Mortgage rates will probably make a downward turn this year — but not in July. Instead, rates are likely to creep upward this summer or stay about the same.
Forecasting mortgage rates is always an iffy proposition, and that’s especially the case for July because of uncertainty about the trajectory of the inflation rate and what the Federal Reserve will do about it.
The Fed has a goal of reducing the inflation rate to 2%. The central bank made progress in 2022, but inflation’s downward movement stalled in early 2023. The core personal consumption expenditures price index (the Fed’s favored inflation measurement) has been stuck at 4.6% to 4.7% in 2023.
Without decisive improvement on the inflation front, the Fed is likely to raise the short-term federal funds rate at the end of its July 25-26 meeting. Mortgage rates often rise in the run-up to Fed rate increases. That’s the most likely course for mortgage rates in July.
How the forecast could go off course
Someday, inflation will decrease, the Fed will ease off on its rate increases, and mortgage rates will drop. But the Fed’s monetary policymakers don’t seem to think that will happen this summer. In their June summary of economic projections, they signaled that they expect to raise the federal funds rate another half a percentage point this year. That probably would take the form of two more rate increases of a quarter of a percentage point each.
An unmistakable downturn in the inflation rate could cause the Fed to rethink its expectation of two rate hikes. It’s possible, but not probable, that this month the Fed will see signs of decreasing inflation. That seems more likely to happen in August or September and not in July.
What other forecasters say
Fannie Mae predicts that the Fed will continue raising rates “until it is abundantly clear that inflation pressures from the labor market have eased.” But in Fannie’s estimation, it’s scarcely clear that this evidence will show up soon enough to avoid a recession. Fannie expects mortgage rates to rise slightly from July through September, then drop in the final quarter of 2023 as the economy cools.
By contrast, Freddie Mac predicts that the economy will avoid recession as inflation cools and that mortgage rates will remain above 6% all year.
What happened in June
At the end of May, I predicted that mortgage rates could rise through the first half of June, then level off or fall in the second half. That’s not what happened. Instead, mortgage rates fell from one week to the next, with the 30-year mortgage averaging 7.02% in the week ending June 1 and 6.66% in the week ending June 29.
Two major factors gave mortgage rates room to fall: the deal to resolve the debt ceiling standoff early in the month and the Fed’s rate hike pause in the middle of the month. At a minimum, both developments relieved upward pressure on mortgage rates, and they might have even pushed rates lower.
Holden Lewis writes for NerdWallet. Email: [email protected]. Twitter: @HoldenL.
Real estate focused artificial intelligence firm Restb.ai has formed a strategic alliance with Black Knight, according to an announcement on Monday. Through this new partnership, all Black Knight Paragon MLS platform users will have access to the Restb.ai MLS Product Suite, as it will be integrated into Paragon.
With Restb.ai, Paragon users will now have the ability to automate listing creation processes, unlock new data sets, and instantly validate property listings imagery to support compliance with MLS guidelines.
“Black Knight is known for delivering highly innovative, proven and cutting-edge real estate solutions that strengthen customer relationships and help agents work faster and smarter, not harder,” Ben Graboske, the president of Black Knight Data & Analytics, said in a statement. “With Restb.ai, we’re helping our MLS clients deliver more value to brokers and agents nationwide. Agents will be able to spend significantly less time on manually entering listings, enabling them to focus instead on interacting with homebuyers and sellers.”
Using the listing photos uploaded by the agent, Restb.ai automatically detects each image’s interior and exterior features, architecture style, and room type.
Restb.ai also has a photo compliance solution that can evaluate logos, watermarks, yard signs, people, license plates, and duplicate images, enabling it to auto-detect misuses of listing photos and corresponding violations based on MLS and Realtor association rules and regulations.
“Building Restb.ai into Black Knight’s MLS platform will radically transform how MLS subscribers interact with MLS Listing data. This enhanced AI automation will provide users with a new listing entry experience along with unique visual search capabilities for over 200 MLSs,” Lisa Larson, Restb.ai’s managing director for North America, said in a statement.
According to the press release, Restb.ai processes more than 1 billion images a month.
Amanda recently sent J.D. an e-mail looking for advice about gift-giving:
My husband and I have made huge lifestyle changes since our son was born with congenital heart disease four years ago. He’s had five open-heart-surgeries, and we’ve had some killer medical bills. My husband stays home with both of our kids to help prevent Liam from getting sick too often, so we’ve gone down to one income, one car, basic cable, and a really aggressive budget.
One of our worst budget breakers however is gifts. I have eleven nieces and nephews, two kids, etc. At Christmas we’ve convinced both sides to just do a name exchange and then we only have to buy for two nieces/nephews on either side, which helps and we’ve just outright stopped exchanging gifts with our brothers & sisters, but there are still our parents, his grandparents, kids of friends who have birthday parties, and graduations, weddings, and baby showers!
We actually do plan most of these things into discretionary spending since we know when people have birthdays, but it’s always those gotchas like weddings and new babies (and we didn’t pre-think graduations with this year’s planning).
Could you offer any advice on fitting generosity and gift giving into a frugal budget? No one wants to be a grinch, but it really adds up some months. Sometimes, it’s half of our discretionary spending just to get small gifts (we only spend $10-15/kid!).
Ah, Amanda, I hear you! Gifts can be a budgeter’s downfall! Many of us readily accept our own sacrifices in the name of being frugal, but don’t want to seem “cheap” when it comes to giving gifts to others. I’ve struggled with both sides of this issue.
One side of me likes choosing and giving gifts, likes having those gifts appreciated, likes receiving gifts in return. But the other side opposes the commercialism and expectations that accompany holidays and occasions. Too often, hastily-purchased gifts can seem like a substitute for the spare time and energy we don’t have to make a gift meaningful. These gifts can be merely an obligation, which is no fun for either giver or recipient.
For big family gift-oriented occasions like Christmas (Hanukkah, Kwanzaa, etc), you must have “The Talk”. In some families, money is a difficult subject, but your options are either to continue spending more than you want on presents, or to mystify everyone when you cut them off cold turkey. A good way to start is to explain your budget goals, as in, “We’re starting to save for the kids’ education funds,” “…to buy a house,” “to be able to afford to live on one salary,” “pay off the credit cards” or something like that — just make sure you’re being honest.
Whatever you do, don’t insist that everyone stop giving gifts to you (or your kids). You have the right to stop giving gifts, but for many people, being generous with presents is a true pleasure and you should avoid depriving them of that pleasure. It may seem wrong to accept without giving, but you can give back in other ways. Of course, your relatives and friends may be relieved at the prospect of the never-ending gift-exchange ending — maybe they were just too shy to bring it up.
If you don’t want to stop all gifts, here are some ideas to cut costs.
Draw names. As Amanda does, this can allow you to focus on one or two recipients instead of the whole clan. There are various arrangements. Some families write their name and a gift suggestion or two on a slip of paper. In some systems, adults pick an adult and each kid gives to a kid (with adult help as needed). Or, if everyone is gathering together, each person can bring one gift (marked as adult or child) and you can do a sort of “Yankee swap” exchange where unwrapped presents can be stolen or traded until everyone ends up with someone.
