DeadBeats Are Us

By: Marjorie Salada

Debt Freedom it is something that everybody wants to achieve, but the question is, how you get there. Reaching debt freedom involves changing the way we think about our money and the way we manage our money. I am not saying you need to give up all the things that you like, but you may want to take a good hard look at what is really important in your life.

Is having things now more important than having a future. Fulfilling your dreams in the future will take some planning in the present. How you handle your money in the present will determine how much of it you will retain for your future. There are some very basic and simple changes you can make in your daily life that will help you prepare for a financially sound future. Here are some simple changes you can make that will you achieve debt freedom:

1. Stop financing your lifestyle with credit cards. If it is not an emergency (the latest shoe style is not an emergency) or it can not be paid off in full monthly, it should not be charged. Credit cards are robbing Americans of a sound financial future.

2. Keep a log of your spending. Once you know where your money is going, it will be easier to see where you can cut back. Put the extra money towards paying down your credit cards.

3. Pack your lunch 3 days (or more) a week. Eating out can be expensive and brown bagging it will save you money.

4. Instead of going out to the movies, rent a movie and enjoy a family movie night at home.

5. Have a pizza party and make your pizza at home instead of ordering out.

6. Buy in bulk and freeze dinners. This will not only save you money it will save you time.

7. Give handmade gifts and cards.

8. Shop at consignment shops, thrift stores, discount stores and yard sales.

9. Consider discontinuing or downgrading your cell phones and cable TV plans.

10. Pay more than the minimum payment on your credit cards. If you pay only the minimum on a credit card with a $3000 balance, it will cost you $2780 in interest and will take you 8 years to pay the balance off. If you pay an extra $50 a month towards your balance, you will save $1800 in interest and have your debt paid off in three years.

Bottom line is before you can live debt free you have to become debt free. Following some of these tips will help you achieve debt freedom. With a little bit of effort, you will be able find many ways of saving money. Start by looking at things you spend money on and find ways to reduce or eliminate these expenses. Every little bit helps.

About The Author Marjorie Salada is the owner of http://www.debtmanagement1.com, a website that contains information on debt consolidation, debt settlement, debt counseling and how to manage credit card debt.

By:  Marjorie Salada 

Have you started receiving credit card debt settlement notices in the mail? Have you been receiving collection calls? If this is the case, you have probably been in debt and been dealing with financial difficulties for quite some time.

Creditors are sometimes willing to settle the account for a lesser amount if the credit card account is seriously delinquent or has been written off. This creditor will usually accept the settled amount in one payment and the payment has to be made within a short period of time.

Now you may wonder why a creditor would settle for less than what is owed. Your credit card issuer is trying to reduce their losses and they have concerns about you paying this debt. Your credit issuer feels that recovering some of their money is better than not getting any of it back. Keep in mind that accepting a settlement may affect your borrowing ability in the future with this creditor, but it is a better option than bankruptcy or doing nothing at all.

A creditor will not usually settle on an account that is current. Normally, the account has to be at least 90 days delinquent before they will talk settlement and many credit card companies will wait longer than that. Here are a few things you should be aware of before agreeing to a settlement.

1. Your settlement payment may not completely satisfy the debt. There is a possibility that the uncollected portion of the debt could be turned over to another collection agency for further collection activity, but this is not the norm.

2. The IRS considers the amount of the debt that has not been satisfied as income. Any amount that exceeds $600 will be report on a 1099, to the IRS, by your creditors. You will be required to pay taxes on this amount.

3. Know what’s on your credit report. If the debt is not on their at all, it is not recommended that you do anything with this debt. If it is showing as being “charged off,” this is negative note on your credit report. If you settle, it will be noted as “settled for a lesser amount” which as also somewhat negative, but not as bad as doing nothing about it at all.

The best thing to do is to try to deal with the original creditor. Communicate with them in writing. If they will not deal with you, contact the collection agency in writing. If at all possible, try to negotiate a repayment plan on the balance. If you decide to settle the debt, get the terms of the settlement in writing to avoid problems on down the road. Once you have paid the debt, ask for a release of debt as proof that the company has agreed that the debt has been satisfied.

