There are many false assumptions when it comes to credit scores. Here are five credit score myths that you should understand:

Myth #1: A low credit score means I will not get credit.

This is not true in all situations.  Whether or not a lender will extend credit to you depends on a number of factors:

Your score is important, but they also look at:

• Income
• Total Amount of Debt
• Type of Debts
• Payment history

Based on the lenders underwriting policy, they may or may not extend credit or they may offer you credit at an extremely high interest rate (Pay Day Loans, Finance Companies, etc.)

Many times, a person has a reasonably high credit score, but may not be extended credit because of the factors above.

Myth #2: A poor score will stay with me for a long time.

Not if your take the proper steps to improve your credit score.

A credit score is really just a picture of your risk at a point in time.  If you have had a financial problem in the past, had late or missed payments, then you score will have declined.

However, as you "get back on track" and or pay off or settle debt, your credit score will improve.

Myth #3: Credit Bureaus are unfair to minorities.

This myth is not true at all! Your race, religion, sex and many other things are not part of the credit score process.

Myth #4: My credit score will go down if I apply for new credit.

This has always been a myth about credit scores to most people.

Don't apply for several credit cards in a short time frame.  Making many requests for new credit will show as "inquiries" on your report.

So the next time your checking out and the clerk asks if you'd like to save an extra 15% today by applying for their store card...think again.

However, if you are shopping for a new car and visit several dealerships, they each may request a credit report on you but this is interpreted by the bureaus as basically a single inquiry and will not hurt your score.

Myth #5: Closing or canceling a credit card or account will improve your credit score.

Although not having access to "easy credit" may help you not abuse your available credit, as far as the credit reporting agencies are concerned, you may hurt your credit score by closing accounts.

Why? 

The credit bureau has a term called "credit utilization ratio".  Basically, this is the amount of debt you have in relation to the amount of credit you could have.

For Example:

Let's say you have 5 credit cards.

• One has a balance of $1,000 on a $2,500 limit.

• The second has a balance of $1,500 with a limit of $1,500 (maxed out).

• You have $0 balances on cards 3,4 and 5, but the total available credit limit on those is $7,500 ($2,500 each).

To the credit bureaus, you have:

• Total outstanding balances = $2,500

• Total available credit limit   = $11,500

• Your credit utilization ratio is $2,500/$11,500 or 22% (not bad!)

If you decide to cancel the 3 cards that have $0 balances, your credit utilization ratio will look like this:

• Total outstanding balances   = $2,500

• Total available credit limit     = $4,000

• Your credit utilization ratio is not $2,500/$4,000 or 62.5%

Your credit utilization ration went from 22% to 62.5% and this will probably lower your credit score!

As you can see, there are a lot of things that are used to determine your credit score.  Some thing you have control over and some you will have to work on over time.  If you would like to know how you can elimnated your debt for abut HALF of what you owe with reduced monthly payments, click on the link below or give us a call at 1-877-492-4109.

photo by: rosmary

Credit Repair... Is it really possible?

There are several credit repair myths out there, but which ones are real and which ones are just plane untrue?  In this post, I will examine 4 common Credit Repair myths to shed some lite on the whole thing!

MYTH # 1:

If you have negative or derogatory accounts, a credit repair company can get them removed.

Although some negative or derogatory accounts can be removed from your credit report, a few of them cannot. Before you pay a fee to any company, make sure you "get in writing" their guarantees of what they can and cannot do for you.

If any company states that they can remove all negative items, RUN!

MYTH # 2:

If you are delinquent on an account and call the creditor to close that account, it will help your credit score.

Sorry, this one is not true either!  Inactivity and/or delinquency will damage your score.  FICO (Fair Isaac Corporation) has information that tells you what is in and not in a credit report.

Unfortunately, your PAYMENT HISTORY accounts for 35% of your credit score, and closing the account will not change your payment history.

MYTH # 3:

If you add a statement to your credit report (up to 100 words), it will raise your credit score.

If you cannot get the  three major credit reporting agencies to remove inaccurate information or mistakes, you can opt to add a statement on your credit report.

Unfortunately, FICO usually does not see or use it in determining your credit score. Even though adding a statement might make you feel better, the effort may not be worth it.

MYTH # 4:

You cannot do anything on your own about improving your credit score!

This myth is absolutely FALSE! There are several things you can do to improve your credit scores:

Of course, the most important is to PAY OFF YOUR CREDIT CARDS AND ACCOUNTS in a timely manner.  There are no shortcuts to living up to your responsibility to repair what you agreed to repay!

