Credit Card Debt in Alabama

Although Alabama went into full recession later than many other parts of the country, it is by no means immune to the effects. Alabama lost close to forty thousand jobs between March 2008 and March 2009 and further job losses are expected. The first sector to be hit were service related jobs in 2008, but this soon expanded into the manufacturing sector as well. The job losses in the service sector heavily impacted the major metropolitan areas of Birmingham, Montgomery and Mobile first. However, as the job losses expanded into the manufacturing sector the impact spread to places like Huntsville and Tuscaloosa. Alabama is still faring better than many of its neighboring states, but times are still tight.

As is always the case, many people that find themselves unemployed turn to using credit to pay for their day-to-day expenses. This has certainly been the case in Alabama. The most recent publicly available information from Experian, one of the "Big Three" credit reporting agencies, reports that the average debt in Alabama is $12,931. Bear in mind that this is an average, so many people have even higher debt. As a consequence of the housing boom and the easy credit trends before 2007, many people in Alabama have multiple credit cards today and are carrying multiple balances.

Having a lot of credit available coupled with a dramatic economic downtown is a recipe for falling into a debt spiral. After losing a job and with their property value declining, many people have no option but to turn to their credit cards to make ends meet. As the credit card debt rises and the amount of available credit falls, the interest rates on the credit card debt tends to increase. This happens dramatically as soon as a payment is late or missed. The result is a large amount of debt growing at a very high interest rate, quickly burying the consumer in debt. Minimum payments soon become too much in their own right, without even denting the principal amount owed.

People all around the country are facing this situation today, and the people of Alabama are no exception. If you are already in this situation or see it looming over the horizon, it is time to take action. We offer a number of tools that can help you make your credit card debt more manageable and steadily reduce it.

First you should review your overall position. How much are you making? How much do you owe? What are your monthly payments? Your secure debts for necessities should take priority, like your home and car; but your unsecured debts cannot be ignored either. Defaulting on your credit cards can lead to serious consequences that can stay with you for years, complicating your future in many different ways.

The first step for bringing your credit card debt under control is education. In the era of easy credit it was far too easy to get approved for credit and receive a card in the mail. Few people bothered to study the terms of the agreement in any great detail as long as the monthly minimum was very small and the basic interest rate did not appear to be too outrageous. Now that easy credit is over and many people find themselves using their credit cards to pay for their living expenses and to pay other bills, the terms of those card agreements are more important.

Going back and reviewing the terms of your credit card agreements may be beneficial as you may discover some term or condition that might be of benefit to you. However, the terminology and language used in these agreements can be very difficult to follow. We provide online glossaries that can help you with this review of the agreements.

While you have them out, you will also want to note the specific conditions that affect your ability to pay off the debt. What is your current balance due? Is the card already over its limit? Are you going to reach the limit soon? What is the interest rate? Are you already paying the highest rate? How do the fees work? Are you being charged fees and penalties on top of what you already owe?

Once you have this information, you can use our credit card payment optimizer to determine which cards to pay off first. After you provide the relevant terms of each credit card account, the optimizer can provide a plan that will allow you to pay off your credit card debt in the least amount of time and with the least amount of money. While this can help you strategically pay off your credit card debt, other measures - such as debt consolidation - may allow you to pay off the debt much quicker and with a lot less money.

One important metric to use in determining your credit standing is your FICO score. FICO, formerly Fair Isaacs Corporation, is a private corporation that utterly dominates the credit rating process in the United States. Their system of calculating a person's credit rating is used by all of the major credit reporting agencies, mortgage lenders, credit card companies, and many other lenders. Therefore, your FICO score is a great way to tell where you stand.

At any given time, you have three primary FICO scores, one from each of the "Big Three" credit reporting agencies: Equifax, Experian, and TransUnion. This is because each of these agencies receives their data from different sources and use slightly different FICO algorithms to calculate your score. Information that is on one report may not be on another and this leads to different scores. Major lenders, such as those offering debt consolidation loans, tend to use an average of all three of these separate scores as a person's personal FICO score. This if your Equifax score 700, your Experian score is 689, and your TransUnion score is 703; your personal score would be 697. This is the "three-in-one" credit report you see offered by many companies.

Credit card issuers are very diverse and have their own policies and practices. Like most U.S. lenders, they also tend to rely on a person's FICO score to determine their credit worthiness as well as what interest rate is appropriate for the borrower. Some issuers may take an average of all three of your FICO scores, others may only look at the score provided by one company, while still others may choose to use your highest or lowest score. This means that it is important to keep track of all three of your credit reports and their respective FICO scores, because you never know precisely what future lenders will be looking at to determine whether or not to lend to you.

According to Experian, the average FICO score in Alabama is 680, which counts as a "good" (680-699) score on average; less than an "excellent" score (700+) but better than an "OK" score (620-679). However, Alabama in particular is facing a steep increase in the use of credit, which will bring the average FICO score down. According to TransUnion, Alabama had one of the steepest increases in credit card debt over the first quarter of 2009, increasing by 5.6%. This means that a lot more people in Alabama are accruing new credit card debt.   

The information from TransUnion shows that more people in Alabama are relying more heavily on their credit cards. If you are one of these people, have been in the past, or expect you may soon join their ranks; we may be able to help you. Our website offers a wide range of free resources for self-help with credit card debt and we also offer more comprehensive services such as debt consolidation that might be appropriate for you.  

Letting your congressional representatives know how you feel about credit card reform can make a difference. Your representatives and senators will listen to you. Contact them today, using the information below, to help reform credit card laws and to help consumers gain additional protection against questionable credit card lending practices.

Contact Your Senators About Reforming Credit Cards
	Senator Jeff Sessions PHONE: 202-224-4124 (DC office) FAX: not available (DC office)		Senator Richard Shelby PHONE: 202-224-5744 (DC office) FAX: 202-224-3416 (DC office)