Yesterday I was a guest on Allan Handelman’s radio show and took a call from a listener who faithfully paid a debt relief company $450 a month for two years. But that firm never paid a penny to his creditors, and then abruptly closed shop.

Today at 1:30 pm ET, FTC Chairman Jon Leibowitz and Vice President Joe Biden will announce a new debt relief rule designed to help protect consumers against debt relief abuses. It’s expected that the rule will restrict the marketing of debt settlement services and place limitations on the upfront fees that settlement companies can charge.

At Credit.com we’ve warned consumers to be very careful when considering debt settlement, and have suggested questions to ask a settlement company before you do choose one to help you with your debt. We understand that debt settlement can be a legitimate option for consumers who have too much debt to qualify for a debt management plan administered by a credit counseling agency, and either can’t – or won’t – file for bankruptcy. And in my ebook Reduce Debt, Reduce Stress, I profiled several consumers who successfully used debt settlement to get out from under crushing credit card debt.

I will be watching the announcement today, and will be back with a summary of the new rules, and more advice for consumers who are considering using a debt relief company to get out from under overwhelming  debt.

Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Reduce Debt, Reduce Stress: Real Life Solutions for Your Credit Crisis.

Recently FICO revealed that 35% of consumers have FICO scores of 650 or below. Those scores will make it difficult for many of them to qualify for traditional unsecured credit cards. That may mean more consumers will be turning to secured cards, which are much easier to qualify for if you have less than perfect credit.

Here is an interview I did recently With Fox Orlando in which I explain how secured cards work:

Tips for choosing a secured credit card:

• Choose a card that reports to all three major credit reporting agencies.

• Use your secured card like any other major credit card. Charge things you would buy anyway, and pay the bill in full to avoid interest. You do not have to revolve debt on your secured card to rebuild your credit rating.

• Pay your bills on time. While this may seem obvious, some people think that if they miss a payment it will be taken out of their deposit. That’s not the case with a secured card.

• Understand that prepaid debit cards, which are different animals than secured cards, are not reported to the major credit reporting agencies. Though you may want one for convenience, they do not help you rebuild your credit.

• Use Credit.com’s free Credit Report Card to monitor your progress with your credit over time. It’s truly free (we won’t ask you for a credit card number) and because it’s a soft inquiry it won’t hurt your credit.

Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.

Over the past couple of weeks, I’ve gotten a healthy dose of questions from friends and friends-of-friends via Twitter and Facebook, many of them credit-related. I thought this would be a great forum to include my answers and to encourage you, our readers, to submit your credit blunders, as well.

Stephanie from Pittsburgh writes…

I would like ideas on how to teach young children about credit health.

Stephanie’s a new mom and I’m happy to know she’s thinking in the right direction. With young children, it’s important to remember that they’re very observant and will pick up on a lot of our behaviors. It’s not so much about having a firm talk, but about teaching them by example. First, I’d recommend using cash more often in front of them versus credit cards. In our plastic-driven world, kids barely ever see cash anymore and begin to see credit cards as the only way to buy stuff (and it makes purchases appear "free"). But when they actually see you parting with cash at the checkout line they can better understand that there are limits to how much you can spend in life. Next time you explain that there’s no money left for ice cream after the movies, they’ll more likely get it. And when explaining credit cards you might want to say something like, "With this card I can borrow money from the bank to buy only what we need for the family…but then I have to pay the bank back right away.” (You can get more specific about the consequences of paying late when they're in grade school and old enough to understand interest, late fees, debt, etc.)

Richard from Boston asks…

I have a 780 credit score and I have some cash in my checking account that is earning a meager .01%. Should I pay off my $5,000 car loan outright which has a 3.9% APR (which is a low rate historically)? Would paying the car loan early affect my credit score in the long run?

Congrats on having a very strong credit score, Richard! I’m sorry to tell you, though, that you won’t see a boost in your credit score just for paying down your car loan early. On the other hand, you may end up saving a little bit of money by avoiding those extra years worth of interest. Just make sure that if you’re going to pay off the loan in full that you won’t be depleting your savings to do so. As for your meager .01% savings, you can definitely do a lot better than that by either putting some of that money in a long-term CD or in an online checking account where you can find rates as high as 2.00%. In fact online bank Smartypig.com is boasting a rate of 2.15% right now.

Torez from Catersville, Georgia asks...

I'm about $4,000 in debt between two credit cards. I was wondering should I consolidate or pay both separately?