But, if you see errors on your credit report, you can make requests to have these removed.  If you provide the proper documentation to prove you either did not incur the debt or that you have repaid the debt, it will be removed.

To contact the 3 major credit bureaus, click on the links below:

• Experian
• Transunion
• Equifax

Want to read more about credit repair directly from the source, the Federal Trade Commission  has some good advice on How to Repair Your Credit. 

If you would like a FREE CONSULTATION about your situation, please let us know.  We have been helping people become DEBT FREE for many years, and may be able to help you too!

If you have had a JUDGMENT recorded against you, then it will show up under NEGATIVE ITEMS on your credit report.

A JUDGMENT tells anyone reviewing your credit:

• You failed to pay a credit account as promised
• Attempts to work out a repayment plan failed
• The creditor filed a COMPLAINT and you received a SUMMONS
• The creditor was awarded a JUDGMENT by default

If you do not have a current FREE CREDIT REPORT from all 3 of the major report agencies:

• Experian
• Equifax
• TransUnion

From the Credit Report, find out where or what court the judgment has been recorded.

If there is a phone or fax, great!  If not, do a little searching (yellowpages.com) to find.

Fax or mail:

• Proof of payment or release of the judgment.  A copy of the settlement agreement or actual letter from the collection agency or law firm is even better.
• Copy of cancel check(s) from your bank records.
• A brief explanation why you are requesting the judgment to be removed.

Follow the procedure for each agency. Sending to one doesn't do anything for the others!

In some cases, you can make your request online.

It may take 45-60 days to get a response or see the jugment removed.  The Credit Reporting Agency should email or mail their decision.

If positive, YOU DID IT!

If not, then try again.  You may want to call.

The credit reporting agencies want to provide accurate, up-to-date information.  As long as you have the proper "proof and/or explaination" of why the judgment should be removed or classified as "paid-as-agreed", they will work with you.

Welcome to 2012!  It is a new year, and most people are thinking about a total body makeover.  That's right, it's time to start that diet and get back to the gym.  But I bet your finances could use a makeover too.  Now is a great time to take a close look at your financial situation, set some goals, and make positive changes to help you achieve financial fitness in the New Year!

Money Makeover for the New Year

Step 1: Set Your Financial Goals

Before you can reach your goals, you first have to figure out what those goals are.  Do you need to eliminate debt, start saving for retirement, or maybe buy a house?  These things won't happen on their own.  Start by putting your goals in writing, so you can make a plan to achieve them.

Step 2: Live Within Your Means

Creating a monthly spending plan is aboslutely essential to your Money Makeover.  Start by making a list of your FIXED monthly expenses (rent, mortgage, utilities, car payment) and your VARIABLE expenses (groceries, entertainment, "mad money")  Use this FREE BUDGET SPREADSHEET will help make sure that you don't forget anything. 

Now comes the "hard" part.  Keep track of your spending each and every day.  At the end of your first month, you will be able to see how well you were able to stick to your new spending plan and make adjustments as necessary.  Maybe you don't need as much for groceries as you thought.  That extra money can be added to your savings or used to pay more to your credit cards to help your reach your financial goals even faster!

Step 3: Stop Using Your Credit Cards

In step 3 you learned how to live within your means.  That means only spending what you make and NOT reaching for those credit cards!  If you are scared to cut up your credit cards, you can freeze them in a block of ice to make them very difficult for to use! 

Instead of using your credit cards, look to your budget and only use cash, checks or debit cards.

Step 4: Keep and Eye on Your Credit Report

You should check your credit report at least once per year. This is quick and easy at www.annualcreditreport.com. By checking your credit report regularly, you can easily find and correct any errors.  For more information on DIY Credit Repair click here -->> What You Need to Know About Credit Card Debt Repair

Get started on these first 4 steps to your Money Makeover for the New Year, and check back later this week for part 2!

It's almost impossible to live debt-free; most of us can't pay cash for our homes or our children's college educations. But too many of us let debt get out of hand.

Ideally, experts say, your total monthly long-term debt payments, including your mortgage and credit cards, should not exceed 36 percent of your gross monthly income. That's one metric mortgage bankers consider when assessing the creditworthiness of a potential borrower.

It's far too easy to spend more than you can afford, especially when you pay by credit card. The average U.S. household with at least one credit card carries nearly a $10,700 balance, according to CardWeb.com, and personal bankruptcies have hit record highs in recent years.