The best thing that you can do for yourself is to examine the curcumstances that caused your debt to get to this point and to put a plan in place that will prevent you from ending up there again.

About The Author
Marjorie Salada is the owner of http://www.debtmanagement1.com, a website that contains information on getting and staying out of debt. If you are looking for information on debt consolidation, debt settlement, debt counseling or how to manage credit card debt this site is an excellent resource. 

By: Jennie Crawford

Is living debt free possible? So many people in todays society struggle with overwhelming amounts of debt. Our society has become one obsessed with more. More everything. Debt free living is certainly a goal for most, but is it possible?

To discuss debt free living, for the purposes of this article, I am not going to consider mortgages. Although it is a dream of mine personally to pay off my house and enjoy living without a mortgage, at this point in my life, its not going to happen. At least not for at least 10-15 more years. So the debt free living that I am going to be discussing in this article is becoming credit card debt free.

It sounds simple. If you can’t pay for it, don’t buy it. Thats how our parents lived as did their parents. And the advice to pay more then the minimum payments is great advice. But for some, making even the minimum payments is a struggle. How to pay more? I remember a friend of mine in college who got in over her head with credit card debt. She would use the availability of cash advances on her credit cards to make the payment. Or use one card to make the payment on the others. It is truly irresponsible to give students in college who are adjusting to life without the supervision of their parents, credit cards. Those who have little to know experience with credit coupled with full time schooling and perhaps part-time jobs have no business with credit cards. Speaking from experience, it is very easy to get in over your head very quickly. And difficult to get out. Debt free living or the lack thereof effects every aspect of your life. If you are overwhelmed with debt, there is little else you can think of. Debt free living seems like an unobtainable dream to most.

Debt free living. How to do it? As I struggle with debt myself, I have to ask myself. Is there a way out? Certainly not as easy one. If is comes right down to it, what is said most often in this case is most true. If you can’t pay for it, don’t buy it. Pay more then the minimum payment each month or you’ll never pay it off. Just take a deep breath and decide you don’t want to live your life this way anymore.

Debt free living is possible, but not easy. It takes hard work and determination. It is a goal of mine and I believe should be a goal of everyone. When I send in that last payment on that last credit card - I will have the best nights sleep EVER. And that day will come. I will experience debt free living before I am too old to enjoy it. We all should. Debt free living should be everyone’s goal. Or at least not getting into debt to begin with.

About Author

Jennie Crawford is the stay at home mom of two children. For more information on getting debt free, go to http://www.jenniecrawford.com/debtfreein3

Source: ArticleTrader.com

By:  Stephen Snyder

Reprinted with Permission

Less than 6% of the population in the United States can brag about having FICO credit scores above 800.

It’s an elite club.

The benefit of having a score above 800 is that you’re guaranteed credit approval with the best terms from the best lenders. No hassles. Only the red carpet treatment.

But do you really need to have FICO credit scores that are 800 or higher to accomplish your goals? I don’t think so. Any score over 740 is worthy of celebration.

You may have scores in the high 500’s or low 600’s, and you may think “740, yeah right!” But if you follow the steps I’m about to outline, you will see your scores approach 740 and you will become much more attractive to lenders.

So how do you go about building your FICO scores to 740?

I can’t tell you specifically, because I don’t know what your negative reason codes are. You see, the secret to increasing your FICO credit scores is for you to understand your negative reason codes.

Negative reason codes are a boring topic to people with good credit.

But to people that had credit challenges in the past, it can mean the difference between continuing to be denied credit or hearing those wonderful words, “You’re approved.”

Your negative reason codes are the keys to unlock credit doors that up until now have been slammed in your face.

The great thing about negative reason codes is there is no guesswork involved. Your negative reason codes will tell you everything you need to do to accomplish your goals of buying that new car you always wanted or getting approved for that mortgage with a single digit interest rate and no money down.

