Bills.com Counsels on Credit-Saving Strategies for 4 Common Financial Frustrations

San Mateo, CA, April 09, 2009 --(PR.com)-- With consumers facing the greatest economic challenges in decades, free online consumer finance portal Bills.com suggests individuals and families should educate themselves to protect their credit.

"Many people are naturally inclined to worry about a situation where we or our neighbors are losing jobs, homes are facing foreclosure, markets have tumbled to half their peak levels, and the outlook is not optimistic for the next year or two. On top of that, individuals are worried about their credit scores and how they may impact future loans and purchases," said Ethan Ewing, Bills.com president. "Today’s challenging times provide a wake-up call to all of us to get our financial houses in order."

Bills.com offers numerous resources to assist individuals with managing financial challenges. Ewing suggested several areas of focus for consumers seeking to protect their credit in today's economy:

Credit cards. "Banks are cutting credit limits on credit cards to reduce their lending risk. Many individuals are seeing their limits slashed by thousands, down to levels that are close to their outstanding balances -- and in some cases, even below existing balances," Ewing said. "No laws protect consumers from these changes, although these actions reduce available credit and therefore can have a negative impact (up to 50 points) on a credit score."

Credit-protecting strategies:

1. Know credit limits.
2. Check credit card charges and balances regularly online or by phone to avoid going over the limit, incurring over-limit fees and possibly going into default.
3. If a limit is cut below the existing balance and an over-limit fee is charged, call the lender to protest. The lender might waive the fee.
4. Do not close your account.
5. Do charge only what you can afford to pay off in full at the end of every month.

Mortgage loans. "A person's home is his or her greatest asset -- and often, greatest liability," noted Ewing. "Furthermore, the payment history on a mortgage has a major impact on a credit score."

Credit-protecting strategies:
1. Stay on top of payments.
2. If you get behind, contact the lender immediately.
3. If there is a realistic likelihood that you will lose your income, consider selling the home. Both sales and rentals are tight today, and a sale takes time. Do not wait for foreclosure, as it has a huge negative impact on credit.

Home equity lines of credit. Mortgage lenders are reducing or eliminating home equity lines of credit (HELOCs), and many homeowners have received notices that their HELOCs are being closed. "With banks short on credit reserves, they do not want people drawing thousands of dollars from those lines -- especially if the funds are being drawn down for emergency funds that might not be repaid," Ewing explained. "It is generally not a good idea to use a home as a piggy bank, but many people who counted on their HELOCs to provide flexibility for home renovations or major home maintenance expenses will now be out of luck."

Credit-protecting strategies:

1. For those carrying a balance, fortunately, most credit reports differentiate credit cards from HELOC draws. A HELOC's unavailability should not have a significant effect on a credit score.
2. To compensate for the lack of a HELOC as an emergency resource, do whatever you can to build an emergency fund with savings. Start with only $50 a week if need be, and add more when you can.

Get help. "When people cannot pay the bills, it is OK to seek help," Ewing said. "Many options exist, including credit counseling, debt settlement and bankruptcy."

Credit-protecting strategies:

1. First, try calling lenders to explain the situation; they might renegotiate terms and interest rates, depending on the particular situation.
2. Debt settlement can help resolve large balances at reduced payoff amounts while avoiding bankruptcy, but it does have a negative impact on credit. It is generally best for people who cannot afford to make payments on their credit cards and are looking for alternatives to bankruptcy.
3. Bankruptcy, generally viewed as a last resort for people in seriously financial difficulty, comes with a severe impact on the credit report. Those considering bankruptcy should talk with an attorney to determine suitability and qualification.

"Our reliance on debt can make us even more vulnerable in a time of crisis," Ewing cautioned. "Take the time to analyze your situation, educate yourself on your options and make smart decisions to start reducing debts and protecting your credit. In the process, you will gain new habits and new mindsets that can take you far in today's environment and in the future."

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