Credit Education




Education Center

HOW TO ESTABLISH CREDIT

Open a checking account

If you dont have a checking account, potential lenders become very skeptical about the way you handle your financial affairs.

Open a savings account

When potential lenders see a savings account on your credit application, it gives them a good feeling, regardless of the amount you have in your account.

Type of Credit Cards

Are all credit cards created equal? Before you compare the various credit cards offered by various merchants and banks, it is good to know a few main types of credit cards. This will assist you in determining which credit card suits you better. If you need to entertain your guests or make business trips frequently, the amount you spend may differ from one month to another. Charge cards will be useful to you as they do not have credit limits for your spending. If you make the payments in full each month, you do not have to pay any charges on the short term loans. Diners Cards and American Express offer such cards for travel and entertainment. American Express has other payments options available for you to make your payments over a longer period of time. Some people may use the terms ‘charge cards’ and ‘credit cards’ interchangeably, but there are differences to the two. The second type of major cards is the credit card we are familiar with. The main credit card companies are Visa and Master Cards, and they work together with banks to issue the credit cards to the consumer. Based on your income level, the banks will decide the spending limit you are entitled to. Different cards have different terms and conditions. If you only pay the minimum amount for your credit card payment, be prepared to fork out hefty sums that stemmed from your interest payments and new purchases. Due to the nature of unsecured loans, interest rates are considerably higher and over time, they may add up to a lot. Business Credit Cards are the next type of cards. These cards may be useful to those for small businesses, but you do not need to own a business in order to receive such cards from the banks. These cards tend to have lower interest rates and higher spending limits. Cash flow issues can be easily resolved for small business with business credit cards as you can pay the bills over an extended period. Finally, we have retail store cards from various major companies. Some are linked to shopping malls or other retail stores or we have fleet cards, for various fuel purchases as well. Since there is such a huge variety of retail store cards, the terms and conditions are definitely different. Only certain countries accept such cards. Since various types of credit cards offer different conditions and payment options, you need to decide what cards such as charge cards, credit cards, business credit cards and retail store cards suit you best.

loans for people with bad credit

Don’t let your past mistakes keep you from living your life. Just about everyone has committed a financial faux-pas at one time or another. Many lenders recognize that a poor history doesn’t always make for a risky customer. There are loans for people with bad credit available. You just have to do a little research to find out which one is right for you. Consolidation is the first thing that comes to mind when considering the different types of loans for people with bad credit. In this instance you consolidate all of your debts and make just one easy payment each month. Although it does not happen overnight, it’s a great way to get your credit rating back where it should be and it gives you the opportunity to keep your head above water at times when money is short. You will soon be pleased to see things coming good for you once again. Bear in mind, your credit history did not develop overnight. It may well have been months or even years of bad luck and trouble which earned you a poor reputation with money matters. But you can put all this behind you by taking out one of the loans for people with bad credit in an effort to become more responsible. As soon as you begin to make your payments on a regular basis your reputation will take turn for the better. You may be wondering how I know about this sort of thing? Well, I know because I am one of those folk who have applied for loans for people with bad credit. My lender put his trust in me and up to now, I have not let the company down. I have been paying my loan for over a year and the truth is my financial state of affairs has improved immensely. I pay one easily manageable monthly payment and I make sure I stick within my budget as far as spending is concerned. There will be no other loans or credit for me in the meantime. Even the 0 interest credit cards which are thrust upon me almost daily do not tempt me. The way I look at it loans for people with bad credit should alleviate debt problems not encourage you to take on more debt. Of course, being offered the 0 interest credit card is quite flattering really. Just the fact that I am eligible for this sort of deal shows that my credit rating is going from strength to strength. Regardless of this though, I intend to keep my eye on the prize and remember the promise I made to my lender - the fact that my only concern for the time being would be loans for people with bad credit. Remaining focused on reaching the last installment and ensuring this loan is paid off in full before taking on any other sort of loan is clearly the best approach for me to take. There will be no need for me to make an application for loans for people with bad credit ever again as my credit rating will be well on the way to being exceptional very soon.

Open a charge account with a department store

These accounts are usually the easiest to get when you are new to credit.

Try getting a loan from a finance company

Financial companies are usually more receptive to individuals who are just starting out in credit. The interest rate is a lot higher than a bank, but your chances of getting started are greater. Be sure you talk with your banker first to see the chances of getting a loan from your bank before applying to a finance company.

Find a co-signer

Try to get your parent to co-sign a loan for you.