Be creative. On J.D.’s side of the family, we have been doing $5 gifts for several years. Everyone (7 adults, 4 kids) buys a $5 (or under) gift for everyone else. (This was my sister-in-law’s idea.) J.D.’s mother asked to be excepted — she loves piling gifts on everyone and exercises her grandmotherly rights to do so. The $5 limit has forced us to be bargain hunters and the results are often both surprising and hilarious. We found a practically new set of drafting pens for a brother’s gift: $80 new, marked as $10 at a garage sale but we bargained it down to five!
Emphasize the experience. Some people have more time than money. If you fit in that category, you can use it to your advantage for all sorts of occasions. Do friends have a new baby? Deliver dinner to the new parents, then stay to hold the baby while they eat the meal. Clean up afterwards, of course. Nieces and nephews? For that special occasion, invite them to join your family for camping, a hike, miniature golf — whatever your family does for fun. You’ll all get to know each other better, too. Parents and grandparents often would rather have you spend time than money on them, as well. Invite them over for brunch, or go feed the ducks at the park, or hear a free concert together.
Don’t turn your nose up at used. Aren’t we silly Americans! We talk about how great recycling is but we want everything we get to be new, new, new! It’s all about mindset. For kids’ toys, as long as they’re in safe condition, the fact that they’re “pre-owned” means little to a child — unless non-stop commercialism has already gotten to them! J.D. and I found two wooden sleds set out for the trash pickup in a ritzy neighborhood. After swallowing our hesitation, we grabbed them. With a cleaning and a few minor repairs, they were good to go — and looked great under the Christmas tree. Keep your eyes open all year for bargains, or arrange a toy exchange or toy hand-me-down system with friends and neighbors. Get to know people’s tastes and decorating styles so you can choose gifts they will appreciate.
Kids love the dollar store. I know, I know — everything’s made in foreign countries by underpaid workers. But seriously, if you are spending more than $3 for a kid’s birthday party gift, you need to visit a dollar store. The kids I know are fascinated by dollar store stuff until age 6 or 7. The parents may turn up their noses, but what kid wouldn’t love growing giant lizards or sharks (600% growth — just soak ’em in water!), red-white-and-blue glow necklaces, or a hundred fuzzy animal stickers?
Agree that gifts are only for the kids. Not having kids myself, I wouldn’t vote for this option, but I know many families like it. I think a better choice if you’re going to do this is to have adults buy small gifts for the kids ($5-10), and let kids make homemade gifts for the adults. I think this gets kids to think about giving as well as receiving.
Use homemade gifts. I’m a big fan for using the homemade gift for most every occasion. Special birthdays get a bouquet of garden flowers in a mason jar. Or, I take the time to write a sincere note in a beautiful card. If someone’s a fan of sweets, I’ll whip up a batch of cookies. If the season’s right, I might present them with fresh berries or a holly and cedar swag. The cost for all these gifts is minimal, but the gesture is still meaningful.
Mass produce. Last year, English Major offered a great tip about gift-giving ideas. You can save lots of dough by the assembly line approach. Pick a gift that will be appropriate for your list of recipients and buy craft items, ingredients, or components in bulk. Before you start, figure out how many gifts you’ll need and the cost per assembled gift. Check the figures against your budget. To maximize this idea, choose an idea that still allows for some personalization, say in the color or style of gift.
Just speak up. At my workplace, the envelope is constantly being passed for one event or another. The loss of a parent, a new baby, a retirement, etc. The flowers or gifts purchased with the collected cash may very well be much appreciated. But if your budget prevents you from chipping in, instead write a heartfelt note or tell the person face-to-face. A verbal expression of sympathy or support may be just what they need.
Shrug it off. Unfortunately, some people are all about the goods. If the people in your life aren’t going to appreciate or adjust to your frugal mindset, you have a choice to make. Keep spending to keep up with the Joneses, or go your own way and hold your head high. Find ways to show you care that don’t just involve handing over your debit card. Give when you can; give what you want to.
The side benefit of implementing any of these ideas is that it moves the whole concept of giving gifts back to thoughtfulness, effort, and individual creativity, rather than the focus on prices and packaging. Think of it as one small chink in the great wall of marketing and consumerism!
These are just some thoughts on the topic to get the discussion rolling. I’m sure there are scores of creative solutions out there.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
There are many ways to improve your credit score fast, like checking the accuracy of your credit reports, fixing late payments, becoming an authorized user, and much more. Each method can add points to your current credit score.
Having a bad credit score can make it difficult to navigate life, and it can also cost you quite a bit of extra money. A low credit score can increase your interest rates for credit cards and loans and may also require you to put down larger deposits when renting a home or turning on services. However, a good credit score gives you more options for where you can live and the loans you can get. Plus, it can save you money in the long run, which is a win-win for most.
Here, we provide you with 11 different ways that might help you improve your credit score faster. Not only will these methods help you improve your credit score, but they’ll also help you maintain a healthy score in the future.
In This Piece:
Check the Accuracy of Your Credit Reports
Target the Areas You Need to Improve
Fix Your Late Payments
Get Added as an Authorized User
Clear Any Outstanding Collection Accounts
Open a Secured Credit Card
Dispute Credit Inquiries
Be Mindful of Your Credit Utilization
Increase Your Credit Limits
Set Up Automatic Payments
Have Your Utilities Reported
1. Check the Accuracy of Your Credit Reports
The first step in improving your credit score is to be aware of what’s on your credit history. There are three major credit bureaus, Experian®, Equifax®, and TransUnion®, and each has its own credit report and score based on your credit history. That means everyone actually has multiple credit scores.
Sometimes, you may find errors on your report that you’ll need to correct through a dispute process. If you find an error, you’ll have to file a separate dispute with each credit bureau since they’re run separately. If there are multiple errors on your credit reports, you’ll need to dispute each of those individually. You might consider working with a credit repair company to make things a little easier for yourself.
Due to derogatory marks having such a big impact on your credit score, removing errors can be one of the fastest ways to build your credit score.
2. Target the Areas You Need to Improve
Checking your credit reports from each of the three main credit reporting agencies is easy. Under the Fair Credit Reporting Act, you have the right to obtain a free copy of all three credit reports once each year. The government mandates that you can receive one free credit report each year, and you can easily access it at AnnualCreditReport.com. You can also check your credit through our free credit report card, which provides a snapshot of your credit and a letter grade for each of the factors that drive your score.
Once you receive a copy of your credit report, you will know which areas need improvement and where to start.
3. Fix Your Late Payments
Late and missed payments can stay on your credit report for seven years. These derogatory marks lower your credit score and make you appear as a bigger risk to lenders.
The credit reporting agencies don’t remove these items, but you may be able to talk a creditor into doing so. Creditors can forgive one late payment if you have a history of on-time payments and you call to discuss it with them. Removing repeated delinquencies may require a little more effort on your part.
4. Get Added as an Authorized User
You can become an authorized user for a credit card account if you have a friend or family member with a good credit history. Even if you don’t use the credit card, your credit reports will reflect the person’s credit history of on-time payments.
