3 Easy Steps To Raise Your Credit Score

Is No Credit The Same As Bad Credit?

How would you like to live life knowing you’ve paid off your mortgage, car loan, student loans and credit cards? For many this is a dream come true. This, they figure, will result in a perfect credit score. But credit bureaus think otherwise. No credit is the same as bad credit. Yes, that’s right. Credit scoring takes into account a healthy mix of debt versus not having any demonstrated record of debt-handling ability. One of the gravest mistakes people make in their quest for financial freedom is to pay off all their credit cards and then close them. This in most cases does not help your credit score.

There are 3 major ways to boost your credit score; The first is to pay charged-off accounts but make sure you get a commitment from the creditors in writing that the item will be removed from the report upon payment of the settlement amount.

Another way is to acquire new credit. Get 2-3 credit cards. Most people with bad credit may have a hard time qualifying for a good credit card so the answer would be to get a secured card. Applications for secured credit cards are hardly denied because the applicant has to deposit an amount into a savings account before the card can be issued and activated. Caution should be used when selecting a secured credit card because of the varying fees, terms and conditions offered by different financial institutions. For example, some companies have lofty annual fees, others will ask you to pay for insurance while others will require a monthly fee. Even more require an initial application fee. By far, the best place to get a secured credit card is a credit union. You may visit http://creditunionaccess.com/ to access credit unions in your area. Also visit NO Hussle Cash for secured and unsecured credit cards for people with bad credit.

A third way to raise your credit score is to ensure timely payment of your monthly bills. You can enlist the use of technology to achieve this. For example, most banks now offer automatic bill pay to their customers for a small fee. Open a separate checking account for bills and automate it.

We have seen how having no credit is as good as having bad credit because financial institutions and lenders want to see that you have a grasp on handling finances, especially installment loans, credit cards and revolving accounts.

Bouncing Back After Bankrupcy

Bankrupcy is one of the most financially traumatic experiences one can undergo not to mention that it stays on your credit report for up to 10 years. There are two different types of bankruptcies; Chapter 7 and Chapter 13. Chapter 7 is where a bankruptcy judge orders your assets liquidated and the proceeds used to pay off your creditors. Chapter 13 is where a structured payment plan is put in place and you are required to adhere to this plan to pay off your debts within a stipulated duration of time. Failure to do this can result in the court over-turning the Chapter 13 ruling and converting it to a Chapter 7.

Bankruptcy can affect your financial livelihood and cost you hundreds of extra dollars in higher interest rates not to mention the embarrassment of perpetually being denied credit. Despite the headaches of bankruptcy, there is a way out and countless families are realizing with the right strategy, they can indeed overcome.

Credit repair is the process of rebuilding one's credit especially after a bankruptcy, foreclosure, divorce or a charge-off. After bankruptcy, your credit may be reeling in the mid-400s depending on the presence of other delinquent items, length of credit history, state of revolving accounts and recent payment defaults (usually people filing for bankruptcy are delinquent in multiple bills at the same time). You can easily raise your credit score by applying for 2 -3 credit cards. If no lender wants to talk to you especially because of the bankrupcy you can try secured credit cards. These are easy to acquire and anyone is approved. About 6 or more months of faithfully paying on time will do great benefit to your credit score. So the secret here is to boost areas of your credit that are still in your control.

How Do You Know If You're Rich?

The easiest way to determine whether you're there yet financially is to gauge your net worth.

You can use this formula;

Multiply your age times your pretax annual income then divide by ten. This is what your net worth should be.

One of the biggest huddles to overcome in boosting your net worth is being debt-free. For many, that is a far-fetched goal but with the right planning and tools you can actually become debt-free in less than 3 years!! I learnt that here.

Negotiating With A Creditor For Deletion of Negative Items

One of the steps to take to cure a negative credit score is to negotiate with a creditor to get deragatory items removed from your credit. There is a right way and a wrong way to do this.

Many people from time to time find themselves with items on their credit that have been charged-off. A charge-off is a delinquent debt that the creditor has written off as a loss and has no hope of recovering the same from you. These are normally sent to an outside collection agency which in turn attempts to collect the debt from you (knowing they will keep 100% of the amount)

Paying off a charge off to a creditor will only affect your credit score possitively if the amount is eventually deleted from your credit. Before you pay off a charge-off, never admit that the debt belongs to you and then negotiate for a Letter of Deletion to be sent or faxed to you. This is a written guarantee that the item will finally be deleted from your credit upon satisfactory payment of the debt. Learn how to repair your own credit here.

Key Factors That Determine Your Credit Score

So how do the credit bureaus determine your credit score? For the longest, they prefered to keep this information secret but recent pressure from consumer advocacy groups has forced them to begin to "demystify" the criteria they employ to determine your score.

