Category — Credit

Let me start off by saying that understanding how the three major credit bureaus arrive at your credit score is one of the most powerful pieces of knowledge you can have. Most likely this is not something that you have ever been taught. In fact, when it comes to your credit scores, the three major credit bureaus, Equifax, Experian, and Transunion, run sort of a “black box” operation.

Here’s a brief explanation of the system -

Payment History: 35%
Payment history makes up the largest piece of your credit scoring model. It reflects how timely you make payments to your creditors.

Credit Utilization - 30%
Your credit utilization is how much of your credit you’re currently using. An easy way to boost your scores is to keep your balances below 50% of your total credit limit.

Credit History: 15%
Credit history indicates the length of time your credit has been open for. Newer accounts aren’t regarded as well as older accounts are.

Recent Inquiries 10%:
Whenever you apply for any kind of credit, a credit inquiry is reported. Too many of these, and they can negatively effect your scores.

Types of Credit In Use - 10%
Your types of credit in use lists how many accounts you have, and what kinds of accounts they are. Having too many loans can lower your scores.

Now that you know a little bit more about credit scores, here are a few things you can do in the next half hour to add some more points to your score!

Raising Your Limits -
It’s often easier to raise your limits than you think it might be. You might not realize that most times, all you have to do is ask that your limit be increased and your wish will be granted. Call the customer service department of your credit card company and let them know you’re looking into transfering your balance to another card with a lower interest rate and a higher credit limit and that you’d like to keep your account with them, but only if they are willing to make the concessions you are asking for. A lower interest rate might just come with your new, high credit limit! A lower interest rate won’t help your credit scores, but it will definitely help your financial situation.

For example … Let’s say you have a credit card with $5,000 as your limit and your balance is $4,000. Your card would be 80% utilized, well over the recommended percentage of 50%-or-lower. One phone call to the customer service department of your credit card company could raise your limit to $6,500. You would now be looking at a 62% credit utilization instead, which would definitely be a positive way to impact your scores.

Lower Your Balances: Referring to the example above, your credit utilization on your card is at 62%. There’s even more you can do to improve your credit with this one account! Bringing the balance down to 50% would mean making a one-time payment of $750. And even if you can’t afford to pay the $750, you’re still better off than you were before, thanks to the new high credit limit you received from that phone call you made. If you’re trying to make a big purchase (such as a home or a car), though, you’ll wind up saving yourself thousands of dollars on your new loan as well as being granted an even lower monthly payment, if you pay down your existing accounts. The result will be higher credit scores and your loan terms will be even improved as well!

These are very powerful techniques. I have seen this work for clients time and time again. One client recently was able to raise the credit limits on 3 credit card accounts and raise their scores by 105 points immediately.

Keep in mind that these techniques work best for those who have a good credit history, and at least 3 open, established credit accounts. For those with more challenged credit or a negative credit history, a more aggressive approach and credit repair strategies may be more appropriate.

Do you have too much debt? If you do, what steps are you taking to reduce your debt?

Review your credit card and loan statements and do your best to calculate the total amount of combined debt.

Determine the percentage of your pay that is spent on non-housing debt and then determine the percentage again; this time include housing payments.

Speak with your spouse about working toward the goal of being debt free.

Having some debt some debt is typically unavoidable. But the problem is that many people are in over their heads. With mortgages, car payments, and credit cards, many people find themselves drowning in debt.

The average American has over 9 thousand dollars worth of credit card debt, and credit card companies have made it super easy to get there.

How do you know if you’re too far in debt? The general rule is if more than 20 percent of your take-home pay goes to pay for non-housing debt, or if your housing payments surpass 30 percent of your monthly take-home pay, you may well be overextended.

If you discover that you are overextended, there are several steps you can follow to eradicate debt and get back on track.

Plan a budget. Step one is to determine where your money goes. You will need to write things down and track your spending for about a month to hatch out what you’re spending and where. It may help you to keep your receipts for review.

After that initial month, you will tally your expenses and begin to construct your tangible budget. Take into account the things you will have to pay for and also the areas in which you can cut back.

Once you have settled your budget, you can attack your current debt. You should pay off high-interest rate debt initially. Take an aggressive interesting eliminating high rate debt.