This is also known as “piggybacking” on someone’s credit. Should you do this, it’s important to remember that the other person and yourself are now linked. This means that using the card and missing payments can harm the other person’s credit score and vice versa.
5. Clear Any Outstanding Collection Accounts
Contacting your creditors about paying off your debt is a great way to raise your credit score fast. Make sure that they agree to remove the negative hit to your credit report if you repay it in full—and get it in writing. If this agreement isn’t made, there will likely be no impact to your credit.
After making an agreement with the collections company, request a pay for delete letter to have it removed from your credit report. A pay for delete letter is an agreement in writing stating that the creditor will have the derogatory information removed from your report.
6. Open a Secured Credit Card
Having and using a credit card can help you build credit, but it’s difficult to get approved for a credit card when you have a low credit score, which is where secured credit cards become useful. Unlike a typical unsecured credit card, where you are given a credit line based on your credit alone, you can open a secured credit card by depositing money, which becomes your credit limit.
For example, if you deposit $500, you will then have a $500 line of credit. Banks are more likely to approve you for a secured credit card because it’s less of a risk. Your payments on this card are reported to the credit bureaus, and if you make those payments on time, this can help you raise your credit score.
7. Dispute Credit Inquiries
Many credit inquiries are hard inquiries, and hard inquiries impact your credit score. In fact, a hard inquiry stays on your credit report for an entire year. While each individual hit is relatively small, it can push you over the edge from one credit score tier to one below it. What’s more, several hard inquiries over a short period of time can drop your score by a lot.
Like any other negative factor on your credit report, you can dispute credit inquiries. If you didn’t approve the inquiry into your credit, you may be able to get it removed. This could potentially increase your credit score, but only slightly.
8. Be Mindful of Your Credit Utilization
If you carry a large amount of debt compared to your available credit, your score can suffer. In fact, credit utilization accounts for 30% of your credit score. So, if your total credit card available credit is $10,000, and you’re currently using $8,000 of it, paying down those balances can increase your score.
Keeping your utilization rate at around 30% is recommended. That’s $3,000 in debt on a $10,000 available limit, for example.
9. Increase Your Credit Limits
As discussed above, a low utilization rate is ideal, and one way to improve your credit utilization is by increasing your credit limits. Using the $10,000 example, $4,000 of debt would be a 40% credit utilization ratio. If you increase your credit limit to $15,000, that same $4,000 of debt would only be 26%. But be aware, this could trigger an inquiry and that will impact your score as well.
10. Set Up Automatic Payments
Having a good payment history is one of the best ways to improve your credit score because your payment history accounts for 35% of your FICO score. One of the simplest ways to do this is to set up automatic payments. Simply go to your credit card company’s website, make an account, and set up automatic payments for the minimum each month.
This way, you never have to worry about forgetting your payment. You can also make additional payments during the month if you plan on paying more than the minimum.
11. Have Your Utilities Reported
Typically, your utilities are not reported to the credit bureaus, and not many people realize this. Each month, it’d be great to get positive payment history on your credit score for making these payments on time. You can do this by taking an extra step to have your utilities reported through different services. For example, Credit.com offers this as part of our ExtraCredit® service.
How Your Credit Score Is Calculated
When working on improving your credit score, it’s helpful to know how your score is calculated so you know which factors are the most important. You can then make a plan for where you should start. Here are the major credit scoring factors and how each one can impact your credit score:
Payment history: A history of overdue and missed payments may signal that you are a bigger risk to creditors. Thus, this factor has the greatest negative effect on your credit score. This makes up about 35% of your credit score.
Amount of debt: Debt is 30% of your FICO Score and also weighs heavily on other credit scoring models. This is also known as your “credit utilization,” and ideally, you want to keep it below 30% of your max credit limit.
Age of accounts: Creditors like to see a proven record of borrowing, utilizing, and repaying credit. If you’re new to credit and borrowing, there isn’t a lot of data to go on. This makes up 15% of your score.
Account mix: Making 10% of your score, lenders want to make sure you can handle both revolving and installment credit. This means credit cards that you continue to use after repaying and loans that are closed upon full repayment.
History of credit applications: Multiple hard inquiries on your credit may look like you are overextending yourself financially and appear desperate. This will lower your score. Credit inquiries make up 10% of your score.
How Long Does It Take to Fix Your Credit Score?
Most people want to fix their credit score as quickly as possible, but the length of time often depends on your situation. If you have multiple derogatory marks on your credit report, it may take months or even years for them to drop from your report. When trying to fix your credit score, it’s most beneficial to start with methods you can control, like making your payments on time, disputing errors, and trying to settle your debts with collection agencies.
FAQs
Below, we’ve answered some of the most common questions people have about how to quickly improve their credit score.
Checking Your Credit Report Is the First Step Toward Improving Your Credit Score
Your credit report is the best place to start if you want to improve your credit score. Your credit report will show you your account balances, any derogatory marks you may have, and hard credit inquiries. This will help you see where to start, and you can also find out if there are any errors on your credit report.
To get an idea of where you stand with your credit, sign up for Credit.com’s free credit report card today.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
300 is the lowest credit score that a person can have. It’s impossible for a score to drop below 300 for any reason.
Learning how credit scores work can be mystifying, especially if you’re establishing credit for the first time. 42% of Gen Z don’t fully understand how credit scores work, which can lead them to ask questions like “What is the lowest credit score?” 300 is the lowest credit score anyone can have—but there’s a difference between knowing your score and having a plan to improve it.
We’ll discuss credit scores and credit ranges in this guide, and we’ll share five steps for improving low credit. Building credit can pave the way for tons of great opportunities like low-interest loans and premier credit cards.
What Are the FICO Credit Score Ranges?
Credit scores typically fall into five different ranges—Poor, Fair, Good, Very Good, and Excellent. Each range encompasses a set value of credit scores; the “Poor” category covers the widest range of credit scores and while the “Excellent” section covers the smallest range.
Different credit agencies and websites generally classify credit score ranges similarly, with slight variations. More often than not, you’ll encounter the following information:
Poor (300-579): 300 is the lowest credit score a person can have, and it’s impossible to drop below that number.
Fair (580-669): Lenders and banks will look at a Fair score more favorably, but their best offers may still be out of reach.
Good (670-739): Experian® reported 714 as the average credit score in 2022.
Very Good (740-799): Keeping your credit utilization ratio low and consistently making payments on time can contribute to a Very Good score.
Excellent (800-850): Approximately 1.3% of Americans have Excellent credit. Excellent credit isn’t necessary to attain great loans per se, but it’s a worthy goal to strive for.
The Risks of Having a Low Credit Score
Lenders, real estate agents, banks, and loan agencies use our credit scores to gauge our financial trustworthiness. These entities may interpret “Poor” and “Fair “scores as a sign that someone either won’t make their payments on time or at all. Securing a loan can be very difficult with Poor or Fair credit—and even if you do, that loan will have significantly higher interest rates.
