Yes, You Need to Check Your Credit Report

Checking your credit history and being aware of your rights is one of the most important steps as a borrower. It is recommended that consumers check their credit history minimally one time a year. The three main credit reporting agencies are Equifax, Experian and TransUnion. These credit bureaus are required to provide consumers with one free credit report each year.

Protecting your privacy is the single most important reason why you should check your credit report. Credit reports offer a great deal of sensitive information such as name, addresses; past and present, social security number, birth date and past and present employment information.    As a consumer you have the right to know who has requested your credit report.   Each time you apply for credit the lender may request a copy of your credit report prior to granting you credit.  Your permission is not needed for circumstances in which you are asking for credit.  If you have not given a party permission to access your report it becomes a matter of compromised privacy for you because they have access to your personal information.   Consumer surveys report that there are approximately 10 million victims of identity theft in this country each year.  Don’t be a victim of identity theft. 

You want to know who has checked or attempted to gain access to your credit report.  Privacy and identity theft are major consumer threats.  It is legal for lenders to check your credit report to approve you for borrowing.  It is not legal for other parties such as landlords, employers or insurance companies to gain access to your report without your written consent.  You have the right to know who has attempted to access your credit history.  When you request a copy of your report it should also contain the identity of all parties who have requested your credit report within the last six months. 

You need to ensure the accuracy of your credit report.  An inaccurate report can be the difference between getting approved or denied for credit.  Your credit report includes pertinent information about your personal credit history.  Delinquent payments, liens bankruptcies and outstanding debts are all listed on your credit report. Creditors that have granted you credit make regular reports to the credit reporting agencies that produce the credit report.  A survey conducted by a U.S. Public Interest Research Group (USPIRG) in 2004 found that there were significant errors in one in four consumer credit reports. Checking and correcting your report if necessary is your responsibility. It can be both frustrating and time consuming to correct the report, however unless you push for the errors to be corrected do the report may remain inaccurate and negatively affect your credit score. Ensure that your personal information is correct as well as your debts and borrowing history. 

It is important at to be an informed and aware borrower. What you don’t know about your report can hurt you.  Your report determines your credit worthiness in many circumstances in your life.  Issues or discrepancies with your credit report should be addressed immediately through credit reporting agency responsible for your report. 

Still Got Credit Card Debt? Here’s How to Reduce It

Credit card debt became a huge topic of discussion over the last few years. Mainly, the credit card industry’s propensity for allotting credit lines to people who genuinely could not afford them caused massive chaos in the industry. This chaos led to cut or eliminated credit limits without notice as well as a dramatic increase in people’s interest rates. Many families could barely make ends meet with all of the rising debt.

Luckily, it seems that many in the nation began to take a real interest and dedication to paying off debts and getting their financial house in order. With credit cards becoming harder to get nowadays, it is wise for people who already have cards to keep them in good standing by paying off balances each month and spending wisely on credit.

For those who still find it a struggle to eliminate credit card debt, there are steps you can still take to find relief. Here is the top tips for paying down plastic debt and eliminating it entirely:

Stop Spending
If you find it too difficult to come up with even the minimum required monthly payment, stop spending immediately. Living on your plastic line of credit is a sure-fire way to stay deep in debt. If you can’t pay for something in cash, don’t buy it. If you are living day to day on credit, seek out a second source of income immediately.

More Than the Minimum
When constructing your monthly budget, make a point to include more than the minimum amounts for credit card accounts. If you begin to expect having to pay more a month through planning, the faster you can pay down the debt. Pay as much extra as you can afford but stick with the commitment to paying more every month, not just when you feel like it. By using this tactic, you can essentially cut years off of your debt payments and improve your credit score at the same time.

Shop for a Better Card
If your credit score is still in good standing but it is getting harder to meet even the minimums, start shopping for a card with lower interest rates. During the recession months, many credit card companies shot cardholder interest rates through the roof. Where once was a 9% rate, there soon was a 25% rate. Now as the industry is trying to rebound, card companies are trying to woo new customers. Check out the many online comparison sites and then transfer your balance to a lower interest card.

Get On the Phone With Creditors
Now that some of the drama in the industry has died down, consider contacting your creditors and ask them for lower rates. They may not want to risk losing you if you have been great about payments in the past. Many will be willing to work with you by renegotiating your card terms.