1. The length of your credit history
2. Your payment history
3. The amount of money you owe
4. Type of credit
5. Credit inquiries


Remember, the score can change daily and understanding the credit scoring criteria is essential in the battle to remain debt free.

How Harmful Are Inquiries Into Your Credit Report?

There's a lot of hype surrounding credit inquiries and their exact impact on your credit score. The truth is; inquiries depend on type, frequency and how young your credit history is. A relatively young credit history will be impacted more by an inquiry than one that has been in existence longer. Likewise, bureaus do offer "grace". For example, all hard inquiries by auto loan officers or mortgage loan officers within a 45 day period are considered just one inquiry. "Soft" inquiries (inquiries into your own credit score), do not impact your score at all.

All credit inquiries affect your credit score for only one year although they actually fall off after two years.

Have you bought your copy of the credit secrets bible?

When Is A Home Equity Loan A Good Idea?

Home equity loan line of credits are extremely popular way for most people to cash in on the accumulated value of their home and many banks and financial institutions make them extremely easy to get. As long as the debt does not go over 100,000 , the interest is tax deductible. Why are home equity loans more attractive than credit cards? A $5000 credit card with a 15% interest rate would cost $4860 in interest if you took 10 years to pay it off while a home equity loan of the same amount at 6% interest would only cost $1220.

Advantages of a home equity loan therefore include:
Lower interest rates
Flexibility
Repayment terms are easier

The downside is that failure to repay a home equity loan may lead to foreclosure. Home equity loans may also extend your indebtness. The best way to use a home equity loan is for home improvements or purchasing a second home or tuition. Here are some quality lenders offering low interest home equity loans.

Consumer Credit Differences

Ever wondered why your credit score is different whenever you request it from different sources? The three major credit bureaus each have a different score while auto companies, banks, jobs and others pull up a different score. After investigating, I was able to determine that the differences arise because everyone uses a different formula to compute your final credit score.

1. Auto Formula-This is the score bureaus use whenever you go to buy a car
2. Tenant Formula-This is the one used by landlords whenever you apply to rent an apartment.
3. Consumer Formula-Given to you whenever you request your own score.
4. FICO formula-Mostly widely used and is the one used when applying for a home loan, credit card or line of credit.

Fair Isaac and Company(FICO) is a company founded in 1959 by Bill Fair,an enginneer and Earl Isaac, a mathematician. The two developed a formula that they claimed can predict the likelihood of a borrower to pay bills in full and in a timely manner.

Still confused? Get the CREDIT SECRETS BIBLE for more information.

The Profile Of A Smart Shopper

Let's face it, we are a consumer society. Every hour of the day in every place imaginable we are bombarded with commercials advertizing one enticing new product or another. As competitive as we are, we want it all-whether its the video ipod to the iphone to the latest clothes, cars and consumer electronics. But it is also no secret that consumer debt is a national epidemic, with over 75% of American families now having a debt-to-income ratio of more than 25% (See debt-to-income ratio in this blog). The main culprit is Consumer Debt. Consumer debt consists of credit cards, departnment store cards, major appliances, furniture etc. In 2003, the Federal Reserve recorded that American consumer debt had topped $1.98 trillion dollars which is roughly more than $19000.00 per household. The total credit card debt alone stands at $735 billion, with the household card debt of those who carry balances estimated to average $12,000. Shopping smart is one of the ways to beat the debt epidemic caused by consumerism.

Consider the following if you are to get on track as a smart shopper.

Be a bargainer. Don't always settle for the face-value price. You might save 10-20%

Shop early. We all know the key shopping seasons-Thanksgiving, Christmas season and New Year's Day. Contrary to many views,prices are actually higher on those days because of demand. Shopping earlier can result in significant savings.

Alwaus use cash. Research has shown that shoppers spend 1/3 less when using cash as opposed to checks or plastic.

Avoid extended warranties. This is especially true with electronics. In most cases, 80% of warranties are never used (and that's why the store associates push so hard for you to get it)

Be alert as to the times when you're most likely to overspend. For most of us again its the holiday season. Keep a tight watch on your spending during these times and always use cash whenever possible.

Always shop alone. It has been proven that shopping while in the company others (especially kids) will induce you to shop more.

Always use a list. This prevents impulse shopping by keeping you focused on the essentials.

Don't go grocery shopping while hungry. According to Stacy Johnson of Money Management International, shopping while hungry will actually induce you to shop more than was originally planned.

Keith Diem, college professor with indepth know-how on money management, has compiled an excellent resource to help you save money on big and small items and will get you well on your way to a lifestyle change which will surely put you on the path to living debt-free living.