A low credit score also makes it difficult to increase your credit limit in several ways; most banks are hesitant to offer new cards or grant a credit limit increase to Poor or Fair credit applicants. Lastly, many landlords will turn down applicants with credit scores below a certain threshold.
How to Get a Loan with a Low Score
Securing a loan with a low credit score can be challenging, but it’s not impossible. Nonprofit organizations like credit unions can accommodate clients with Poor or Fair credit. It may even possible to acquire a mortgage with bad credit if your score is hovering above 580.
Be wary of scams and fraud when searching for low-credit loans; cybercriminals may try to glean sensitive information by imitating legitimate lenders. Prudence is your best bet—research the person or organization that you’re speaking to by looking them up online to verify their identity before providing your SSN.
Actions that Could Improve Your Credit Score
There’s only one direction to go if you’re at the bottom, and that’s up. Someone with a score of 300 can repair their credit by making plans and taking action. The following five steps can help you start on the road to recovery from even the lowest credit scores—and stay the course as things improve.
1. Get Your Free Credit Report
Equifax®, Experian, and TransUnion® are America’s most significant credit bureaus. These agencies provide reports about our credit history, and the law requires them to provide one free credit report each year.
Credit.com also provides free credit scores, plus a credit report card that grades your credit activity and offers practical feedback.
2. Challenge Errors on Your Report
Everyone makes mistakes, including credit lenders and credit bureaus. If you find false or inaccurate information on your credit report, you can challenge the accuracy of these blemishes. Contact the corresponding credit agency and company that made the mistake and respectfully request assistance.
3. Avoid Hard Inquiries
Hard credit inquiries result from lenders and agencies looking at your credit history when you apply for a card or a loan. Inquiries don’t stick around forever, but they can significantly inconvenience you by making your score seem lower than it really is.
Don’t apply for too many new cards while working to improve your credit. A mistimed hard inquiry can make the difference between securing a loan and having to wait months to try again.
4. Pay Down Your Debt from Largest to Smallest
Paying off your debt will always be one of the best ways to improve your credit—it’s more a matter of figuring out how to best go about doing so. As tempting as it may be to pay off your smallest accounts, paying off your largest debts will make the largest difference on your credit report.
Large debts contribute to your credit utilization ratio the most, so paying them off will free up tons of space. A large debt might also belong to one of your oldest accounts, and time is a significant factor that impacts credit. Whittling down a massive loan over time could tangibly boost your score in real time.
5. Utilize Credit Repair Services
Credit repair services excel at helping people create practical plans to work to build their credit. ExtraCredit® offers several features to help you manage your credit, including an exclusive discount to a leader in credit repair.
Low Credit Score FAQ
Is It Possible to Have a Credit Score of 250?
It is impossible for a person’s credit score to drop to 250, as 300 is the lowest number that the major credit bureaus standard modeling will recognize. However, a person’s specialized FICO® score, specifically their Auto Score and Bankcard score, can range from 250-900 as they focus on more specific areas of your credit. Auto and Bankcard scores help lenders decide if they’ll offer you an auto loan or credit card, respectively.
What Happens If I Have a Credit Score of 300?
A credit score of 300 will make it difficult to secure auto loans, home loans, and credit cards from respected lenders. Poor credit scores also can affect insurance premiums and interest rates.
Can I Buy a House with a Low Credit Score?
It’s certainly possible to gain a home loan with a low credit score—but the process may be much more difficult. Federal Housing Administration (FHA) loans can be monumentally beneficial to individuals with Poor or Fair scores. However, you may need to make a larger down payment.
Stay on Top of Your Credit
The most important step you can take to improve your credit score is to stay on top of your credit report. You can request a free credit report from all three main credit reporting agencies—Experian, Equifax, and TransUnion—once a year.
The details on these reports can help you make sure everything on your credit report is accurate and up to date. Make sure you take the appropriate steps to remove any inaccurate information from your credit report. Additionally, having access to your report and credit score can help you determine what areas you need to focus on to rebuild your credit.
To get your free Experian Vantage 3.0 credit score, you can also sign up for Credit.com’s free Credit Report Card.
When facing the loss of a loved one, the last thing someone wants to think about is the expense related to the funeral. Often the cost comes as a shock to the family. When I lost my father in 2006, it was up to my step-mom and me to go about planning his funeral arrangements. I guess I always knew that the cost of a funeral could get pricey, I just never realized how much
Table of Contents
Average Funeral Costs
The cost of the average funeral has dramatically increased in the last 25 years. However, it’s an expense that we can’t avoid. Being prepared and understanding the costs involved can help the process of planning for a funeral a little bit easier and help people decide whether getting a burial insurance policy is the right choice to support their loved ones.
Breaking Down the Costs of a Funeral
From death to burial, and all the steps in between, today’s average funeral can cost upwards of $15,000. There are a few areas where the expense can be cut, such as in choosing the style and extravagance of the casket. But some basic services, such as the cost of the funeral directors services cannot be avoided.
There are two areas that need to be looked at in terms of expense: the funeral service/funeral home fees, and the burial/cemetery fees. This is where a burial insurance policy can be very helpful.
Costs of Funeral Services
According to the National Funeral Directors Association, the average funeral cost is around $6,500. This does not include the burial fees, including plot and headstone.
Here’s a look at some of the fees broken down and what they cover:
Non-declinable basic services fee, $1800 – this fee can include the cost of the funeral directors services in securing permits, overhead, arranging the funeral plans, and coordinating services
Removal/transfer of remains to the funeral home, $250 – while your loved one may pass at home, in a hospital, or someplace else, their body has to get moved to the funeral home for the services
Embalming, $625
Other preparation of the body, $200 – this may include dressing the body, grooming, or applying make-up
Use of facilities/staff for viewing, $395 – average cost, but can change based on the duration of viewing hours and space needed
Use of facilities/staff for a funeral ceremony, $450 – let’s face it, those folks who drive the hearse, open the doors for visitors, fetch more tissues, etc… need to get paid
Use of a hearse, $275 – includes a driver and their services as well
Use of a service car/van, $125 – this is usually a limousine used to transport the family from the funeral home to the church and/or cemetery
Memorial printed package, $125 – can include programs and mass cards
The Cemetery Costs
Costs related to the burial are separate than those of the funeral. The burial costs include:
The cemetery plot, $1000 – this is the area of land purchased in the cemetery for the burial of the body
The vault, $700 – an airtight container is required to hold the casket, the cost can vary based on the material used
Headstone, hundreds to thousands of dollars – this cost varies greatly based on the size, material chosen, engraving and details.
Regarding the headstone, I have to emphasize “cost varies greatly”. I was unaware of all the subtle differences that can go into selecting a headstone and much the cost can escalate. For example, by having smooth sides or edges really jumped the price up considerably.
Planning Ahead for Funeral Costs
It is common now for people to plan ahead for their funeral services and even pre-pay or purchase a burial insurance policy. Arrangements and payments can be made over time with the funeral home to help family members not be burdened with the costs and details of funeral arrangements in their time of grief.
Even if your loved one hasn’t paid ahead, taking the time to consider what costs are really necessary and where you might be able to save is a good idea.