By understanding and acting on your negative reason codes lenders will no longer treat you like a second-class citizen. No more “special finance” departments. No more high-interest finance companies. You can look for an apartment or begin house shopping with confidence.

Powerful stuff. And it’s easier than you think.

First of all, negative reason codes are two digit numbers that accompany each of your credit scores.

When you purchase your FICO scores you should automatically receive four negative reason codes for each score (from each credit reporting agency), giving you a total of twelve codes.

…as long as you purchase your scores and codes through the right source.

The best place to purchase your scores and twelve negative reason codes is NOT myfico.com. You don’t receive all twelve negative reason codes from myfico.com.

Technically, you receive four negative reason codes and eight “positive” reason codes. Unfortunately the positive reason codes are absolutely no help to someone with low credit scores.

I was so frustrated that Fair Isaac didn’t give all twelve negative reason codes that I begged Fair Isaac to make the real negative reason codes available to the public. So after several months of me prodding them, they finally gave in and created myfico/12.com for us. Through this site you get everything lenders see! Cool.

Mortgage lenders are another good source to get your scores and negative reason codes when you apply for a mortgage. Just be sure your mortgage company follows the new FACT Act and shares your scores and codes with you. It’s mandatory now.

Alright. So now you know what negative reason codes are and how to get them.

How do you know what these codes mean?

The definition of each code is explained with your credit scores.

For instance, a negative reason code “38″ will be defined as: “serious delinquency, and derogatory public record or collection filed.” A negative reason code “08″ is defined as: “too many inquiries last 12 months.” So your negative reason codes tell you exactly why your scores aren’t higher.

Unfortunately, the definitions provided by the credit reporting agencies are not as detailed as I would like. That’s because they were designed to help lenders explain why you were declined…not designed to be shared with consumers.

This should help.

I was fed up with how difficult it was to decipher negative reason codes. (Boy, I’m fed up a lot, aren’t I?) So one day I sat down and read every single reason code, then rewrote it in plain English so I could understand it!

Imagine how much easier it would be for you to understand your negative reason codes if you had this plain English translation for yourself?

 

Now you know all the negative reason codes…in plain English.

Joining the 740+ Club is easy when you have a goal and a clear game plan to make it happen based on your negative reason codes.

Your negative reason codes are the critical keys to unlock credit doors that up until now have been slammed in your face.

I have good news for you. You can get your own free copy of the Negative Reason Code Decoder Report now by going to:

http://www.lifeafterbankruptcy.com/links/CodeReport.pdf

 

By: Talbert Williams

There are simple, common sense steps you can take to get out of debt. Unfortunately, like losing weight, they are not necessarily easy or painless - but if you stick to them, you will become debt-free.

Stop Borrowing Money

The first step to escaping debt is to stop borrowing. Simply put, the more you borrow, the more you will owe. You can’t borrow your way out of debt, but must instead pay off your existing debts while not borrowing additional funds.

If you are a typical consumer, you engage in a lot of borrowing by making purchases with credit cards. You should try to break this credit habit. Most credit card companies and store cards will reduce your credit limit if you ask them to do so. (The credit card company may try to talk you out of lowering your credit limit - because they make the most money when they let you borrow more than you can afford.) You can also cut up some or all of your credit and store cards.

Budget Your Income and Expenses

Map out your income, expenses, and payments on your existing debts for a typical month, and create a balanced household budget. Remember to budget some money for emergencies - if you are fortunate enough that no emergency occurs, you can either save the money for future emergencies or (if you are afraid that you will spend it) use it to pay down some of your debts.

If you are paying credit card debts, budget to pay more than the minimum required monthly payment. Minimum payments are usually set in an amount such that, if you don’t make an additional payment toward the credit card balance, you will never pay off the debt. Usually, your credit cards will carry the highest interest of any of your debt, and thus it will make sense to pay them off first.

If you cannot figure out how you can possibly pay your bills and still have enough money to survive at the end of the month, you may wish to consider using a credit counselor or a debt management service. You may also wish to consider the possibility of a debt consolidation loan.