Find Alternative Sources for Funds
If credit card balances are quickly spiraling out of control, you may need to borrow cash from other resources. Your 401k, life insurance, and savings are all viable sources for cash. You may also investigate a home equity loan to pay off all debts. There are several places you may be able to turn for extra cash, but do so with extreme caution because you can end up losing more than you bargained for by not considering the consequences.

Living Debt-Free Can Be Bad For Your Credit Score

Imagine working so hard to pay off all of your debts only to discover that living a debt-free life is bad for your credit score and other aspects of your financial life. As bad as it sounds, it is exactly what happens to many who have done away with credit cards and paid off their loans. Unfortunately, for as hard as people work to get out of debt, the world seems determined to keep people in debt in order to reap financial benefits.

Why Does It Happen?
Credit scores are based on the different factors of your financial life. The score is supposed to be a reflection of how responsible you are for paying back debts in a timely manner and how well you manage your financial obligations. When your credit report has no information to gauge, your score goes down considerably. In theory, a person with lots of debt who still pay on time may have a better score than someone without any debts at all. The credit score formula involves a mix of credit card account activity, mortgage loans, student loans, and other types of extended credit. If you have none of those account types, you have nothing to calculate.

Why Does It Matter?
There are many who feel a credit score is worthless because they are living debt-free and have no plans to apply for a line of credit or a loan in the future. However, that assumption can be a costly one. Nowadays, there are many situations were a credit score will make a big difference in your life such as when applying for a job, renting an apartment, or when you purchase vehicle insurance. These companies will often pull a credit report and base rates or job offerings on your credit score because the score is meant shed light on credit risk factors. For someone who is responsible enough to have no debts, an increase in insurance premiums is boldly unfair.

What To Do About It?
If your credit score is suffering because you are debt free, there are things you can do to help the situation. It may not be the most desirable way for you to fix your finances but when it comes to necessity for insurance purposes, you may not have many other choices. Here are some things to consider for upping your credit score:

Get a Credit Card
You may have closed your credit card accounts long ago but using a credit card for normal, everyday purchases and paying off the balance in full at the end of the billing cycle can signal a jump in your score in a few months time.

Apply for a Loan
It sounds crazy to apply for a loan when you haven’t a need for a loan but it can help you get your credit score back on track. You can visit with your bank or credit union and apply for a small personal loan.  A loan officer may be able to advise which is best for your situation. The money loaned can then be deposited into an account and all monthly payments can be automatically withdrawn each month. This may not be the best solution for everyone but it is an option.

Money Management Tips For 2010

People who have wrestled with long standing debt often find themselves facing an unsure future once that debt has been paid off. The reason for this dilemma is the fact that most people who have been dealing with debt for months or even years have no idea what to do with that “extra” cash that is now available in their budget. If you are recently debt-free and not sure how to proceed in the future, the following tips can help you manage your money in the recovering economy.

• Debt- Anyone who has successfully paid off high interest debt (or those currently in the process) understands how long and frustrating the journey can be to debt-free living. With that being said, it is imperative you remember that journey as you move forward in the future. It is true that many people end up in debt for reasons beyond their control, however the rest of the population can usually blame only themselves and poor money management. Avoid future debt whenever possible and tread carefully with credit cards in the coming months. New regulation that will be in place in 2010 should provide some protection to consumers, but those who have historically had trouble managing credit should avoid incurring debt regardless of new rules.

• Savings- Debt is the four letter word that often stands between financial independence and living paycheck-to-paycheck. Once debt has been eliminated, consumers have to deal with an infusion of cash in their daily budget. Do not waste this opportunity to build your savings. The current economy is not offering high yields for savings right now, however this should not discourage you from shopping around for the best interest rate offered for traditional savings accounts. After building an emergency fund, you may consider short term CDs or other savings vehicles that do not tie you into long term commitments. Opportunities for better interest rates are likely right around the corner as the economy improves in upcoming months.

• Rebuild your credit- As consumers and lenders alike gain confidence in the recovering economy, a good credit score will be necessary should you need to borrow money to buy a home or automobile. Take steps today to begin the long process of rebuilding or improving your credit history and credit score. This will help set you apart from the rest of the pack in qualifying for more lucrative terms and conditions for future loans.