Word of caution on pre-paying funerals: make sure you know where the money is going. An estate attorney that I work with shared a story of a funeral home that was selling pre-paid funeral plans. Those plans became obsolete when the funeral home went bankrupt.
For some people, burial insurance isn’t enough – they need a traditional life insurance policy.
Did you have to bury a loved one and get shocked at how much it cost?
“Mortgage delinquency rate again fell to a historic low in May, returning to the level seen in March of this year, while the near-all-time low foreclosure rate has not changed since spring 2022,” CoreLogic noted in its report. “However, 14 states and nearly 170 metropolitan areas saw overall delinquencies increase year over year in May, … [Read more…]
Looking for a stylish and comfortable mid century lounge chair for your home or office? We’ve got you covered. Our team of experts has researched and tested numerous options to bring you the best products on the market. With so many choices available, we understand that finding the perfect chair can be a challenge. That’s why we’ve taken into consideration essential criteria such as quality of materials, comfort level, and overall design, as well as customer reviews, to create a list of top recommendations. Whether you prefer a classic or modern twist on the mid century design, our selection has something for everyone. So why wait? Invest in a high-quality mid century lounge chair today and enjoy the benefits of improved comfort and timeless style.
Modway Bestow Mid-Century Velvet Accent Chair Green
The Modway Bestow Mid-Century Performance Velvet Upholstered Tufted Accent Lounge Chair in Green is a stunning addition to any living space. Made with high-quality velvet upholstery, this chair is both comfortable and stylish. The tufted backrest and armrests provide excellent support, while the solid wood frame ensures durability. This chair is perfect for relaxing, reading, or enjoying a cup of coffee. Its mid-century design will complement any decor, and its vibrant green color will add a pop of color to your room. Don’t miss out on this gorgeous armchair!
The Modway Empress Mid-Century Modern Upholstered Leather Accent Arm Lounge Chair in Black is a stylish and comfortable addition to any living space. Made with high-quality leather and a sturdy frame, this armchair is both durable and luxurious. Its mid-century modern design adds a touch of sophistication, while the comfortable cushioning ensures a cozy seating experience. Perfect for lounging, reading, or simply relaxing, this armchair is a versatile piece that will elevate any room.
The Aoparts Mid Century Modern Shell Lounge Chair is a beautiful addition to any living space. Made with high-quality faux leather and solid wood accent legs, this chair is perfect for lounging, reading, or simply relaxing. The comfortable backrest and seat cushion provide ample support, while the classic design adds a touch of Scandinavian elegance to any room. Whether you’re looking for a statement piece for your living room or a comfortable chair for your office or salon, the Aoparts Mid Century Modern Shell Lounge Chair is a must-have. Available in white, this chair is sure to complement any décor.
Mid-century modern design, Comfortable faux leather, Solid wood accent
May not suit all decor
OAKHAM Mid Century Modern Chair White
The OAKHAM Mid Century Modern Chair is a stunning addition to any living space. Made with high-quality leather and featuring a sleek, Scandinavian design, this chair is both comfortable and stylish. Its shell lounge design provides excellent support while also adding a touch of elegance to any room. Perfect for use as an accent chair or side chair, the OAKHAM Mid Century Modern Chair is sure to impress. Available in a beautiful white color, this chair is a must-have for those looking to elevate their home decor.
Stylish mid-century design, Comfortable leather accent, Durable and sturdy construction
May not fit all decor
Furgle Shell Lounge Chair PU Leather Style-16
The Furgle Mid Century Modern Shell Lounge Chair is a beautiful and stylish addition to any living room, reading nook, or office space. Made with high-quality PU leather and a solid wood tripod base, this chair combines both comfort and durability. The classic design and sleek style make it a versatile piece that can fit into any decor. Whether you’re looking for a cozy spot to curl up with a book or a statement piece for your home, the Furgle Mid Century Modern Shell Lounge Chair is the perfect choice.
Stylish mid-century design, Comfortable and supportive, Durable materials used
Limited color options
KINFFICT Mid Century Accent Chair
The KINFFICT Upholstered Mid Century Accent Chair is a stylish and comfortable addition to any living room or bedroom. With its thicken cushion and sturdy wooden frame, this armchair offers both durability and relaxation. Its 300 lbs weight capacity ensures that it can accommodate a wide range of people, while its coffee color adds a touch of modernity to any space. Whether you are reading a book or watching TV, this lounge chair is perfect for any cozy night in.
Mid-century modern design, Thick and comfortable cushion, Sturdy and durable construction
May not fit all decor styles
BELLEZE Shell Chair Avalon Black
The BELLEZE Shell Chair is a sleek and stylish addition to any home or office. Made with a solid wood tripod base and a faux leather padded seat, this mid-century modern accent chair is both comfortable and durable. Perfect for use in the living room, bedroom, or office, the armless design and compact size make it easy to fit into any space. The black Avalon color adds a sophisticated touch to any decor. Overall, the BELLEZE Shell Chair is a great choice for those looking for a comfortable and stylish seating option.
Mid-century modern design, Comfortable padded seat, Solid wood construction
Limited color options
ZHENGHAO Swivel Accent Chair with Ottoman
The ZHENGHAO Swivel Accent Chair with Ottoman is a must-have for anyone looking to add a touch of mid-century modern flair to their home. The chair’s faux fur material and fluffy armrests provide ultimate comfort, while the 360-degree metal base and footrest allow for easy movement and relaxation. Whether you’re reading a book in your living room or lounging in your bedroom, this chair and ottoman set is the perfect addition to any space. Available in white fur with a white base, this chair is sure to elevate your home decor.
Comfortable and cozy, Sturdy metal base, Swivels 360 degrees
May shed fur
ANJHOME Mid Century Modern Accent Chairs Set of 2
The ANJHOME Mid Century Modern Accent Chairs Set of 2 are a great addition to any living room. These armchairs are made with a solid wood frame and upholstered with a comfortable fabric that makes them perfect for reading or lounging. Assembly is easy and straightforward, and the chairs come in a beige color that complements any decor. Not only are they stylish and comfortable, but they are also durable and made to last. These chairs are perfect for relaxing after a long day or for entertaining guests.
The Guyou Mid Century Modern Accent Chair with Ottoman Set is a stylish and comfortable addition to any home. Made with high-quality materials, this chair is both durable and comfortable. The beige upholstery is easy to maintain and complements any décor. The lumbar cushion provides extra support, making this chair perfect for long periods of sitting. Whether you’re lounging in your living room or need a comfortable place to sit in your bedroom, the Guyou Mid Century Modern Accent Chair with Ottoman Set is the perfect choice.
Comfortable, Stylish design, Includes ottoman
Assembly required
FAQ
Q: What is a mid-century lounge chair?
A: A mid-century lounge chair is a type of indoor lounge chair that was popularized in the mid-20th century. It typically features clean lines, organic shapes, and a minimalist design. Mid-century lounge chairs are often made from high-quality materials like leather and wood, and are known for their comfort and durability.
Q: What should I look for in the best lounge chair?