Stick To The Budget

For many people, this is the hardest part - it is easy to create a theoretical budget which allows them to get their debts under control, but impossible to resist the impulse purchases which break the bank each month.

You can help avoid temptation by cutting up your credit cards and instead making your purchases with cash. As previously mentioned, you can also have your credit limits lowered.

If you need help creating a workable budget or sticking to the budget, as previously suggested, you may wish to work with a debt management service.

About The AuthorTalbert Williams offers debt consolidation referrals and advice. Formore information, articles, news, tools and valuable resources ondebt solutions, visit this site: http://www.1debtfreedom.com. Talbert Williams offers debt consolidation referrals and advice. For more information, articles, news, tools and valuable resources on debt solutions, visit this site: http://www.1debtfreedom.com. partnership@1debtfreedom.com

Reprinted with permission from http://www.articlecity.com

By: Gary Foreman

This month on our two credit card statements are notices informing us that as of Oct. 1st we may be charged “more than two” late fees or over the limit fees” per month. What’s going on?

Gwen

It’s estimated that Americans charged $1.8 trillion in 2005 on the 690 million credit cards outstanding. According to a Government Accountability Office study released in September, 2006, 13% of credit card users were assessed over-limit fees and 35% were assessed late fees in 2005. So Gwen has a lot of company. Let’s try to do three things. First, understand what these fees are. Next, see how fees are changing. And, finally, what Gwen can do to keep from being hurt. Credit cards have always had fees. Some, like for a late payment, are understandable. Others came along as credit cards took on new capabilities. Think cash advance and balance transfer fees. Still others, like over-limit fees, seem like they shouldn’t be possible. You would think that they wouldn’t allow you to borrow more than your limit. There are also ‘penalty interest rates’. If you’re late with a payment or go over your credit limit you could see your rate bumped to 30% or more.

The 2006 GAO study looked at fees and penalties. It said that not only were fees increasing, but the credit card companies were doing a lousy job of informing consumers about those fees. The credit card companies are obligated to tell you about any fees or penalties and how they’re triggered. Some fees, like paying your credit card bill by phone, are sometimes not clearly disclosed. What Gwen received with her statement was a notice of a change in how fees would be charged. And, as long as she’s notified they can get by with almost anything. Late fees have nearly tripled in the last 11 years. And many cards have adopted a ‘universal default clause’ that says a late payment on any card will trigger the penalty interest rate. Credit card companies say that the higher interest rates and fees are appropriate based on risk factors. If it weren’t for the higher fees, they claim that they wouldn’t be able to offer credit to riskier consumers. In fairness, the GAO’s survey found that (at least among 6 of the largest card issuers) 80% of accounts paid interest rates of less than 20%. So the vast majority of card users are not paying penalty rates.

But the study also found that the disclosures were written well above the eighth grade reading level and (surprise!) featured small print. They recommended that the Federal Reserve Board revise rules on credit card disclosures. Now that we understand what’s going on we can try to help Gwen avoid problems. The first thing is to recognize that the card issuers get to make most of the rules. And, whether those rules are fair or not isn’t relevant. The best she can do is to avoid getting hurt by those rules. Get familiar with each account. The only way to know exactly what’s allowed is to read and understand the “Card Member Agreement.” Tough duty. But necessary. Watch out for unexpected fees. Like for balance transfers or increasing your credit limit. Know what could trigger fees or penalty rates. Know exactly when your payment is due. Keep a list of due dates for your credit card accounts. If you don’t get the bill, it’s your responsibility to contact the company and still make a timely payment. If possible, the best thing to do is to join nearly half of the cardholders who paid little or no interest. That’s because they do not carry a balance.

Obviously, for many people that’s not immediately possible. Then it’s important to send in your payment as soon as possible. Being seven days early is better than being one day late. If you find it difficult to get your payment in on time, you might want to authorize the credit card company to automatically debit your checking account for the minimum payment each month. You’ll probably pay for the service, but that way the payment can’t be late. Talk to your card issuer. If your due date falls at a bad time of the month, they’ll move it.

