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Debt Management

 debt management  No Responses »
Sep 212011

How will debt management affect my credit score?

 

If you’re having serious problems repaying your unsecured debts, there are a number of debt solutions that could possibly help you.

 

One option is a debt management plan, which could allow you to repay your debts with reduced, affordable monthly payments.

 

Let’s look at what a debt management plan is and how agreeing one can affect your credit score.

 

What is a debt management plan?

If you can no longer repay your unsecured debts as originally agreed, a debt management plan could help you get back on top of your repayments and clear your debts in full.

 

A debt management plan is a non-legally binding agreement between you and your unsecured lenders. Basically, you – or the debt management company you’re working with – will ask your lenders to accept reduced monthly repayments that you’re confident you can afford, since these payments will be calculated to be affordable after all your essential expenses have been covered.

 

If your lenders agree to the new repayment plan, you’ll start making a single, affordable payment every month to the debt management company, who will then distribute the agreed amounts to your unsecured lenders.

 

If you have multiple unsecured debts you’re struggling to repay every month, making just one reduced payment per month could remove a fair bit of the pressure that comes with having to deal with several lenders – and the letters and telephone calls that are often involved in the process – from month to month.

 

It’s always important to speak to a debt expert first to get more information about whether a debt management plan could be the best option for you.

 

How long will it take me to repay my debts in full?

If your lenders agree to smaller monthly repayments, you’ll repay your unsecured debts at a rate you should be able to afford – but over a longer period of time than originally agreed.

 

This could mean that you end up paying back more overall, as your repayments will go towards covering any interest that accrues on your debts too – and the interest would simply have longer to accrue.

 

However, one of the potential advantages of a debt management plan is that your lenders may also agree to freeze or reduce interest (and any other charges) on your debts. This means more of your repayments will go towards repaying your debts, rather than the interest.

 

How will debt management affect my credit score?

Failing to comply with the terms of your original agreements (when you originally borrowed the money) will affect your credit score for six years – which can make getting credit difficult during this time. The worse your credit rating, the more likely you are to be charged a higher interest rate on any credit you do successfully apply for.

 

Having said that, debt management would only be a possibility if you can’t afford your payments as they stand, so there’s every chance your credit rating will have been damaged already.

Posted by admin at 12:35 pm  Tagged with:

How can you reduce credit card usage in your life?

 Uncategorized  No Responses »
Apr 062011

A credit card is both a necessity and a curse. If you can make regular payments on your cards, you can easily manage to have a good credit report. But if you have a lot of credit cards, it can negatively hamper your credit scores. You may not be able to cope up with the payments and may fall into debts. Then you may have to take help of credit card consolidation to get out of the debts in your life. But if you can prevent this situation in life, you may not even need a cure for your debts ever.

Ways to reduce credit card usage in life

Credit cards really have a lot of power over money as they help you buy anything you want without carrying a lot of money. That’s why it’s called plastic money. But the interest rates are also very high for the credit cards. Check out the steps you can follow to minimize your credit card usage:

1. Use cash most of the times
As it suggests, you must fore go your credit cards for most of the times and use cash instead. Credit cards have very high interest rates and that really matters a lot when you make the payments every month. If by any chance you miss the payments, the amount you need to pay gets very high since you accrue a lot of interest rates. This is not for the cash. Since you have to carry cash every time, you may also reduce your spending a bit and that can go into paying off your credit card debts.

2. Make things at home
You can also save quite a lot of money if you can try to make things at home that you need to buy. You can make cleaning agents at home that require you to buy every month. You may use your cards to buy them. But if you can make the things at home, you can obviously cut short the card usage. This will also help you save quite a lot of money. You just need to know the ingredients so that you can use them to make things at home. Lemons and vinegar prove to be the best cleaning agents at home and they can also be used directly on the stains. You can also try using baking powder that can really help you clean stubborn stains and dirt.

Apart from the points given above, you can also try to cut on restaurant food and cook at home. That can be healthy and you can also save yourself from taking out the cards for once and all.

Posted by admin at 9:17 am  

How to Re Build Credit

 How to Re Build Credit  No Responses »
Nov 262010

There are dozens of books and programs for sale that promise to show you how to re-build credit. The problem is that these books are written by pretend experts with little or no credit repair experience. The fact of the matter is that rebuilding credit after a financial disaster like bankruptcy, foreclosure, or a car’s repossession is more difficult than most “experts” know. Here’s a step by step plan to get you fast results.

  1. Dispute the inaccurate or unverifiable negative data from your credit report.

The credit reporting system is flawed at best. According to the government accountability office study 80-90% of credit reports have errors. Until recently, consumers weren’t even allowed to see their credit reports. Once they could, and they saw the inaccuracies, they pressured the FTC into passing the Fair Credit Reporting Act. This act states, in a nut shell, that you can dispute information that you believe is reporting inaccurately. The credit bureaus must have the creditors verify the data within 30 days, at which point the credit bureaus must then update you as to the outcome of the verification process. If they fail to respond, find they’re reporting inaccurately, or cannot verify the data as accurate they must delete the information.

  1. Get new revolving accounts.

Credit cards are called revolving accounts because the payments revolve with the balance. You need to establish new accounts as soon as possible to start building a new credit history and showing timely payments. You can either become an authorized user on a family member’s account or you can try applying for a new account.

Authorized user accounts are great because you can piggy back on someone else’s great history. Just make sure you’re related or your score won’t benefit.

A new credit account can be harder to obtain. No lender wants to be the first to take a risk on someone with a questionable payment history. Try some store credit cards first like Target or Walmart. They tend to be easier to get approval for. If you’re unsuccessful then you need to find a card that specializes in poor credit borrowers like the kind you find at www.build-credit.net.