Everyone is struggling to find level ground in the wake of the recession. Fortunately all signs indicate the recession is in fact over, however that does not mean things will immediately go back to “normal”. It will likely take many months or years in some cases for consumers and businesses alike to feel confident in the economy. By following these tips you can feel comfortable that you are on the right path the long term financial security.

 

 

Credit Repair Scams- Don’t Take The Bait

There are millions of people who have been affected by the recession. As consumers work to get their finances back on track, the prospect of dealing with credit repair can seem a bit overwhelming. There are companies out there that know how frustrating the process can be and offer services to consumers who want help repairing their credit. Unfortunately there is no “easy fix” for damaged credit and companies that promise otherwise are selling lies. Here are a few tips to avoid being the victim of a credit repair scam.

 

• Do not pay for services upfront. It is against the law for credit repair companies to charge a fee before services are rendered.

• Understand your rights- Each person has the right and ability to repair their credit on their own. If you are considering a credit repair company and they have not disclosed this information, they are more than likely up to no good.

• Avoid the “new identity” pitch- Some credit repair companies will encourage clients to create a new credit report or identity by applying for an Employer Identification Number (EIN) that will be used instead of your social security number. Do not fall for this pitch and avoid working with a company that offers this advice.

• Stay involved- Review your credit report and contact the credit reporting company if you have any questions regarding the information contained on your report. Fraudulent credit repair companies often recommend you avoid contact with credit reporting agencies which leaves you in the dark in regards to the activity on your credit report.

• Do not dispute accurate information- Inaccurate information reported on your credit report can and should be disputed in order to have it removed. Avoid companies that suggest you dispute all negative information regardless of the accuracy.

 

Many consumers find the process of repairing their credit long, confusing and disheartening. In truth, it can be a long process but one that each person can and should do on their own. Their are legitimate credit repair companies out there, however they do not do anything that you can not do yourself. This is one situation where you can eliminate the chances of being scammed by an illegitimate company by simply learning how to repair your credit on your own and committing to the process. It may take time, however you will have the satisfaction of knowing the right steps are being taken and the end result will be a credit report and score that reflect your true credit worthiness.

 

 

5 Reasons Debt Settlement is Better than Debt Consolidation

1. You Save Money.

It’s true using debt settlement as a means to get out of debt saves you tons of cash in interest and fees.  Not only that, but by settling a debt you are actually being forgiven for a portion of your debt.

Bottom ine is that you will end up paying your creditors less than you originally owed them.  Not so with debt consolidation, as you will still be paying you full credit card balance and losts of interest to boot.  I was going to title this point You Save More Money, but that implies that you save money with debt consolidation, which is not really true.

2. You Get out of Debt Faster.

This is kind of a no-brainer.  If you start out owing a creditor $10,000, you settle your debt with them for  $5,000, then you end up only having to pay $5,000. And using the same brilliant math, you can pay off $5,000 faster than you can $10,000.

3. You are in Charge.

That’s right.  It may seem that since you owe the credit card company thousands of dollars, that they are in the driver’s seat.  But in reality, since the debt is unsecured, they can’t do a thing to you. Yea, I know they can sue you, but generally, that’s only if you are completely unresponsive to their demands for payment. Which of course, you won’t be because you’re looking for a settlement and working with them along the way.

In addition, the credit card companies are usually reluctant to sue because the fact is they will end up paying more for attorney time and court cost than you owe them in the first place.  They want to get at least a little green from you and they know that you’ll probably declare bankruptcy if they slap a lawsuit on you.

4. You’re not a Slave.

Guess what? Most debt consolidation companies are owned by groups of credit card companies.  Surprised?  When you hear a TV or radio commercial for a non-profit debt consolidation company claiming to “work with hundreds of creditors to help you get your financial life back in order”, it’s true.  Most, not all, are funded by these credit card industry organizations.

So the main objective of the debt consolidation companies is to keep you financially alive enough to keep you paying your bill to them.  Can you say, “Slave”?

5. Your Credit Score Bounces Back Faster.

This truth may be a bit of a shocker to those of you choosing debt consolidation to protect your credit score.  While it’s true that your credit score will suffer a good amount by settling your debt, it will come back faster because your debt will have been cleared.  If you take out a debt consolidation loan, or enter a debt management program, you still have a high debt-to-credit ratio well into your program.  It will take you years to get the balance down to a reasonable level where your credit score will start to grow back.

