AUTHORIZATION. Because you own your trust account and the funds in it, we require your permission, or authorization, to disburse funds from the trust. Once we’ve negotiated a settlement, we will reach out to advise you of the settlement terms and get your authorization to begin making payments toward the settlement. BANKRUPTCY is a legal process through which consumers are offered certain protections while they resolve their debt. There are many forms of bankruptcy, but only two are available to consumers: Chapter 7 and Chapter 13. 

CFT PAY. An independent firm that maintains your trust account. Program deposits will show on your bank statement as CFTPay, not Clarity Debt Resolution. 

CREDIT SCORE. Your credit score is a number that tells a potential lender how likely you are to repay what you borrower. Generally, the higher your number the lower the risk to lend to you. Several companies market credit scores, but the best-known score and the one used most often by lenders is the FICO® score. Any credit score is only one element of your creditworthiness. 

CREDITWORTHINESS is a concept that describes how potential lenders decide whether you are worth the risk they assume when lending money to you. Although many people falsely believe that your credit score is the only thing that lenders consider, that’s not true. In fact, it’s only about half of what they consider. The rest is your debt-to-income ratio 

(DTI). DEBT-TO-INCOME RATIO (DTI) is approximately half of your creditworthiness. DTI compares how much you owe each month (on housing, car loans, credit card debt and other expenses) to how much you earn before taxes. The higher your DTI, the less desirable you are as a borrower. In some cases, such as applying for a mortgage, a high DTI will disqualify you – regardless of your credit score. To calculate your DTI, divide your monthly expenses by your gross income. DTI is always expressed as a percentage.

DRAFT. The funds you commit to the program each month. Funds accumulate in your trust account, and are used to pay the settlements negotiated on your behalf. Some clients refer to the payment they make each month, but technically your monthly draft is not a payment. It’s a deposit into a savings account. 

FICO® SCORE is generally regarded as the best-known credit score, and it is the one used most often in making lending decisions. FICO® scores range from 300-850. Generally, the higher your number the lower the risk to lend to you. What score should you have?

 

FICO® views scores this way: 

• Less than 580 is a poor score 580-669 is a fair score 
• 670-739 is a good score 
• 740-799 is a very good score 
• 800+ is an exceptional score 

People with better scores are not only more likely to be approved for a credit card or loan, but if they are approved, they generally pay lower interest rates. The formula for determining a FICO® score is proprietary, but FICO® does share general guidelines on how scores are calculated: 

• 35% of your score is your payment history. It reflects whether you make at least your minimum required payment on time. 
• 30% is how much you owe. It reflects how much of your available credit you’ve used (the ideal is less than 30%) and the total you owe across all debts. Excessive credit use works against a good score, even if you make your payments on time. 
• 15% of your score is your credit history. Assuming you use credit carefully and pay on time, keeping a credit card open over time works in your favor. 
• 10% of your score is reflects your credit mix. Generally, creditors want to see both revolving credit (such as a credit card) and installment credit (such as an auto loan or mortgage) on your report. 
• 10% of your score reflects new credit. Opening new accounts – or even applying or new accounts – can lower your score.

POA. A POA , or power of attorney, is one of the documents you sign at the time you enroll. The POA we use is a limited power of attorney that grants the creditor permission to discuss the client’s file with us and grants us the permission to negotiate on your behalf. Because the POA formalizes the relationship between you and us, it typically results in the creditor reducing or ceasing efforts to collect from you directly. 

SECURED LOAN. A loan whose repayment is guaranteed by being attached to real property (such as a home or car) that is used as collateral. If a consumer defaults on a secured loan, the creditor has the right to seize the property used as collateral. Although mortgages and auto loans are the most common secured loans, loans may also be guaranteed by other collateral, such as home improvements (e.g., solar panels), furniture, jewelry, or artwork. Secured loans are generally not eligible for our program, except for auto loans when the car has already been repossessed or surrendered. 

SETTLEMENT LETTER. A document, typically provided by the creditor, that outlines the terms of a negotiated settlement. The letter includes the original balance, the settlement amount, the number and amount of payments required, and the dates those payments are due. Settlement letters are required before we can begin making payments toward the settlement. 

SIF or SIF LETTER. A SIF (settlement in full) letter is provided by the creditor after the creditor receives the final payment of a settlement agreement. The letter documents that the account has been paid and has a zero balance. If your credit report continues to show that you owe money on the account, you can use the letter to force credit reporting agencies to correct the error. 

STIPULATED AGREEMENT. Such agreements are often part of the process of settling accounts in legal status, meaning that the creditor has sued the client. As part of the settlement terms, creditors may require that the client sign a stipulated agreement. The agreement outlines the settlement terms. It also stipulates that if the client defaults on the settlement (i.e., misses a payment), a judgment will automatically be applied to the case. The judgment grants the creditor permission to take action (such as garnishing the client’s wages or levying the client’s bank account) to collect the unpaid balance. It’s common for creditors to require that stipulated agreements be notarized. 

SUMMONS. A legal document that serves to notify a consumer that he or she is being sued. Although some creditors send collection letters designed to look like legal documents, there are ways to distinguish an actual summons. First, a summons is delivered either in person (from a process server) or possibly via certified mail; it is not delivered via regular mail. Summons also include a court seal or stamp, and they include either a court date or a response date. 

TRUST or TRUST ACCOUNT. A special account maintained by a third-party firm. The account exists so that you can save money to be used toward paying the settlements negotiated on your behalf. The trust account is in your name, and you own the account. Funds can only be disbursed from the trust with your permission. 

UNSECURED LOAN. A loan made simply on the consumer’s promise to repay it. Personal loans, credit cards, overdraft protection, pay day loans, and some lines of credit are examples of unsecured loans. Our program is designed to resolve unsecured loans.