained in your credit report

It is very important to know what you are looking for when you check your credit report.

Personal information

The first category is your personal information. It includes your name, address current and previous, date of birth, social security number and current and previous employer. You should make sure that all of this information is correct. Check carefully for any similar names or incorrect, also check address changes. If there are any mistakes I can be sign that someone tried to change your contact information to make fraudulent charges.

Credit history

The next category is your credit history. It includes your payment history for all your accounts such as your auto loans, home loans, credit cards, finance companies. This section also contains information about your balances, amount of credit available, and your actual payment status on your accounts. When checking your credit list, make sure that all accounts listed are truly yours, your account information and payment status on each of your accounts are correct.

Public records

The next category is public records. This is your public records on file which will indicate your tax liens, court judgments, bankruptcies and etc. Check this section in your report carefully. Public records will remain in your files from seven to ten years.

Credit statement

Following category is your credit enquiries. This section includes everyone who requested a copy of your credit report during the past two years. You should make sure that all requires are familiar to you. As an unauthorized enquiry to your credit report could be a sign that someone has tried to open a credit card account using your name. it is also important to know that when you check your own credit it is known as a soft enquiry and will not create an enquiry in your credit files that counts against your credit score.

Dispute statement

Finally, your credit report may contain your dispute statements. These are statements of explanation that you are allowed to place in your credit files. Over all it is important to you as a consumer to take charge of your personal credit.

And remember the only person who can check and make sure that the information in your credit report is accurate is you. So know your credit, manage it and protect it. Because it can be a key part of your financial future.

Do your customers owe you money? Develop a credit management plan!

It is a great problem for businessmen when they have customers who do not pay the money they owe for delivered goods and services in time. Most business people simply do not know how to carry on with such customers and feel really uncomfortable when they have to lead the conversation towards paying debts. Business is a serious sphere and there is no place for mercy and forgiveness. You came into business in order to earn money and you cannot simply forgive debts to everyone, otherwise, very shortly you will probably have serious financial problems. Your customers should know who is who; they must understand that you do not give an easy time for this matter. Only in this case you will get your money in time.

Non-payers can cause serious financial difficulties to any company, but especially to a small business company. The working capital of such companies directly depends on constant receipt of the expected funds and its further paying for growth and operation. Such financial strain can lead the business to fairly difficult circumstances. On the contrary if you manage to get in time the money from the customers who owe you, your business will definitely thrive.  So you should learn to collect money quickly and efficiently.

First of all, before starting any relations with potential customers, it is very important to obtain as much information as you can find about them. You will probably need this information in future, if it turns out that they owe you money. We recommend you to take the following information during the negotiations with the customers: first name and last name, date of birth, addresses, telephone numbers, partners’ names and addresses, etc. With the help of the above information it will be easy to track down the person or the company very quickly and carefully. Please note that at the beginning of your collaboration and business relations customers do not have intentions to cause you any problems at all and they will be happy to provide you with all the information you require. But if you see that a potential customer does not want to supply the information or tries to hide it, it is time to think about the necessity of your collaboration with such customer.

From the very beginning you must gain control over your money, show your potential customer that you are a serious person and you need you money back in time. Remember that you should not issue a credit without a credit policy. Make sure that a customer fills out and signs a credit application before any business negotiations with him. Before extending a credit, it is important to check customer’s credit references. If you take these preventive steps, you will get your money back in time and as a consequence you will have more money on your account, you will definitely push up sales and have good customers in future.

Let us discuss some tips that will help you get started and avoid collection problems.

1. It is better to start from a little sum of credit. Remember that extending any credit especially for a small business company is a great risk. The most effective method to avoid having financial problems in collecting future debts is to extend the minimum amount of credit at least at the beginning of your collaboration with a new customer. Of course this fact can push away your potential customers, but in this case you are out of risk.

2. Before extending a credit, think and behave like a banker. It is unlikely that a bank would give you a credit without finding out some additional information about us. You should act with your customers just like banks act with the borrowers. We recommend not only to make sure that the customer fills out a credit application, but also to update them every year, because the financial situation changes very quickly. The more customer owes you, the more paperwork he should make in order for you to feel safe and ready for collection actions if needed.

3. Do not forget to remind about the debts. Some people feel quite uncomfortable, when they are obliged to ask for paying the owed money. But remember that it is your money and there is nothing to be ashamed of. You are recommended to create your own system of following up the bills. If you need your money back and the borrower is not really in a hurry, the best thing to do is to make a phone call. A live phone call usually brings more results than an E-mail or letter, because it is hard to ignore the request. But please always stay calm and patient. If your phone calls do not help, it is time to make a visit.

4. Collect all the necessary information. Before making a phone call, you should collect all the information about customer’s account in order to be well informed about the situation in general and to avoid talking in circles. If you are familiar with the customer’s account, it is easier to control the situation and to maintain the conversation in the necessary direction.

5. Be ready to accept the compromise. Customers can simply find themselves in a difficult financial situation that is why they are unable to pay back the debts. Try to understand their position and work with them in order to get your payments. Otherwise, you are in risk to get nothing at all. Do not demand the full amount to be paid at once, but ask for a lower amount.

6. If all your steps fail, turn to a competent authority. If all your intentions to get your money back are not crowned with success and you just feel you are wasting your precious time, the moment for contacting competent authority has arrived. You can put this case into a collection agency or attorney’s hands. It is better to continue developing your business, to find new customers than just calling people to get your money back.

Non-paying customers can cause you lots of troubles, so you should be ready for the credit management in order to succeed in business.