Posted by admin at 12:59 pm  Tagged with:

How to Build New Credit

 build new credit  No Responses »
Nov 262010

If you’ve experienced a recent financial hardship that caused your credit scores to drop, then you know it can be very hard to build new credit. Cleaning up past credit problems with credit repair can be expensive. Without good credit scores lenders will be hesitant to approve you for a new credit line. No one wants to be the first to find out if you’ve fully recovered or are still stuck in your downward spiral of debt. Not to worry though. There are solutions available that can help you reestablish your credit score without the expense of credit repair.

The 5 Factors That Determine Your Credit Score.

The first factor is your payment history. Your payment history accounts for as much as 35% of your credit score. Your payment history includes whether or not you’ve made timely payments on your debt obligations. This is the largest factor in determining your credit score and the area most credit repair services focus on improving.

The second factor that determines your credit score is the amount of credit owed. The amount of credit owed makes up 30% of your score. This is often the most overlooked aspect for improving your credit score and the secret behind this strategy.

The amount of credit owed is calculated by dividing your total outstanding balance by the total amount of credit extended to you. This ratio is known as your debt ratio. The lower your debt ratio the better your score.

3 Simple Methods to Improve Your Debt Ratio.

The first method to improve your debt ratio is to pay down some of your credit card balances. If you have the funds, then this is easy enough to accomplish. If you don’t have the funds on hand you can still get creative. Sell some junk on eBay. Have a garage sale. Get a second job. A little extra money goes a long way towards improving your credit score.

The second method is to increase your existing credit limits. If you have a good payment history, then all you need to do is call your lender and ask for a credit limit increase. Normally they can approve or decline you on the spot. AS long as you’re making timely payments, keep asking for credit limit increases every 6 months.

You should know that anytime you apply for credit the lender has the authority to pull your credit report, even if you’re only asking for a credit limit increase. This “hard” inquiry can have a negative effect on your credit score.

The last method is to open new credit accounts. When you open a new credit card, the new credit limit is added to your total credit available, which drops your debt ratio. The higher the credit limit you have the lower your debt ratio will be.

Mistakes to Avoid

I’ve seen some of my clients make the tragic mistake of closing old credit cards while trying to improve their debt ratio. This is almost always a mistake for many reasons. First, if the card has a balance on it, then the balance is still applied to your debt ratio, however the credit limit is not, since the credit is no longer available. This will instantly hurt your debt ratio.

Another reason this is a bad idea is because the number and age of your credit accounts affects your score as well. Closing your card will almost always have an adverse effect on your payment history.

In conclusion, removing inaccurate negative data from your credit report isn’t the only technique for improving your credit. By studying how your scores are formulated you can find some out of the box strategies, like adding an unsecured tradeline for $5,000 from www.build-credit.net, that won’t cost you a fortune that you can use to start improving your credit today.

Posted by admin at 12:57 pm  Tagged with:

How to Build Credit Fast

 how to build credit fast  No Responses »
Nov 262010

Did you know there is a right and wrong way to build credit? You need to have a strategy to get the maximum benefit from your credit portfolio. There are two schools of thought on the best way to build credit. I call them the old school and new school strategies.

Old School Strategy

The old school strategy for building credit is the way your parents probably taught you. First, you would get yourself a job, so you could pay off any credit balances you would eventually build up. Then, you open a checking and savings account and place a portion of each paycheck into each. Finally, you’d start building credit by applying for either a secure credit card or a store credit card.

A secured credit card is kind of like a debit card, except that it reports to the credit bureaus. You have to put money in your account before you can spend it. There is no real “credit” extended, but it does show a payment history.

Store credit cards are generally easier to get approved for if you have a thin credit history. Those lenders are willing to take larger risks because they will charge you among the highest interest rates possible. They’ll start you with a low credit limit of $150 -$300.

Over time, you will establish yourself as a low credit risk by showing a timely payment history and be able to apply for credit limit increases every 6 months or so. As your credit limits begin to increase you will eventually start receiving other credit offers.

For best results, you should include a mix of fixed loans in your credit portfolio. Generally speaking, one loan for every 3-5 credit cards works best. Loans could include car financing, personal loans, or mortgages.

New School Strategy

If you’re in a rush or live in the real world, like I do, then the real world strategy is more your speed.

Your FICO score is designed to determine your level of risk as a borrower to a potential lender. If your credit is new, that is a warning sign to a lender. N o one wants to be the first to give you credit. You can instantly add age to your credit report by becoming an authorized user.

An authorized user is a person who may use another person or business’ credit card account, but is not liable for the balance or payments. They are commonly used with businesses as expense accounts. for example, if you worked for a construction company and your job was to buy the supplies, the company would probably give you an authorized user account to make your purchases.

When you are an authorized user, the credit history of the accoutn is reported on your account as well. Due to changes in FICO08 the benefits of an authorized user account are realized only if FICO can verify there is a legitamite purpose to the account, such as a professional or personal relationship.

Typically, your parents can help you establish your credit by adding you as an authorized user. You now instantly have age and history.

Adding one account with age is great, but a lender will still see you as a risk since you only have one account. A second account for a few hundred dollars would be helpful, but not ideal. Instead I would recommend obtaining a card with a high limit, like those available at www.build-credit.net.

With a 100% approval rate you can instantly add a second card with a $5,000 limit. Now your credit will show two sizable accounts with high limits and low balances. Any lender would be willing to give you a great deal on another card or loan. From their point of view you are the ideal customer and you built your credit in less than 60 days.

Posted by admin at 12:56 pm  Tagged with:
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