Building your credit using your current bills

PBRC connects people who lack a traditional credit history with lenders who want to reach them. They document and verify rental, utility, phone, and other recurring payment that aren’t reported to other credit bureaus. Pay Rent, Build Credit, Inc. (PRBC) is an FCRA compliant repository that enables consumers and small business owners to build a credit file and score, based on their history of making rent and other reoccurring bill payments, which can be used to demonstrate creditworthiness when applying for housing, credit, insurance, and employment.

Obtain Free Credit Report

With the economy teetering on the verge of a recession and peoples budgets and lifestyles being altered, having a high credit score is not quite as easy anymore. With the mortgage crisis still lingering and some financial institutions stepping up their requirements for borrowing money, it is becoming harder and harder to get ahead in this country. Little do people know or realize, your credit score is affected by so many factors and can change in no time at all. At this moment, it’s a buyer’s market for homes. For sellers, things don’t look so bright - but buyers have the ability to negotiate some great deals right now. Many start house shopping without even knowing their credit score. This is a mistake, since it can lead to your being denied a home loan; and you may not even know why you were turned down. While if you’re not in the market for a home right now, you may not think you really need to know your credit score. However, you can gain a lot by knowing your credit rating and if you are house hunting, you should first find out how to obtain free credit reports. Once you have done this and have the opportunity to look through your free credit report, you will know exactly what is on your report. By federal law, you are entitled to free credit reports once a year. Even if you are not seeking out a home loan at the moment, it is helpful to look at your report; in many cases, there is inaccurate information on credit reports. It may be easy to fix these errors in some cases, more complicated in others, but knowing what is on your report is the first step to ensuring that your credit is in good shape. An amendment to the Fair Credit Reporting Act mandates that consumers can get a free credit report annually from all three of the credit reporting agencies - TransUnion, Experian and Equifax. The FTC warns consumers that there are plenty of scams to watch out for who prey on people seeking to obtain free credit reports. Most of these “opportunities” are in fact scams and can result in you giving your personal information to unscrupulous operators or paying a fee for something which you ca get for free by law. These sites might ask you to buy something or join something in order to obtain free credit reports. Don’t fall for it. There is a place where you can obtain free annual credit report cards, this is http://www.annualcreditreport.com. The government suggests this site as a place to obtain free credit reports. If you had to pay for your credit report or feel that you were otherwise defrauded, file a complaint with the FTC. You might not see that money again, but you can help to prevent them from scamming other consumers.

WHAT AFFECTS YOUR FICO

Find out your FICO Score Your FICO score can be found on your credit report, so you first need to obtain a copy of that. There are three major reporting agencies in the US: Experian, EquiFax, and TransUnion. Youll want to get credit reports from all three, as they may all have slightly different information on them. All three credit bureaus use credit scores, but FICO is specific to Experian and TransUnion. To get a free copy of your credit reports from all three credit bureaus, you can visit Annual Credit Report, FreeCreditReport.com (a website owned and operated by Experian), or you can call 1-877-322-8228. You can also write any of the agencies directly. Note that while the credit report is free, the companies charge $6-8 each to give you your credit (FICO) score.

Evaluate your score

The point system used technically ranges from 0 – 999, but all or nearly all actual scores fall between 330 and 850. 330 – 619: Poor credit. In banker jargon a person with a score in this range is considered a “Credit Leper.” 620 – 659: Sub-prime financing will be available to you. 660 – 720: Prime financing will be available to you. 721 – 750: Prime – x% may be available to you. That is, you may be able to get interest rates on loans that are even lower than the prime rate. 751+: Excellent credit. May enable you to get even lower prime -x% interest rates depending on the credit type youre utilizing.

Understand what affects your credit

The exact calculation of the FICO score is kept secret as proprietary information, but there are some general guidelines we can apply. Payment History: Approximately 35% of a credit score may be based upon payment history. A credit score is negatively impacted if bills are paid late or if there is a history of delinquent payments listed on the credit report, including matters of public record such as bankruptcy, collection accounts, etc. Amounts Owed: Approximately 30% of a credit score may be based upon amounts owed or other outstanding debt. A credit score can be negatively impacted if the amount owed is close to the credit limit. A low balance on two credit cards may be better than a high balance on one credit card. Length of Credit History: Approximately 15% of a credit score may be based upon length of credit history. A credit score can be positively impacted the longer that accounts have been open, especially if they are with one financial institution. Taking on More Debt: Approximately 10% of a credit score may be based upon how much new debt a consumer is incurring. A credit score may be negatively impacted if someone has recently applied for a number of new credit accounts. Promotional inquiries usually do not negatively impact a credit score. Types of Credit in Use: Approximately 10% of a credit score may be based upon the types of credit currently in use by a consumer. A credit score is usually negatively impacted by loans from finance companies.