A: When searching for the best lounge chair, there are a few important factors to consider. First, look for a chair that is both comfortable and supportive. It should provide adequate cushioning and support for your back and neck. Additionally, consider the chair’s design and style to ensure it fits with your existing decor. Finally, look for a chair made from high-quality materials, such as leather or wood, to ensure it will last for years to come.
Q: Can a mid-century lounge chair be used in modern decor?
A: Absolutely! Mid-century lounge chairs are known for their timeless design and versatility, making them a great choice for modern decor. They can be paired with a variety of different styles and colors, and can be used to add a touch of warmth and texture to any space. Whether you’re going for a minimalist, bohemian, or industrial look, a mid-century lounge chair is a great option.
Conclusions
After conducting thorough research and analysis of multiple mid century lounge chairs, we have come to the conclusion that these chairs offer a timeless aesthetic and comfortable seating experience. From the classic design of the Furgle Mid Century Modern Shell Lounge Chair to the sleek leather upholstery of the Modway Empress Mid-Century Modern Upholstered Leather Accent Arm Lounge Chair, each product has its own unique features that cater to different preferences. Whether you’re looking for a statement piece for your living room or a cozy reading nook chair, there is a mid century lounge chair out there for you. Overall, we highly recommend considering a mid century lounge chair for your home or office space.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
Are you struggling with debt and feeling overwhelmed? You might also be tired of hearing the same old tips that don’t help at all, like “Don’t buy coffee out” or “Just stop spending money.” Don’t worry — you’re not alone.
Many hardworking individuals like you face similar challenges. The good news is that there are effective strategies for paying off debt faster, even on a tight budget.
This guide will walk you through 10 practical and actionable steps that can significantly impact your journey to financial autonomy. Are you ready to better control your finances? Here is how to pay off debt fast with low income.
In This Piece:
Take Inventory of Your Debts
Create a Realistic Budget
Avoid Any New Debts
Try the Debt Avalanche Method
Consider the Debt Snowball Method
Increase Your Income
Negotiate a Better Rate
Increase Your Credit Score
Consider Debt Relief or Consolidation
Stay Consistent
Step 1: Take Inventory of Your Debts
Before tackling your debts, taking inventory of them is a crucial first step to clearly understanding what you owe, allowing you to understand the full extent of your financial obligations, and developing a comprehensive and more effective action plan.
Start by gathering all your financial statements and creating a comprehensive list of your debts. This includes credit card balances, student loans, medical bills, and other outstanding obligations.
You gain a complete picture of your economic landscape by documenting each debt, including the creditor, outstanding balance, interest rate, and minimum monthly payment. This knowledge empowers you to make informed decisions and prioritize debt repayment strategies.
Step 2: Create a Realistic Budget
A budget can help track your income and expenses, clearly showing where your money goes, but if you want a successful budget, it needs to be realistic.
Creating a realistic budget is essential to pay off debt fast with a low income. You can start by identifying areas to cut back on unnecessary expenses, like reducing discretionary spending, such as eating out. Look for creative ways to save money, such as using coupons, shopping sales, or negotiating lower bills. Though this is good advice, it might not be enough or as simple as it sounds.
Here are more steps and tips to help you create a budget that could work for you:
Track income and expenses: Start by calculating your total monthly income, including your salary, freelance earnings, or any other sources of income. Next, track your expenses for a month to understand where your money is going. Categorize your expenses into fixed costs (rent, utilities, etc.) and variable costs (groceries, entertainment, etc.).
Set attainable goals: Determine how much you can allocate toward monthly debt payments while covering your essential expenses. It’s crucial to set realistic goals that consider your income. Remember, even small monthly contributions can make a significant difference over time.
Prioritize debt repayment: Allocate a specific portion of your budget to debt repayment. Consider prioritizing your debts using the debt avalanche or snowball methods mentioned earlier. By focusing on one debt at a time while making minimum payments on the others, you can make steady progress and gain a sense of accomplishment.
Monitor and adjust: Regularly review your budget and track your progress. Adjust as needed to stay on track and meet your financial goals. Be flexible and willing to adapt your budget as your circumstances change.
Creating a realistic budget requires discipline and commitment, and it’s crucial to paying off debt. By understanding your income, tracking your expenses, and making intentional choices, you can take control of your financial situation.
Step 3: Avoid Any New Debts
It might sound obvious but avoiding new debts can help greatly. Avoid the temptation to rely on credit cards or take out additional loans. Instead, focus on living within your means and prioritizing your financial goals. Of course, implementing this step is easier said than done.
Here are some recommendations to help you avoid accumulating additional debt:
Change your mindset: Understand that taking on new debts will only prolong your journey to becoming debt-free. Embrace living within your means and making conscious choices to avoid unnecessary borrowing will help you pay off your debt faster.
Cultivate healthy financial habits: Practice mindful spending, distinguishing between needs and wants, and make conscious choices aligned with your financial goals.
Building an emergency fund: This is a crucial step to prevent relying on credit or loans during unexpected expenses or financial setbacks. Start by setting aside a small amount from your monthly income until you have a comfortable cushion to cover unforeseen emergencies.
Practice delayed gratification: Avoid impulsive purchases and practice delayed gratification. Before making a nonessential purchase, give yourself a 24-48 hour cooling-off period. This allows you to assess whether the item is a genuine necessity or a momentary desire.
Seek alternative solutions: When faced with financial needs, explore alternatives before committing to new debts, like borrowing from friends or family, negotiating payment plans with service providers, or seeking assistance from local community resources or nonprofit organizations that offer financial aid or low-interest loans.
Remember, avoiding new debts requires discipline and commitment. By adopting a proactive approach to managing your finances and being mindful of your spending, you can stay on track toward paying off your existing debts and achieving financial freedom. Stay focused, make intentional choices, and celebrate your progress.
Step 4: Try the Debt Avalanche Method
The debt avalanche method is a powerful strategy for paying off debt efficiently. With this approach, you prioritize the debts based on interest rates. Additionally, this method provides a clear road map for debt repayment, allowing you to stay focused and motivated as you see progress with each debt you eliminate.
Start by arranging your debts in descending order based on their interest rates, with the highest interest debt at the top of the list. This order will determine the repayment priority. Doing this minimizes the interest that accrues over time, saving you money in the long run. Once you pay off the highest interest, move on to the next one and continue the process.
Remember to continue making at least the minimum payments on all your debts to maintain a good credit standing and avoid penalties. By staying committed to this method and directing your extra funds strategically, you’ll make significant strides toward paying off your debts.
Step 5: Consider the Debt Snowball Method
Another effective debt repayment strategy is the Debt Snowball method. It involves listing your debts from smallest to largest balance and focusing on paying off the smallest debt first while making minimum payments on the others. Once you pay off the smallest debt, you apply the money you were putting toward it to the next smallest debt.
Begin by creating a comprehensive list of all your debts, including credit cards, personal loans, student loans, and other outstanding balances. Arrange your debts in ascending order based on their balances, with the debt carrying the lowest balance at the top of the list. This order will determine the repayment priority.