If Gwen is near or over the limit on any card, she should try to shift part of the debt to a different card. Some fees are even being assessed when an account is merely getting too close to the limit. Your best bet is to keep balances to less than half the available credit. Although the higher late fees are infuriating, they do minimal damage. The real problem is in the universal default clause. Most credit card accounts now have a universal default clause. Suppose your rate went from 15% to 30% on every open credit account. For every $1,000 you owe, an extra $150 interest would be charged each year. So if you’re the type of person carrying a $10,000 balance, that one late payment could cost you $1,500 per year. For as long as you have the balance! Gwen is right to pay close attention to her credit card accounts. With newer fees and penalty rates in place, it becomes more important to manage your credit. In fact, it’s critical to your financial wellbeing. _______________

Gary Foreman is a former financial planner who currently edits The Dollar Stretcher website . If you’d like to stretch your day or your dollar visit today! You’ll find hundreds of articles to help you “live better…for less”.

About The Author Gary Foreman is a former financial planner who currently edits The Dollar Stretcher website . If you’d like to stretch your day or your dollar visit today! You’ll find hundreds of articles to help you “live better…for less”. View their website at: http://www.stretcher.com

This article was reprinted with permission from http://www.articlecity.com

 

 

 

By Rebecca Fine

Just a few short weeks ago, Mike began to put his big plans for the year into action. Like so many of us, he and his wife had decided that now that their daughter was grown, they wanted to work less and enjoy life more — to travel, spend time with friends and family, and just generally enjoy their home on the lovely east coast of New Zealand.

Now you only have to look around to see that WANTING that kind of freedom is where many people begin and END the process! (And — ouch — sometimes we only have to look in the mirror for a good example, right?)

But for Mike, this was just the beginning. He’d recently read a small forgotten classic from 1910 entitled, The Science of Getting Rich, and something in it just “clicked” for him. Sure, he’d also read plenty of “self-help” books before. But, as he put it, “without taking them onboard.”

This time, though, something was different. This time Mike decided to go for it, to apply the principles he was learning from that little book as he set about changing his life.

Back in 1987 Mike had started an electrical company and it did very well. And he and his wife also own and operate another full-time business, too. To start this year, Mike closed down his business to concentrate on a new interest, property investing, while his wife retired from running the other business, opting to handle just a bit of the administrative work on a part-time basis.

As you might expect, they originally figured this would mean some belt-tightening while Mike got his new venture going — a perhaps substantial temporary loss of income. But rather than focus on that, Mike decided to follow the instructions in The Science of Getting Rich and focus on his clear mental image of the life he wanted and to begin to take action in that direction. He also opted to participate in a course called “The Science of Getting Rich for Practical Geniusesâ„¢.”

Here’s what Mike reported just a little halfway through the course:

$36,000 in unexpected income has arrived!

You see, over the years Mike has developed several products and not long ago he came up with one that seemed very promising — a quality management logging system for welding pipes, including the electronic device that runs the system.

But this side of the business somehow didn’t work out quite as he’d expected, so when his main client went out of business, Mike just put the product on the shelf in the garage and forgot about it. And there it sat, abandoned, for more than a year and a half.

Then, suddenly, a company which had bought several of his devices in the past showed up wanting that almost-forgotten product! Seems they’d been trying to develop a similar one on their own but had become bogged down in major difficulties. They offered Mike a good price for his brain-child and he was all set to agree.

But there was a hitch.

Two deal-killer clauses glared out of the contract — and the would-be buyer’s lawyer wasn’t budging.

“Never allow yourself to be disappointed,” says Wallace Wattles, author of The Science of Getting Rich. So here’s what Mike did.

“I tried to think of and see the deal with a positive outcome rather than see the problems in our way. I also knew the contract wouldn’t work for me with those two clauses in it, so I let go of any attachment to the outcome and rang the person I’d been dealing with directly, instead of talking to the lawyer. I told him what I wanted, and I really was happy for the deal not to go ahead otherwise.”