Raise your score

Your overall FICO score is the culmination of years of credit experience, but even in the short run there are things you can do to raise it slightly. Always make your payments on time. Dont carry high balances on credit cards. Ideally you would never go over half the available amount on your credit card for any extended period of time.

Fix bad credit

Serious credit problems could range from a 30-day late payment to a , judgment or Despite what you may have read on some internet sites, theres no quick fix to repair bad credit. There are, however, ways to remove inaccurate information and improve your credit over the long run. If there is inaccurate negative information on your credit report, get it removed. Dispute the charge with the agencies by writing to them or going online to their websites. They have 30 days to respond to your dispute. If they cannot verify the negative information, they have to remove it. If you have a 30-day late blemish on your credit you can dispute the negative information as above. If the credit bureaus cant verify the 30-day late payment with your creditor, the information must be removed. If you have more serious credit problems such as a judgment, bankruptcy or foreclosure, it may be in your interest to seek a non-profit credit counselor or an attorney specializing in credit repair. The latter can sometimes settle your debts for less than 35 cents on the dollar and may be able to get some of the information removed. If you simply pay off the judgment for example, it is still going to stain your credit for a minimum of 10 years. For a foreclosure the term is 7 years, for a bankruptcy, 10 years; and for tax liens, 5-7. Even after that amount of time goes by you will need to aggressively go after the agencies to get the information off your credit

SHOULD I DECLARE BANKRUPTCY?

There is no “quick and easy” answer to this question. You should discuss your situation with a credit counselor or a bankruptcy attorney, to evaluate the costs and benefits of bankruptcy given your personal financial situation. Not every debtor qualifies to file for Chapter 7 bankruptcy. A means test is applied to determine if you will be able to repay a substantial percentage of your debt, and if you are determined able to do so you will be ineligible for a liquidation of your debts and will likely have to engage in a repayment plan as part of a Chapter 13 bankruptcy. The type of debt you owe can be a significant factor in whether you file for bankruptcy, as well as the form of bankruptcy you pursue. Factors which may affect your decision to file for bankruptcy protection are detailed in this associated article: Filing For Personal Bankruptcy Protection in a U.S. Court.

REESTABLISH CREDIT AFTER A BANKRUPTCY

Your ability to rebuild credit after filing bankruptcy is better than it has ever been. After you get your discharge, you will receive many solicitations from lenders offering to finance homes, vehicles and credit cards.

Here are some tips to responsibly and successfully rebuild credit:

Open a checking or savings account. Lenders may look at this to determine if you can responsibly handle money.
  • Open a checking or savings account. Lenders may look at this to determine if you can responsibly handle money.
  • Apply for store and gas credit cards that you would normally pay cash.
  • Apply for a secured card where you deposit cash and charge against it. Pay advances back over two months so that they will be reflected as positive marks on your credit report.
  • Pay your utility bills and rent on time for at least a year.
  • Find a friend or relative to cosign for you on a loan and pay it on time.
  • Look for car dealers and mortgage brokers that attest to be “bankruptcy friendly”. Buy a used car so you do not get hit with the depreciation that occurs during the first two years of a new car purchase.
  • Stay away from payday loans that are at high interest rates and are a “bad credit” trap.
  • Write a letter to each credit reporting agency explaining the circumstances that lead to you filing.
  • Live within your means. Do not unnecessarily increase your debt to income ratio by taking on credit to purchase luxury items that you DO NOT NEED. Your payments on consumer debt should equal no more than 20% of your expendable income after costs for housing and a vehicle.
  • Pay your reaffirmed, pre-bankruptcy debts on time.

CREDIT SCORE FACTS AND FALLACIES

Fallacy: My score determines whether or not I get credit

Fact: Lenders use a number of facts to make credit decisions, including your FICO?,® score. Lenders look at information such as the amount of debt you can reasonably handle given your income, your employment history, and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you although your score is low, or decline your request for credit although your score is high.

Fallacy: A poor score will haunt me forever

Fact: Just the opposite is true. A score is a “snapshot” of your risk at a particular point in time. It changes as new information is added to your bank and credit bureau files. Scores change gradually as you change the way you handle credit. For example, past credit problems impact your score less as time passes. Lenders request a current score when you submit a credit application, so they have the most recent information available. Therefore by taking the time to improve your score, you can qualify for more favorable interest rates.

