1.  Transferring credit card balances to lower interest credit card.  Allow this may save us some money in the short run.  This type of offer promises lower interest rates in the beginning but we must be sure to read the fine print.  Those lower interest rates are usually for a specified time period.  And transferring balances actually lowers your credit score.

2.  Parking tickets.  Many municipalities and counties are utilizing collection agencies to collect on this type of debt.  Collection agencies report delinquencies to the credit bureaus.  Parking fines are normally handed over to collection agencies 90 after the ticket has been issued, so pay up.

3.  Debt settlement.  First of all, let's clarify what debt settlement isn't.  It is not debt consolidation.  Many consumers who have unpaid debt, receive offers to settle their debt.  For example:  You may have a $1,000 debt.   This is when a settlement offer comes in the mail or you receive a settlement offer by telephone.  You may be asked to pay $500 instead of the original $1,000.  You may be tempted to accept the settlement agreement, if you do, remember that a settlement is worse than leaving the account open and unpaid.  It lowers your credit score significantly.   Your debt will show either 'not paid as agreed' or 'settlement'  on your credit report.  It will show that you settled/paid your debt for a lesser amount than what was owed. 

What creditors are failing to tell consumers who enter a debt settlement agreement is that they may owe the IRS at the end of the tax year.   For instance, take the above example:  you owe $1,000 and you pay $500 as part of the settlement.   The IRS considers the other $500 as income and you are required to pay taxes on this so-called income.  Your creditor will mail you a 1099-C form at the end of the tax year.  Just like your annual W-2 and tax statement, 1099 forms are sent to taxpayers and the IRS.  So if you do not send your 1009-C form with your tax return, you could be opening the door to an audit by the IRS.  It is difficult to escape the IRS!

What we cannot figure out is, if a consumer could not afford to pay the full $1,000.00 why does the IRS think that this same consumer can afford to pay taxes on this so-called income?  When you think about it, it is not money that the consumer can actually put in their pocket - it does not exist.  But yet, taxes must be paid on it.   

We do not recommend debt settlement for a number of reasons.  It is not good for your credit score and it leaves negatives comments on your credit report and most important:  we should always pay what we owe.  If you incurred the debt, pay the debt.   For more information on who should or should not file a form 1099-C log on to http://www.irs.gov/instructions/i1099ac/index.html

There are exceptions to filing a 1099C form even though you may have settled on a debt.  And they are:   If you were bankrupt or insolvent at the time the 1099C was issued, you may not have to include the cancelled debt as income. In this case, use Form 982 to document the bankruptcy and/or the insolvency.
  

4.  Closing accounts that do not have a balance can lower your credit score.    Keeping accounts without a balance, helps your credit score.  Mortgage companies and banks do not like to see available credit on your credit report.  So, if you are applying for a mortgage, close the account, otherwise keep it open.

5.  Many consumers are under the impression that having a credit card with no limit is a feather in their cap.  This is what the credit card companies want you to think, this is how they reel you in.  Credit cards with no limit actually lowers your credit score.