Bad Credit! No Credit!, Bankruptcy OK! Car Loans

Hi,
A relatively new gimmick seems to have taken the credit world by storm: No credit, bad credit, bankruptcies all OK. We guarantee that you will get a car loan, credit card, new furniture etc., Let's look at the scenario that unfolds when a person buys a car under these terms. All "normal" avenues of exploring the best car, the best price, the most favorable interest rates and the most suitable loan term are non-existent. When the borrower approaches the car dealer, he or she is forced to choose among a small inventory of cars, and are at the mercy of the car lots financial department. One of the common ways these car lots hide their excessive interest rates and finance charges is to offer terms 24-48 months longer than conventional car loans. The borrower might believe that the car payment quoted by the dealer isn't all that bad without stopping to realize that he or she is paying an extra $300.00 a month for an additional 36-48 months longer than if he or she had a conventional loan. Another thing missing from financial departments on car lots is the ability of banks and credit unions to work with the customer in the case of problems. In general, these types of car lots have a very short fuse when it comes to repossessing a car, and will do so immediately at the first sign of a problem. Unlike established financial institutions that handle auto loans, car lots will not be concerned at realizing maximum dollars for the sale of the borrower's vehicle, leaving an excessive deficiency balance. In many instances, especially for young people, getting involved in these types of high risk car loans will result in the borrower digging such a deep hole with his or her credit scores, that he or she may not be able to recover for many, many years to come, if at all. The reason these loans are available is that even though there will be a high delinquency rate, the excessive terms on the loans, higher interest rates, finance charges and close monitoring of the loans allows the car lot to still make a nice profit. The other factor in the dealer's profit is that the used cars being sold usually have an extremely high profit margin built into the price.
Until later,
Alan

Using Credit

Hi,
Credit only became a common financial instrument available to virtually anyone over the last thirty years. Before credit cards were made so widely available and marketed aggressively, applying for credit had a sense of seriousness to it which is lost in our current culture of debt. When my father started using credit, his intention was to consolidate purchases into one monthly bill and pay it at the end of each month. The thought of carrying a balance would have been appalling to him. Now we accept credit card balances and interest as a way of life. The barrage of credit card applications that students receive is unbelievable. It's possible that one reason many of them start early adulthood as indentured servants to the credit industry is that they were bombarded with credit card applications and applied for and received credit they were ill equipped to repay. Many of them started using credit without understanding how the credit agreements they signed even work. Over the next week, I'm going to write about how to make decisions regarding how to use credit, how to maintain and protect a good credit score, and how to get back on track if credit use is getting out of hand.
Until then,
Alan

The Evolution of the Collection Department

Hi,
The collection departments of most companies have gone through very similar changes to their credit departments. In the past, when a problem existed on an account it was handled by someone who had the authority to deal with it and solve the problem. Today in many instances when one calls a collection department, one is talking to a customer service representative who has limited authority and is operating under generic guidelines on how to handle each call. It is often necessary to contact collection departments and talk to three or four customer service representatives before one finds someone willing to deal with the particulars of a specific situation. This often results in in the customers becoming frustrated and just paying the bill. Another method employed by corporations in order to save money, is to make access to collection departments very difficult. This is done by setting up a myriad of electronic options, giving the customers a multiple of generic choices, many times of which none apply to their situation. The frustration customers feel when treated this way often results in the customers ignoring their bill, and in the process, damaging their credit. Often time when customers make their way through a maze of generic electronic choices and finally get to a live person in the "collection department" they end up talking to a customer service representative who does not have the authority or ability to deal with their particular problems. The goal of the callers is to make satisfactory payment arrangements for a past due bill. If customer service representatives don't have the flexibility to work with the callers to achieve that end, it is imperative that the callers ask to talk to a customer service representative/ collection supervisor and hope that the supervisor can help find a solution to the problem. On occasion, it might be necessary to request to talk to their supervisor. In the past, when one talked to a collection department, all representatives had the ability and authority to deal with problems. As a cost saving measure, companies replaced most collection people with customer service phone representatives and only kept collection people as their supervisors. This change evolved over the last 25 years as a direct result of the increase in bad credit. Tomorrow I will talk about the effective way collection, credit and sales departments can work together.
Until then,
Alan