Fallacy: Credit scoring is unfair to minorities

Fact: Scoring considers only credit-related information. Factors like gender, race, nationality and marital status are not included. In fact, the Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type of information when issuing credit. Independent research has been done to make sure that credit scoring is not unfair to minorities or people with little credit history. Scoring has proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given score, non-minority and minority applicants are equally likely to pay as agreed.

Fallacy: Credit scoring infringes on my privacy

Fact: Credit scoring evaluates the same information lenders already look at – the credit bureau report, credit application and/or your bank file. A score is simply a numeric summary of that information. Lenders using scoring sometimes ask for less information – fewer questions on the application form, for example.

Fallacy: My score will drop if I apply for new credit

Fact: If it does, it probably wont drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called “inquiries”) will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

MORTGAGE OPTIONS FOR DISTRESSED SELLERS

If you are behind on payments and wanted to know what options are available, many time professionals forget the simple options to homeowners. For professionals in the foreclosure business, we use terms such as deed-in-lieu, forbearance, loan mod, and other terms that homeowners may not. I have come up with a few terms and options that homeowners should have available as options for available alternatives to foreclosure.

Forbearance

A company will attempt to stall or reduce your payment by submitting a hardship package on your behalf. Many times the lender will work with a “foreclosure assistance” company before working with an individual attempting to submit a foreclosure package.

Buy-Back-Program

With this option, you can actually sell your house and continue living in. Some investors offer a buy back program where they will step-in quickly, purchase your house, and allow you to rent it while you catch up on your bills and even allow you to purchase it back from them once you are “back on your feet”. (Be very careful, some companies are better then others, and of course, you have those predators out there)

Restructure (Most Popular Alternative)

Some foreclosure companies will negotiate with your lender to get your loan in good standing again. There are many options available to get a restructure approved like a separate payment plan for your delinquency or even adding the delinquency to the end of your loan. No one can guarantee to restructure your payments, so be careful.

Reinstatement

Pay your lender(s) your entire past due payments to bring your mortgage current. This option is rarely feasible. (However I know some private money lenders that will provide homeowners up to 90% for the reinstatement amount.)

Refinanace

Hardly available, through traditional lenders, however some foreclosure companies have established relationships with in-house lenders who can give loans on mortgages that are in foreclosure if there is enough equity in your property available.

Sell Your Home

You may simply sell your home before the Foreclosure Sale Date. Sometimes the home owner is unable to sell the home outright at the desired sale price and this is not an option.

Short Sale

In this instance the lender may take less than what you owe on the loan to avoid a lengthy and costly foreclosure process.

Deed-in-lieu of Foreclosure

You or a foreclosure company can arrange for you to simply give the home back to the lender and walk away with a clean slate.

Bankruptcy

This is a last resort. This will only save your home temporarily. If you miss one payment during this process the lender will put you right back into foreclosure.

Loans For Debt Consolidation

The majority of us worry about financial debt these days and this is because it is something that affects us each and every day. It’s true to say, concerns about money probably trouble us more than any thoughts we may have about nuclear war, the sun drying up or the ozone layer totally disappearing. Regrettably, within the United States of America owing money is a common occurrence and most of the debt incurred can be put down to our own doing. Maybe it is time for us to take a long hard look at the interest rates we are being charged at the moment and discover if there is any way to get around this situation. One option open to us to get back our financial security and freedom is loans for debt consolidation. For most of us, debt usually starts with our first credit card. We leave school and as we approach adulthood we are constantly showered with all manner of special offers and deals from credit card companies. The temptation becomes far too much to bear and we apply and are accepted for at least one of these cards. Before we know where we are we have accrued a huge amount of debt as a result and we feel we are in financial circumstances that we cannot escape from. This is where loans for debt consolidation come in very handy. In the past I have had credit cards which have charged up to 20% in interest and if you have found yourself in the same position, it’s without doubt time to consider loans for debt consolidation. As far as eliminating high APR’s on credit cards is concerned, this is clearly a practical way forward because these loans usually apply only 7 – 8% in interest charges. This has to be a great deal in comparison with your existing debt. You then only have one monthly payment to make instead of remembering to cover several other outgoings at much higher APR’s which surely has to make an improvement on your lifestyle. Making an application for loans for debt consolidation is simple and can be done on the Internet without having to leave the comfort of your own home. Sites such as MoneyManagement.org, LendingTree.com and debtrite.com are extremely professional and will assist you to take control of your money worries, making sure your bills are paid and the high interest rates of credit cards are a thing of the past.

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