If your credit card is an issue, consider a balance transfer to a lower rate card. Consolidation will save you quite a substantial amount of money over time. You can locate a catalog of low-rate cards at www.cardtrak.com. Your current card companies may have a low rate to offer if you’ll only call and make the inquiry. Most credit card companies will lower rates in order to keep customers

If you must borrow, borrow long term. You should try to go into debt for things that will either appreciate or things that will still be around when the debt is gone. Don’t use credit cards to give you creeping debt such as long-term unsecured loans.

Reducing expenses to cut your debts takes commitment. Analyzing and keeping track of your spending, controlling your expenses, and devising a plan and a budget, will help you reduce, if not eliminate, your debt.

Are you one of the many Americans who are drowning in a sea of credit card debt? So many people have thousands of dollars in credit card debt and can barely make the minimum monthly payments. Since the credit card companies have increased the minimum monthly payment amount, numerous families have fallen behind on their credit card payments.

When consumers are left wondering what they can do to consolidate debt, they are often forced to contact their credit card company to make payment arrangements. Its not recommended to go about the task of consolidating your credit card debt on your own.

You’ll hear about companies who will deal directly with your credit card companies in helping you lower interest rates and your payment amounts. Are these consumer credit organizations too good to be true?

Although there are indeed many dishonest companies who will try to scam you, there are indeed several companies that exist that can really help your debt situation. These organizations will strike agreements with credit card companies, waiving late fees and overlimit charges. Your card’s interest rate may also be significantly lowered to a more reasonable rate of 8% or 10%.

A credit card company is willing to work with these debt consolidation companies to help ensure they will continue to receive some money from you. As consumers fall behind on payments, they are inching closer and closer to trouble. When financial circumstances become so far behind, the consumer is more likely to file bankruptcy.

In the case of bankruptcy settlements, credit card companies do not receive money. Therefore, they are willing to work with debt consolidation companies, and assist the consumer in gaining control over their financial situation, thus ensuring they still receive some money owed to them.

It is not recommended to call credit card companies on your own, for it does not usually give you the leverage you need for the best agreement. Your best option is to look for a reputable debt consolidation organization that can assist you.

You can work towards getting yourself out of debt, and there is no need to do so alone. Find a company that you can trust that will help you secure manageable payments and create a long-term plan to get out of debt.

One of the most frustrating financial situations for a consumer is carrying unnecessary debt. The amount of debt being carried by Americans is rising every year, and the deeper into debt they fall, the harder it can be to recover. We live in a society where people want to live like they’re rich today and are willing to go into debt to have nice cars and material possessions.

Getting out of debt is very difficult, but the financial freedom that results is worth the sacrifice. There are several ways that a consumer can overcome debt problems.

In order to have the necessary motivation to get out of debt, it’s important to first realize the negative consequences of being in debt. First, debt is a promise to pay, in most cases every month, until the amount you borrowed has been returned to the lender. As a consumer’s debt level increases, the monthly payments require an increasingly large portion of that consumer’s income. This leaves less discretionary income, reducing financial freedom.

High interest rates mean you’ll be paying significantly more for the items you purchased than their actual sticker price. Second, debt can hurt a consumer’s credit score, especially if there is a history of missed payments. A low credit score can make it impossible to get a loan when you really need one. Finally, debt is stressful. Families carrying large debt balances, especially credit card debt, experience emotional stress that can make it difficult to enjoy other areas in their life.

The most important element in getting out of debt is commitment. The borrower must commit to stop adding to the debt balance. Paying down debt is meaningless if you’re just making room in your credit line to reload with more debt. Realize that it will require sacrifice and discipline, and you will probably have to hold off on purchases you’ve been thinking about making. Resolve to do whatever it takes to eliminate debt from your life. Commit to keeping a budget and controlling your spending. Have a plan on how you will tackle your various debts.

Professional help is also an option for those trying to get out of debt. Credit Counselors are available to discuss financial situations with consumers and help them weigh their options. Some of the solutions they may discuss with a borrower include debt consolidation loans, debt negotiation, or even declaring bankruptcy.

All of these alternatives have serious consequences that need to be considered and understood before making a final decision. It’s also important to make sure that the professional help you seek is credible, reputable, and reliable - we live in a day and age where scams are everywhere and people are lined up to profit from other people’s debt problems.

Getting out of debt will probably be one of the most difficult things you ever attempt to do, but can also be one of the most rewarding. Regardless of your level of debt, finding a way to get out from under it is a worthy goal.