Result?

“We got our money last week. The amount will cover our basic living expenses while I start our new venture and it’ll also take care of the cut in my wife’s income.”

And Mike did MORE. Understanding Mr. Wattles’ admonition that “you must give every man more in use value than he gives you in cash value,” Mike made the point of adding extra to what the buyer got.

“I spent days creating instruction manuals and also came across extra product when I did my final clean-out which I happily passed on to them at no extra cost. It ended up a good deal for all.”

Good for you, Mike! And thanks for the excellent example of what Mr. Wattles writes about:

“It is not your part to guide or supervise the creative process. All you have to do with that is to retain your vision, stick to your purpose, and maintain your faith and gratitude.

“But you must act in a certain way, so that you can appropriate what is yours when it comes to you and so that you can meet the things you have in your picture and put them in their proper places as they arrive.

“You can really see the truth of this. When things reach you, they will be in the hands of others, who will ask an equivalent for them. And you can only get what is yours by giving the other person what is rightfully his …

“Under the impelling power of the supreme spirit, people’s affairs will be so ordered that someone will be led to mine the gold for you. Other people’s business transactions will be so directed that the gold will be brought toward you. And you must so arrange your own business affairs that you may be able to receive it when it comes to you.

“Your thought makes all things, animate and inanimate, work to bring you what you want, but your personal activity must be such that you can rightly receive what you want when it reaches you.”

Do you see, my friend, how all this is EXACTLY what Mike is and has been doing?

He is …

• Retaining his vision,
• Sticking to his purpose,
• Maintaining his faith and gratitude,
• Acting in “the certain way” so that he is “able to receive.”

Now lest you think that Mike has some kind of superhuman powers of concentration and focus, listen up to what he says here:

“I use the science of getting rich when I remember. Some days I work on it and others I get busy and forget. So I think results can come even when you start and only have ‘average daily attendance.’ I have, though, always been grateful … It is great to have a system that gratitude is a part of.”

None of us is yet perfect in thought and action, of course, and as Mr. Wattles tells us, it takes work and commitment to direct our attention and thinking. In short, like everything else worth doing, it takes practice to get good at it.

Most of us are just beginning to use these long-neglected “muscles” and what matters now is that we just start and continue to NOTICE our thinking when it goes off-track and to — without blame, shame, or guilt — direct our remarkable power of thought in the way we CHOOSE, rather than just flipping into an automatic, conditioned response — which is, when you get right down to it, the exact OPPOSITE of thinking in the certain way (or thinking at all!).

And I promise you that it does get easier and completely natural with time and practice!  

So how might YOU follow Mike’s lead with whatever it is you want to create, experience, or attract to yourself? Take the time to understand these principles and apply them to your own life. “Study this book. Make it your constant companion,” as Mr. Wattles advises. Study it on your own. Study it with like-minded friends. And “take it onboard,” as Mike is doing.

You, too, will feel the excitement as what you want begins to show up in gloriously expected and UNexpected ways!

Oh, yes — one more thing. You may have noted that Mike’s forgotten product netted him $35,000 and the title of this story says “$36,000.” Here’s the rest (so far!):

• “We have five mature avocado trees on our property that for the first time we got a commercial picker to pick.” Mike had thought the fruit would be worth about $200 after picking costs. “A cheque arrived yesterday for $850.”
• “Also our Inland Revenue Department [the tax agency similar to the Internal Revenue Service here in the US] sent me a $200 refund last week for an error they made last year.”

A few months ago, right before the course started, Mike said. “With The Science of Getting Rich, this year is going to be great.” Now he grins and says, “Quite a couple of weeks, I think you would agree. I wonder what next week will hold!”

What indeed. You go, guy!

---

Rebecca Fine is the founder of The Science of Getting Rich Network where you can download your free copy of the amazing 1910 forgotten classic, The Science of Getting Rich. http://www.scienceofgettingrich.net    ©2001 Certain Way Productions.