For example, if you owe $10,000 to a creditor and you settle for $4,000,  you can pay off that $4,000 within a year easily. After a year, your credit report shows no balance and a note on the account, “Settled for Less than Full Balance”.  If you owe that same $10,000 and choose debt consolidation, a year later your balance will be still over $6,000.

Believe it or not, your credit score will be higher with the zero balance and the note on your account, simply because your debt is gone.

Note: I’m simplifying a lot in this article, but the basic points are true. However, there do exist situations in which debt consolidation may be an appropriate choice.

How to Find a Home Loan

Anyone that has tuned into the news or read the papers in the last year may be fearful of reading anything positive about home loans but even after all of the chaos surrounding the housing market and mortgage industry, there are still lenders out there willing and able to give money towards the American dream. The trick is in knowing where to look.

Here are some ideas for finding a mortgage lender:

Stop By Your Bank

Just a few months ago it seemed pointless to ask your bank for a home loan. However, as the tide settles once again, banks are beginning to lend once more. They are however looking much more closely at your credit. If you are looking for a loan that is $400,000 or less, you may find your bank is your best bet. Banks can also be a good option for those who are interested in refinancing a loan they already have. If you speak with a bank that you have a long history with, your chances may be better than applying for a loan at just any bank. Shopping locally may also work to your advantage because the loan officer will be familiar with the area where you plan to buy and have a better understanding of what is going on in the local housing market. It will also be to your advantage to work with a loan officer who has been in the business for five years or more.

Contact a Broker

A broker can be advantageous when you don’t have the time or the experience to go looking for a loan on your own. Generally it is the time to call on a broker’s services when you are looking for a particularly large loan for your residence or for an investment property. A broker will likely have more knowledge about those lenders who are open to unconventional loans. The downside to using a broker is the fees. It is also to your advantage that you do some homework before contacting a broker so you know at least some of what is going on. Plus, doing your own homework may help you avoid using a brokers services in the first place.

Shop Online

Thanks to the technology we have today, we can literally leave few stones uncovered when shopping for financial deals. Since a mortgage loan is a pretty big deal for most folks, the internet opens the doors for consumers with all types of financial situations to look for and find the best mortgage deals available for a number of resources. The internet can help you find what you are looking for as well as bring you up to speed on current rates and the associated fees. While the web can provide you with plenty of information, you do need to be careful of the sites that want to know too much, such as your social security number or other personal financial information. It is always wise to get the information from the online resource but then to take the additional step of speaking in person to someone about fees and the terms and conditions being offered.

Getting a mortgage is a huge deal, for some the biggest financial deal of their lives. It is definitely not a situation to take lightly and the more legwork you do will benefit you in the long run. The more you know going into the mortgage process, the more you will likely gain after the process has been completed.

How To Choose the Right Debt Consolidation Company

When you are deep in debt and over your head with worry about your personal finances, it is time to make some decisions. Making decisions however, should not be as simple as getting hooked into something you’ve seen on television or heard on the radio, especially when it comes to debt consolidation companies. Getting your finances on track is a big responsibility – one that should not be avoided and one that should not be taken lightly.

Benefits of Debt Consolidation

Debt consolidation companies have a mission to help you collect your debt information, negotiate lower balances, and work directly with your creditors to create a repayment plan that leaves you with one easier payment to make each month toward all of your debt.

Debt consolidation specialists will also help negotiate lower interest fees and may even eliminate late charges and other penalties your creditors keep tacking on. Creditors are generally positive about working with debt consolidation companies because in reality, they would rather get some kind of paper rather than risk you filing for bankruptcy.

How to Make the Choice

With the influx of debt across the nation, so-called debt consolidation companies are springing up like pizza parlors. There are so many more advertisements claiming their company can do so much more for you and your debt problems than their competitors. As with many things in life, not all companies are on the up and up. Choosing the right one will be an essential part of relieving your debt so you must make an effort to do your homework. Doing research that involves essentially comparison shopping” among debt consolidation companies.

1) Search online for personal experiences and even contact the company outright to get a feel for their company representatives. If they are rude or not very helpful, move along to the next one. What you feel in your gut can tell you a lot but also be sure to check the cold hard facts.

2) Ask a lot of question and gauge their interest in helping you. They should be open and pleasant and willing to answer any question you have before you sign a commitment.