Continue focusing on one debt at a time until you can pay off all your debts. The debt snowball method is advantageous because it focuses on building momentum and providing a sense of accomplishment by creating small wins, motivating you to continue your debt payment journey.
While this method may not prioritize debts based on interest rates, it provides a structured and motivating approach that can be particularly beneficial for individuals seeking emotional and psychological encouragement along their debt repayment journey.
Step 6: Increase Your Income
How to get out of debt when you are broke? Finding ways to increase your income can significantly impact you but can also be challenging. Consider taking up a side hustle or part-time job to generate extra money.
There are numerous opportunities available, such as freelance work, online tutoring, or selling handmade crafts. Dedicating your additional income solely to debt repayment accelerates your progress. It helps you achieve financial goals sooner, and if everything goes well, you’ll only need to do this for a short time.
Here are a few ideas on how to make extra money to pay off debt fast:
Explore freelance opportunities in your field of expertise
Take on part-time jobs or gig work
Monetize your hobbies or skills
Consider renting out a spare room or property
Participate in online surveys or market research studies
See if you qualify for blood and plasma donations, some places pay for this help
Step 7: Negotiate a Better Rate
Lowering the interest rates on your debts can help you save money and pay them off faster. Reach out to your creditors and explore the possibility of negotiating a lower interest rate. Even a slight reduction in interest rates can make a significant difference.
Here’s a detailed explanation of how to negotiate a better rate and why it can be beneficial:
Review your current rates: This includes credit cards, personal loans, and other forms of debt. Take note of the interest rates, promotional offers, and the terms and conditions associated with each debt.
Research and compare: Understand market rates basics and terms for similar financial products. This will provide you with a baseline for negotiation and help you determine if your rates are higher than what is commonly available. Look for competing offers, promotions, or lower interest rates from other lenders or credit card companies.
Prepare your case: Highlight your payment history, creditworthiness, and loyalty as a long-term customer. Compile improved financial stability or credit score evidence since you obtained the debt. The goal is to present a compelling case for why you deserve a better rate.
If negotiating directly with your creditors doesn’t yield the desired results, consider other options like balance transfers or refinancing.
Balance transfers involve moving high-interest debt to a credit card with a lower interest rate, often with an introductory 0% interest period. Refinancing involves replacing an existing loan with a new one with better terms and a lower interest rate. Both options can help reduce the overall interest you’ll pay and accelerate your debt payoff.
Step 8: Increase Your Credit Score
Improving your credit score can have a positive impact on your financial well-being. A higher credit score can lead to lower interest rates on future loans and credit cards, potentially saving you thousands of dollars in the long run. To boost your credit score, make timely payments, reduce your credit card balances, and keep your credit utilization ratio low. Regularly review your credit reports to identify and address any errors or discrepancies.
Step 9: Consider Debt Relief or Consolidation
If your debts feel overwhelming and unmanageable, exploring debt relief or consolidation options might be a viable solution. Debt relief programs, such as credit counseling or debt settlement, can help you negotiate with creditors to reduce the amount you owe or establish more manageable payment plans.
Debt consolidation allows you to combine multiple debts into a single loan with a lower interest rate. However, it’s essential to research and choose reputable organizations to ensure you make an informed decision that aligns with your financial goals.
Step 10: Stay Consistent
So, what is the best way to pay off debt fast? Consistency is always key. Make your debt repayment a priority and stick to your plan. Celebrate small victories along the way to stay motivated and maintain your momentum.
Remember, achieving financial freedom takes time and dedication. You can overcome your debts and build a brighter financial future with persistence.
Congratulations on taking the first step toward improving your financial well-being. Remember, Credit.com is here to support you on your journey.
Explore our ExtraCredit® program, which provides valuable resources to help you monitor and manage your credit for a small monthly price Or sign-up for our free service that provides an Experian Vantage 3.0 score along with a free credit report card.
If you stop making payments on your debts, creditors usually have a set amount of time to pursue repayment. After that time, they can no longer legally pursue the debt. But that doesn’t mean you can just forget about the debt. Learn more about how debt collection and statutes of limitations work.
In This Piece
How Does Debt Collection Work?
If a creditor doesn’t believe it can recover a debt, it may sell that debt to a collection agency. These agencies specialize in debt recovery and have the resources, staff, and time to pursue old debts more aggressively than some original creditors.
A collection agency can also list an old debt as a new line on your credit report with a continuation of the original debt date.
When you default on debt, the creditor may close your account and report it as a closed account with negative payment information. When the account is sold to a collection agency, the collection agency owns the account and can list it as a collections account on your credit report.
As long as the collection agency can document the debt, it has a legal right to pursue it. That includes attempting to sue you for the debt and following up with methods such as wage garnishment if it receives a judgment for the debt.
What Are the Four Types of Debt?
Debt generally falls into a few main types. Each type works fairly similarly when it comes to debt collection.
If you miss payments on a debt, it can become delinquent and go to collections no matter how the original account was set up. Here are the main four types of debt:
Secured. Secured debt means you put something up as collateral to borrow against. That makes debt collection simple: the collateral can be repossessed.
Unsecured. Unsecured debt doesn’t involve collateral, so collection can get a bit messy. This can include lawsuits and wage garnishment.
Revolving. Revolving credit involves an open line of credit you can continue to draw on as you pay it off. Credit cards are a common form of revolving credit. This type of debt is usually unsecured, but secured options are available for people with poor or no credit.
Installment. Installment debt is a one-time loan paid back via a series of payments. Examples include auto loans, student loans, and mortgages. Installment debt can also be secured or unsecured.
Can a Debt Collector Collect After 10 Years?
In most cases, the statute of limitations for a debt will have passed after 10 years. This means a debt collector may still attempt to pursue it (and you technically do still owe it), but they can’t typically take legal action against you. If you notify them that the debt is past the statute of limitations and request they not contact you again, they likely won’t.
It also depends on when you made the last payment. The statute of limitations for most debts starts when you go into default. If a debt is 10 years old but you were making payments until three years ago, the debt is likely still within the statute of limitations and can be pursued by a debt collector.
However, it’s important to note that every case is unique and the statute of limitations on various forms of debt is different in each state. Understanding what the rules in your state are and how they might apply to your specific debt situation is important. Contact a lawyer for your unique situation if you have questions.
What “Restarts” the Clock on Old Debt?
Many people make the mistake of believing the statute of limitations on debt starts when they open an account. In reality, the countdown starts when you miss a payment or make your last payment.
For example, imagine you have a credit card you opened in 2010. You used the account and paid as agreed for five years. In 2015, something happened that changed your income and ability to make payments, and you stopped paying on the credit card debt. Depending on which state you’re in, the statute of limitations could be from three to 10 years. If the state has a six-year statute of limitations, that debt would have been collectible using the legal system until 2021—six years after the last activity on the account. Note that some debts have an even longer statute of limitations in some states, such as promissory notes, revolving credit, or legal oral contracts.
You can also inadvertently reset the clock on a statute of limitations by making an agreement to pay or paying a partial amount on a debt. In most cases, the clock resets starting at that date. It’s important to factor this point into any negotiations or repayment plans. If the statute of limitations is almost up, it may not be in your best interest to make any payments. However, if there’s still a lot of time left for creditors or collectors to sue, it may be wise to start making payments.