Of course, avoiding debt at any cost is not smart either if it means depleting your cash reserves for emergencies. The challenge is learning how to judge which debt makes sense and which does not and then wisely managing the money you do borrow.

Good Debt vs Bad Debt

Good Debt

Good debt includes anything you need but can't afford to pay for up front without wiping out cash reserves or liquidating all your investments. In cases where debt makes sense, only take loans for which you can afford the monthly payments.

Bad Debt

Bad debt includes debt you've taken on for things you don't need and can't afford (that trip to Bora Bora, for instance). The worst form of debt is credit-card debt, since it usually carries the highest interest rates.

Sometimes the decision to borrow doesn't hinge on how much cash you have but on whether there are ways to make your money work harder for you. If interest rates are low, compare what you'll spend in interest on a loan versus what your money could earn if it were invested. If you think you can get a higher return from investing your cash than what you'll pay in interest on a loan, borrowing a small amount at a low rate may make sense.

photo by: images_of_money

I need to know about Do It Yourself Credit Repair.

I've been told that there are credit repair companies that can remove all of the bad things from my credit report and raise my scores dramatically...FOR A LARGE FEE!

No company has the ability to remove negative items on you credit report without proof that they are in fact mistakes.

A credit score in the US is a number representing the creditworthiness of a person or the likelihood that this person will pay their debts.

Lenders, like banks and credit card companies, use credit scores to determine if in fact a person should be given a loan and based on the score, what interest rate they will charge.

The most widely used credit score model in the US is FICO or Fair Isaac. 

In 2006, the three major credit reporting agencies, Equifax, Experian and TransUnion, introduced VantageScore. 

Regardless of which reporting agency is being used, they all use a somewhat similar formula to determine a CREDIT SCORE. 

This score is based on:

• Payment History (highest weighted percentage)
• Credit Utilization (debt-to-credit ratios as well as how much debt is available) This is the 2nd highest weighted percentage.
• Current and and Delinquent Balances The total amount you owe relative to your employment/income history plus bad debt will impact your score.
• Length of Credit History If you have little or no credit history, it could be a negative to your score until you establish a credit history.
• Types of credit used (installment, revolving, consumer finance, mortgage) A variety of types of debt and a good history of management helps.
• Recent searches for credit.  Credit inquiries that were made yourself (say, to check your credit score), by your employer (to check prior employment history), or by companies initiating prescreened offers of credit or insurance do not have any impact on your credit score.

 OK, so what do you do if you see mistakes on your credit report?

You can contest and correct legitimate errors on your credit report by contacting each reporting agency.

You will need one or more of the following:

• A statement from the company showing that you indeed paid off this account
• Letter from the company if you negotiated a settlement
• Canceled check showing payment was received and processed

 You can contact each yourself:

FICO  (877) 434-7877 or www.support@fico.com

Equifax  (800) 238-8067 or 

https://www.ai.equifax.com/CreditInvestigation/jsp/ECC_Dispute_Login.jsp

Experian (714) 830-7000 or  

https://www.experian.com/consumer/cac/InvalidateSession.do?code=DISPUTE

TransUnion  (800) 916-8800 or 

http://annualcreditreport.transunion.com/entry/disputeonline

The process may take time, so be patient and persistant.

But, if you just don't have the time, you may consider seeking professional help...AT A PRICE!

What You Need to Know About Credit Card Debt Repair

Many people call in asking us about credit card debt repair.There are many companies who call themselves "credit repair" companies.  They claim to be able to remove negative items from you credit report in order to improve your credit score. 

It is a big mistake in thinking that any company has the ability to remove a negative item on a credit report without adequate proof of erroneous information. Any item that is removed with fraudulent proof will most likely be placed back on the report.  This could produce a legal issue, so be careful.

The real question is, "Can I do this myself?"  The answer is YES!

You can contest and correct legitimate errors on your credit report by contacting the three major credit reporting bureaus yourself.  You can use the forms provided on their websites or you can write a simple letter stating the item that you are disputing. Make sure to include proof that your dispute request is legitimate such as:

• A statement from the credit company showing payment
• A letter from the credit company showing settlement
• A canceled check showing payment was received and proccessed

Mistakes on your credit report can significantly reduce your credit score, so make sure to review your credit report and dispute any errors as soon as you find them.  Here is the contact information for each of the three bureaus.

*You may be required to submit an additional form to TransUnion.  This form can be found at http://bit.ly/ctNrKE