Some companies claim to be “non-profit” but the same companies charge outrageous fees that aren’t easily understood.

3) Look for the reputation of the company. Can they prove with they are intimating in their ads? Are they promising you benefits they claim other companies can not match? If it sounds too good to be true, remember that it usually is.

4) Check with the Better Business Bureau and find out what kind of information you can find out about complaints or concerns filed with the Bureau. Be aware of any companies that promise “overnight” success. A quick fix is never going to happen if you are really serious about fixing your debt.

The debt consolidation specialist should be willing to work with you on a reasonable debt repayment plan that you can afford and be willing to offer you assistance with a budget and other personal finance issues.

If you are thinking about pursuing a debt consolidation company to help you with your debt situation, do your research. Feel free to ask the opinions of friends or family but still do the investigation on your own. What works for one individual may not work for you.

How You Can Negotiate Lower Interest Rates on Your Credit Card

There are billions of dollars in fees and interest charges generated every year for credit card companies but those same fees are costing you hundreds of dollars or more as the owner of a credit card. As the competition becomes even more fierce among credit card companies, there is more incentive for your credit card company to keep you as a customer. Because of this reality, you as the card holder may have a bit of power over how much interest and fees you shell out each month to the credit card company.

Many consumers do not realize they have some power to be able to renegotiate the interest rate of their credit cards so they continue to pay as they are told. But for anyone who is working on a stricter budget and looking to cut costs, you should get in touch with your credit card company now and see how far they are willing to go. Before you get on the line, there are some things you should know that can help you succeed with your interest rate renegotiation. Here are some tips for getting a lower interest rate:

Check Your Payment History First
If you have been a late payer or have missed credit card payments in the past, you will not have the pull to renegotiate much. Make sure you have paid on time consistently as credit card company will be more flexible with a good, solid customer.

You Want the Lowest Fixed Rate
Introductory rates can be very attractive but they are not realistic for the long term. When you are asking for a better interest rate, be sure to ask for the lowest fixed rate. Introductory rates will only last for so long. It’s the rate that you have afterwards that is the most important.

Generate An Offer
Check into the prime rate around the country. Your credit card company may not be willing to go that low but if you can talk them in to around 10%, you’ll still be better off than if your rate was 20% or higher.

Don’t Attack
When you are negotiating for anything you need to remain logical and cool-headed. Threatening company representatives will get you no where fast. You need to simply explain that you have has a better offer from another credit card company than ask what they can do to remain competitive.

Don’t Threaten
Many people will threaten bankruptcy to plead their financial hardship situation. But this is not the right approach because it only presents you as being a financial risk. Unless you are really danger of bankruptcy, do not threaten any negative actions just to get a lower interest rate.

Don’t Blow Smoke
If you do not get anywhere with a negotiation but still have no concrete plans to go anywhere, don’t say that you do. If you are ready to move on to another company and have shopped for a better deal, then feel free to mention you’ll be taking your business elsewhere. If you do plan to close out the account, be sure you are able to pay off the balance in full and are prepared to never use the card again.

You can successfully renegotiate many credit card interests rates these days but it is up to you to do it with the proper etiquette and preparation. The savings you can get for yourself will be worth the time you spent getting ready for the negotiation.

Yes, Debt Settlement Will Affect Your Credit Score

When your credit card company offers to take a settlement of your balance in lieu of payment in full to satisfy your debts, you may be relieved a bit to be rid of a debt but concerned about the impact it will have on your future credit. Settling a debt can help make your finances more manageable each month and using a debt settlement company can help you navigate through the process but dealing with the after effects of a debt settlement, generally you are left to your own devices.

What Happens To Credit After a Settlement?
Whether you settle on one or more credit cards debts, there will be other factors that will determine the impact the settlement will have on your credit score. There are four primary factors that will influence your score:

1. The amount of creditors that are reporting settlements to the bureaus as an R5 rating (meaning it’s a settled debt)
2. Your history of late or missed payments on the settled accounts and other accounts
3. The amount of accounts you have on your credit report that show positive activity
4. The average age of your credit accounts

Credit scores are a complex calculation of all of these factors and there is no one way to determine how a settlement, or several, will impact your score. What is important is what you do to prevent the rock-bottom lowering of your credit score. Being proactive about your credit after a settlement can help you keep your credit in better standing. Follow these tips to help prevent a complete bottoming out of your credit score:
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