Having said that, an unpaid debt will stay on your credit report for about seven years, even if the time clock has run out.
How Long Can a Debt Collector Pursue an Old Debt?
In some states, a collection agency cannot try to collect at all once a debt is past the statute of limitations. In other states, they cannot sue you, but they may still try to collect the debt, which can include calls and written requests.
Some debt buyers—companies that buy and try to collect very old debts—still go after borrowers and might even take them to court. If they do this knowing that the debt is past the statute of limitations, they may have violated the Fair Debt Collections Practices Act. But they also know that most borrowers who are sued for old debts won’t show up in court, and the judge will issue a default judgment.
If your debt is past the statute of limitations at this point, you can re-open the default judgment and ask the judge to vacate it because it is time-barred. The process is relatively straightforward, but you may want to consult with an attorney to ensure it’s done correctly.
Always respond to legal summons. Judgments may give collectors additional collection powers, such as access to the money a debtor has in their bank account or the ability to garnish wages to collect the judgment. To prevent this, all a borrower has to do is appear in court at the appointed time and explain that they have a time-barred debt. If that is correct, the lawsuit will be dismissed.
It’s important to note that the statute of limitations is not the same as how long the debt appears on your credit report. The timeline for debt to stay on your credit report is often seven years, but again, this depends on your activity with the debt. If the debt was sold by the original lender at six years, and you made a payment with the new debt buyer, it could restart the clock.
What Is a Time-Barred Debt?
Time-barred debt refers to debt that’s beyond the statute of limitations. It simply means that the debt is not legally enforceable. It doesn’t mean you don’t owe the debt if it was legitimate to begin with. It means the creditor or collector can’t use the legal system to force you to make good on the debt.
According to the Federal Trade Commission, whether or not collectors can continue to contact you about a time-barred debt is up to various state laws. Some states do make this illegal. And in any state, a debt collector can’t sue you, threaten to sue you, or harass you over time-barred debt.
If you’re being contacted by a creditor about a time-barred debt, you can ask them to stop. The FTC recommends sending this request in writing by mail.
When Does the Clock Start on the Statute of Limitations for Debt?
Many people make the mistake of believing that the statute of limitations on debt starts when they open an account. In reality, the countdown starts when you miss a payment or make your last payment.
For example, imagine you have a credit card you opened in 2000. You used the account and paid as agreed for five years. In 2005, something happened that changed your income and ability to make payments. You stopped paying on the credit card debt in July 2005.
Depending on which state you’re in, the statute of limitations could be from three to 10 years. Let’s say the state in question had a six-year statute of limitations. The debt would be collectible using the legal system until August 2011.
You can also inadvertently reset the clock on a statute of limitations by making an agreement to pay or paying a partial amount on a debt. In most cases, that resets the clock starting at that date.
What Debt Isn’t Subject to the Statute of Limitations?
Time-barred debt refers to debt that’s beyond the statute of limitations. It doesn’t mean you don’t owe the debt if it was legitimate to begin with, but the creditor or collector can’t use the legal system to force you to make good on the debt.
What Effect Does Bankruptcy Have on Old Debt?
Bankruptcy means creditors can’t legally pursue debt collection of any credit debt in the bankruptcy. The debt also can’t be sent to a collection agency, and almost all collection activity, including legal action or wage garnishment, is prohibited. If you’re contacted about paying a debt after filing for bankruptcy, it’s a good idea to turn the matter over to your attorney to handle. Some debts can’t be discharged, such as student loans, taxes, and child support, even when you declare bankruptcy.
Negative payment history and bankruptcy can cause major damage to your credit score. So even if you’re off the hook for a debt, you still have to consider your credit and how you can start to build it back up.
What to Do If You Are Contacted About an Old Debt
If you’re contacted about an old debt, it doesn’t mean you should automatically pay it. Remember, agreeing to terms and providing a payment can restart the clock on an old debt, and it’s important to be aware of your rights as a consumer. Instead, take the steps below to see if you need to pay the debt and what your options are.
1. Ask the creditor to send you written notice of the debt.
This is required under the federal Fair Debt Collections Practices Act even if you don’t ask, but asking is a good first step. Scammers will say they aren’t allowed to send a notice or will try to email instead, which helps you weed out illegitimate callers. By keeping the initial phone conversation to a minimum, you may avoid saying or doing something that could hurt you later on with legitimate collectors.
2. Validate the debt.
Once you receive written notice of the debt, you have 30 days to request validation of the debt. Mail your request to the creditor or collections agency via a certified letter and ask them to validate the debt. You don’t have to give a reason for your request. You can simply say, “I dispute this debt. Please validate it.”
Tip: If the debt isn’t yours, you may want to reach out to a credit repair organization to help you work to challenge the debt and request it be removed from your credit report.
3. Confirm that the debt is within the statute of limitations.
While you’re waiting for the response from the bill collector, contact a consumer law attorney or your state attorney general’s office to confirm the statute of limitations for the debt. Consumer law attorneys who regularly represent consumers in cases against debt collectors often provide a free consultation.
4. Decide on an action.
Once you receive validation of the debt and confirm whether it’s inside or outside the statute of limitations, you typically have three main options.
Pay it. If you know you owe the debt and you can pay it, you can do so. Make sure you keep written records of the amount due and your payment. Sometimes these old debts get sold to more than one collection agency, and if you get another call about this debt, you want to have proof you’ve paid it.
Settle it. If you know you owe the debt and want to try to make good on it, but you can’t pay the full amount—or if the debt has been inflated by fees— you may want to negotiate to settle it for less than the full amount due. This is tricky, though, because once you start negotiating, you could reset the statute of limitations and end up being sued for the entire debt. That could lead to wage garnishments or other issues. If you want to go this route, your best bet is to talk with an attorney first.
Send the collector a letter telling them to leave you alone. You have the right to ask a debt collector to stop contacting you. Once you do that, they are only allowed to contact you to tell you if they are taking legal action against you. If you know the debt is outside the statute of limitations, state that in your letter and tell them not to contact you again.
Do Time-Barred Debts Show Up on Your Credit Report?
Time-barred debts can show up on a credit report. Negative items such as missed payments and collections accounts stay on your credit report around seven years. Many state statutes of limitations on debt are less than seven years.
Can a Collection Agency Report an Old Debt as New?
A collection agency can list an old debt as a new trade line on your credit report. It works like this:
You have a loan, credit card, or other debt. It’s listed as a tradeline by your creditor on your credit report.
You default on that debt. The creditor closes your account. It’s now listed on your credit report as a closed account with negative payment information.
The original creditor eventually sells the account to a collections agency.
The collections agency now owns the account and can list it as a collections account—a separate tradeline—on your credit report.
Debt Collections and Credit Reports
One of the best ways to protect yourself against old debts cropping up and creating problems is to keep an eye on your credit report. Sign up for ExtraCredit® for a proactive look at your credit reports and scores so you can take care of issues before they become legal problems.