Troubleshooting Credit Worries

At least 4 out of 10 people are paying more on their mortgages than their counterparts with better credit. 80% of credit reports have errors on them, 25% of them serious enough to warrant a denial of credit.

HOW DO YOU DEAL WITH LESS THAN PERFECT ("SUB-PRIME")CREDIT?

1. Obtain your credit reports from the three main credit bureaus.

2. Review the reports for any errors.

3. Once you locate the errors begin dispute process.

4. If bureaus unable to verify or correct the errors then the items must be removed.

5. Begin negotiating with creditors for acceptable payment terms and have them delete paid items.

6. After negotiating and making payment, creditors should then delete the negative items or change them to a positive rating.

7. Never confirm an account if the information presented about it is wrong.

8. There are many credit repair firms out there. Some are questionable, asking you to pay exorbitant fees and downpayments for them to initiate disputes with the credit bureaus on your behalf. Credit repair firms are controversial. Some experts feel that credit repair firms do not do anything that you and I cannot do for ourselves. To an extent that is true.

9. Get as much knowledge as you can regarding credit, credit scores, FICO scores and how the credit system works. Knowledge is invaluable. There is an excellent publication out in the market that is a must have for anyone wanting to know the insider secrets of how credit repair works. You can get it here. You can also request expert help here
10. We have also reviewed another excellent resource which gives you an easy step by step guide on how to get rid of negative items on your credit. You can access it here!

Apprehending Financial Freedom

The following are vital nuggets to get you on the road to financial freedom

Get organized
Set goals
Get information and education

GETTING ORGANIZED
The first step towards financial independence is getting organized. This involves getting an accurate picture of where you are in terms of debt and income. In getting organized, you need to determine your debt-to-income ratio.

WHAT IS DEBT-TO-INCOME RATIO?
This is your total monthly expenses divided by total monthly income(before taxes). It is expressed as a percentage. Example; monthly income = $2000. Monthly expenses = $ 1100. Debt-to-income ratio is therefore 1100 divided by 2000=0.55 or 55%

A debt-to-income ratio of more than 51% is generally considered dangerous by most financial experts and could lead to bankrupcy if an urgent financial plan of recovery is not immediately put in place.

SETTING GOALS
Every traveller gets a roadmap when setting out on a new journey. This is also true of financial planning. Setting goals regarding what needs to be achieved is definately a step in the right direction. Determine a time-frame needed to raise income levels and lower the debt burden. This will decrease the debt-to-income ratio to manageable levels.

LOWERING YOUR DEBT-TO-INCOME RATIO
A debt-to-income ratio of more than 51% signifies trouble. It is a snapshop that your debt burden is overwhelming. People with such a debt-to-income ratio normally live paycheck-to-paycheck. The first thing that needs to be done is to create an income and expenditure list that details where your money is going. Then you should zero in on expenditure with the aim of slashing items that are not necessary. Use the extra cash to pay down outstanding debt.

EDUCATE YOURSELF
The path to financial freedom involves the initial realization that all is not well. This involves a sober self-analysis. When one undertakes a sober assessment of where one is financially, then one is able to seek help. Help is sought through EDUCATION. Most people get into debt because lack of knowledge regarding interest rates, prepayment penalties, finance charges, late fees, etc. Make a commitment to get as much information as you can regarding credit cards, and personal loans and please READ THE FINE PRINT on every contract you sign.

Essentials Of Financial Freedom

For many working class people in the West, financial freedom is an elusive but attainable goal. Runaway spending habits coupled by erratic saving, have resulted in many Americans and Britons living from "paycheck-to-paycheck" According to a study conducted by careerbuilder, the number of people living "paycheck-to-paycheck" now equals 4 out of every 10 workers. The characteristics associated with this condition include:

Constantly worrying about money
Non-existent savings
Impulse buying/spending
Undefined spending patterns
Juggling bills/paying bills late
Feeling overwhelmed
No life or health insurance
Don't understand tax returns
No investments/unsure how and/or where to invest
Negative cash-flow
High interest personal loans
No funds earmarked for school/school appears "impossible"
Poor record-keeping
Unsure which tax bracket one belongs to
Lack of a Will

For many, bankrupcy or debt consolidation are the only ways out.Amazingly, there is a way out of debt without filing for bankrupcy or debt consolidation. Find out here

Sometimes it may become necessary to apply for a debt consolidation loan or even a personal loan but credit issues usually hinder alot of financially strapped individuals from getting a loan. Most lenders are only willing to work with a credit score of 580 or above, however, I was able to conduct independent research and came up with a few lenders willing to extend personal loans of up to $25000.00 to individuals with a less than 500 credit score. You can access those lenders here