Credit Card Debt Reduction in California

California has been one of the states hardest hit by the financial crisis and subsequent recession. Perhaps the most graphic example of just how bad it has been for some people were the reports about the "tent cities" being constructed by homeless people in Sacremento, Los Angeles, and Fresno. In July 2009, unemployment reached 11.9%, the worst of any state in the union. California also has one of the nation's highest per capita bankruptcy rates, at 3.57% per 1000 people. This is being exasperated by the state government's financial crisis, which is threatening dramatic cuts to many state services.

Large-scale unemployment along with irresponsible consumer spending during the era of easy credit that ended in 2007 has led to extreme consequences in California. Four California cities are in the top ten worst cities in the United States for credit card debt, with more than 15% of the city's median income being owed to credit card companies. These are Los Angeles (16.81%), Riverside (16.19%), San Diego (15.98%), and Sacramento (15.11%).

After losing a job or having to pay for unexpected expenses, like medical bills, many people have no alternative but to turn to their credit cards. This results in people using their credit cards to pay for day-to-day expenses like housing, food, and fuel. This has been the case for many people in California as well. According to Experian - one of the "Big Three" credit reporting agencies - the average debt in California is $21,055, much of which is credit card debt. According to TransUnion's (another of the "Big Three") Credit Risk Index, that determines the risk of lending in particular geographic areas, California's risk has increased by 13.82% over the past year. This means that it is expected that Californians will have a harder time paying back their debt and a higher delinquency rate than many other states.  

As a consequence of the extension of easy credit between 2003 and 2007, many people in California now have multiple credit cards and are carrying outstanding balances on all of them. Further, with the dramatic economic downturn, many people are borrowing more on their credit cards just to make ends meet. This naturally leads to the phenomenon of debt spirals. As the consumer continues to borrow, the monthly payments increase until eventually they become too much for the consumer to pay. As soon as payments are made late or missed altogether, the interest rate charges steeply increases and additional penalties and fees are added to the amount owed. This in turn encourages more borrowing to pay down debt and eventually leads to a financial disaster for most people.

People throughout the United States are facing these debt spirals, and it is certainly true in California. As California was one of the worst states to be hit by the sub-prime mortgage debacle, California is also becoming one of the largest areas for credit card defaults. Many of the people that held - or still hold - sub-prime mortgages have used their credit cards to make their mortgage payments and prevent foreclosure.

If you have over-relied on your credit, reached your maximum credit limits, or have lost your job and are no longer able to make your regular payments, it is time to take control of the situation. Falling into a debt spiral can have serious consequences that can haunt you for years and extremely limit your future possibilities. We offer a series of resources and tools that may be able to help you avoid getting caught in a debt spiral, or may be able to help you get out of one.

The first priority should be taking care of your secured debt that is connected to necessities, such as your home. The basic requirements for life - a home and a vehicle - come first, but after this your revolving credit should be taken into consideration. This is because it is usually liquid - the equivalent of cash - and as such serves as insurance against unforeseen expenses that might arise in the future, like a medical emergency.  

Before you can adequately take control of the situation, you need to have a good understanding of credit and how it works. You also need to make yourself aware of all the options that are available to you. Both the Federal Government and the State of California have many laws on the books that can help a borrower in trouble. These range from providing you with information to stopping abuses by over zealous collection agencies. We provide a wide range of informative articles, glossaries, and other tools to help you understand how the credit industry works and what rights you have.

You should also carefully review your existing credit card agreements and visit the issuer's websites. Since most credit card companies would prefer repayment over default and collections efforts, many credit card issuers offer some resources and options to their clients if they find themselves in a position where repayment under the original terms may not be possible. Similarly, we offer a credit card payment optimization tool that can help you figure out a strategic plan for paying your debt off. Taking several different factors into account, the optimizer then determines which cards you should focus on first to enable you to pay back your debt quickly and for the least amount of money. If your situation is already very bad, other services we offer may be more appropriate, like debt consolidation.

When trying to figure out where you stand with credit, it is important to look at your FICO score. FICO is a private company that was the first to create a credit scoring system that rates potential borrowers. As pioneers in credit scoring, the FICO system now dominates the industry. Virtually all lenders take your FICO score into account when determining the credit worthiness of a potential borrower. Each of the "Big Three" credit reporting agencies - Equifax, Experian, and TransUnion - issue their own FICO score for each potential borrower based on a wide range of factors such as the person's credit history, history of late or missed payments, and the ratio of the amount of money borrowed to the amount of credit available. Knowing and understanding your FICO scores is vital to understanding where you stand and what you need to improve.

Many of the features on our website can help you understand your FICO scores, what factors affect them and what you can do to improve them. Virtually all lenders look at your FICO scores, so it is important to have them looking as good as possible to allow you to borrow in the future. The average FICO score in California is 690 (according to Experian), which ranks as "good". This is below "excellent" (700+) but well above "OK" (620-679). If your FICO scores are lower than the average in California, it may be time to make the effort to improve them. The current situation will not last for ever, and when things improve your FICO score is one of the things that will determine the opportunities you will have available to you.

Regardless of whether you just need a little help with your credit scores or you have already reached the point where major action, such as debt consolidation, is called for, we have something to offer you. Please explore our website to learn more about what we have to offer and what we can do to help you. 

Also remember that your congressional officials are there to help you as well. Contacting them and letting them know about predatory credit card lending can help you and consumers across the United States gain more rights against credit card companies.

Contact Your Senators About Reforming Credit Cards
	Senator Barbara Boxer PHONE: 202-224-3553 (DC office) FAX: 202-224-2207 (DC office)		Senator Dianne Feinstein PHONE: 202-224-3841 (DC office) FAX: 202-228-3954 (DC office)