You really need to do some math with this one. Keep in mind that consolidating debt is not free. You often have to pay a transfer fee of 3 to 4 percent of your balance. Now, if the interest rate on the new card is so low that the transfer fee eventually cancels out, that might be a good deal. But don’t let the low interest rate be an excuse to pay off your debt in smaller increments. You should want to consolidate in order to pay less interest and get out of debt faster, right? So keep your monthly payments above and beyond the minimum. If you decide to pay off the cards separately, be most aggressive with the card that has the highest interest rate since that’s your most expensive debt.

Imagine this hypothetical situation. You walk into a retail outlet and load up your cart with hundreds of dollars of sporting equipment. Clubs, shoes, balls, bats, tees and glasses are all on your shopping list. You stroll up to the register and the cashier asks you if you'd like to save 10% on your purchases. Your bill is almost $700 and saving $70 sounds like a no-brainer. The downside is you have to apply for a store credit card.

This should be a slam dunk thanks to your truly elite credit. In fact, you know for certain that your FICO scores are all above 800. All the retailer needs to do is see that 816 and you're certain that confetti and balloons will soon fall from the sky, as she takes 10% off your bill, of course. However, to your shock and dismay, the polite young lady behind the counter informs you that you've been denied because of your credit.

Here's where the fun really begins. Thanks to the FACS Act and FinReg, you will eventually be entitled to see the score that the lender used to deny you. I mean, adverse action is adverse action, right? You were denied because of your score, which was apparently way too high for the lender. The letter comes a few days later and confirms what you already knew. Your 816 was the culprit.

Why exactly were you denied? You haven't missed a payment in, well, never. Your debt is practically non-existent. You've done all of the things we've taught you and have earned great scores. Well, what not too many folks know is that scores are a great indicator of profitability as well as payment risk. Stratospheric scores, while they look great on a credit report, don't mean you'll be a profitable customer. In fact, the exact opposite is true in many cases. The lender could actually lose money on you because you tend to pay in full each month and rarely use your credit cards.

A lawsuit was filed recently by a retailer against their finance partner because the partner maintained that they needed to deny applicants with FICO scores above 800. You can read more about it here. The financier claims that anyone with scores above 800 doesn't make them enough money. The retailer claims it will cost them 25% of their customers, which means they'll lose out on the margin generated from in-store sales.

Neither party is in the wrong here. The lender is in business to make money and the retailer needs to sell stuff in order to survive. And the lender is absolutely right about the lack of revenue generated from the super-elite FICO holder. It does seem a bit odd thought that someone with FICO 500 and someone with FICO 800 would both walk out of the store empty-handed, assuming they were both depending on the in-store financing to make their purchases. If I've said it once I've said it a million times: the world of credit is not without humor.

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

Earlier this week, a woman asked me whether bankruptcy could help her with her underwater mortgage loan. She lives in California and bought her home a few years ago and the value has since dropped by more than 50%. With the prospect of building no equity in the foreseeable future, she's now essentially renting her home from her lender.

“Are you current on all your payments?” I asked. “Yes,” she replied. “Do you have other debts?” “Not really.”

Since she makes a good income, is able to make her payments, and doesn't have any other debts to speak of, bankruptcy wouldn't likely provide her with any relief. But there are times when bankruptcy can help struggling homeowners get back on their feet.

First, bankruptcy does not likely provide relief if:

You are not earning enough money to continue paying your mortgage. You must be able to pay your mortgage to keep your home – even in bankruptcy.

You are upside down on your home loan but you can afford your payments. Bankruptcy generally does not allow you to “cramdown” your home loan on your primary residence. In other words, you can't reduce the amount you owe to the amount your home is presently worth. (A cramdown may be possible on a vacation or rental home – go figure.)

Here are scenarios where bankruptcy can help you avoid foreclosure:

You have non-mortgage debts which, if wiped out or reduced, would give you enough breathing room to pay your mortgage.

You are underwater, primarily due to a second mortgage or home equity line of credit. If your home is presently worth so much less that the second loan is considered an “unsecured” debt, you may be able to get that equity loan wiped out.

You have put your financial problems behind you but just can’t seem to catch up. You may be able to structure a plan that allows you to catch up on past due mortgage payments.

And if you are going to lose your home to foreclosure, it is vital to talk with a bankruptcy attorney right away. Bankruptcy may allow you to avoid being sued by your lender for a deficiency – the difference between what you owe and the fair market value of your home. Bankruptcy may also help you avoid a scenario where you have to pay taxes on that debt.

Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.