By:  Stephen Snyder of the After Bankruptcy Foundation

Reprinted with permission 

You’re getting ready to make a major purchase on credit and want to get the lowest interest rate possible. You know that paying down your credit cards will increase your credit scores.So that’s what you do.You collect all your recent credit card statements. Verify each balance owed. And grab your checkbook.

But then you think, “I want these payments to post as soon as possible.” So you look at your different lenders to determine the fastest way they will accept your payments.

For some, it makes more sense to pay by phone—so you phone in your payments. Others, you pay over the web. And for the ones you must send a check by mail—you use FedEx®—so your payment arrives as soon as possible. You think, “Now I’ll really see results fast!”

Or will you?

You’ve significantly reduced the balances on all of your credit cards. Two weeks go by. (Enough time for the lender to receive your payment and post it to your account, right?) You call each lender to verify they received your payment. They did.

So far, so good.

Now…the moment you’ve been waiting for. You go to your computer and type in www.myfico.com/12 to purchase your new FICO credit scores. You type in your credit card information, press “purchase,” and await your new and improved FICO scores. Visions of your new car, new home, increased credit card limit, or small business loan dance in your head.Your FICO scores appear on the computer monitor…Nothing’s changed…your scores are the same. What happened?

You have become a victim of “credit reporting lag time”

Although you significantly paid down the balances on your credit cards for the right reason (to improve your credit scores so you could obtain better credit terms at the lowest possible interest rates), you won’t see the effect on your credit reports for 30 to 60 days—and in some cases even longer.

To make things even more frustrating, if you decide to use your credit cards during the 30 to 60 day time period after you paid down your balances, your credit card accounts will post with the new balances you charged during that time period.

Your credit reports will never show a $0 balance even if you pay them in full each month
This occurs on auto loans, mortgages, student loans and any other accounts where you make a monthly payment to a creditor who reports that account to the credit reporting agencies.

So the only way to truly accomplish your goal of obtaining $0 balances on all of your credit cards would be to pay them off and not use them for up to 60 days, then purchase your FICO credit scores after that time to see any increase in your scores.

Here are the two fatal flaws in the credit scoring system

1. The time it takes lenders to report changes in your account to the three national credit reporting agencies.
2. The amount of time it takes the credit reporting agencies to make those changes.

First, understand that FICO credit scoring is dynamic. Your FICO scores change any time information on your credit reports change.

Here’s how it works…

A new FICO score is calculated every time your credit reports are purchased, whether it’s by you or a lender. Your new score is based on the most current information received by the three national credit reporting agencies (i.e., Equifax®, TransUniontrade; & Experian®). In a perfect world—lenders would report your payments the moment you paid them and the credit reporting agencies would accept their updates instantly.

In this perfect world—our FICO scores would be based on the real-time, “up-to-date” information on our credit reports, and our scores would be true and accurate calculations based on our credit as of that second.

It’s interesting that I can go fill my tank full of gas (a pretty expensive purchase these days—we’re up to $3.19 a gallon here in Indiana!) and within seconds of swiping my gas card the lender adjusts my balance and available credit limit based on that recent purchase, and everything is recorded in the lender’s master file.

But it takes that same lender 30 to 60 days (sometimes longer) to report that information to the three national credit reporting agencies.

There is no law stating that your lenders must report your payments That’s right. Lenders don’t have to report your payment history at all. There is no law that says they must. The credit reporting system in America is voluntary.

So what’s the work-around?

There isn’t one, per se.

You just need to know how the system works. This is why, if you’ve ever seen me at one of our seminars, I always stress to make sure that all your lenders report to the credit reporting agencies. The only way to make sure a lender reports to all three agencies is to ask—and then check your credit reports to make sure.

What to do before you apply for credit

Begin the following process 60 days before making a major purchase using credit:

1. Check to make sure your lenders report to all three of the credit reporting agencies. You can get your free credit reports at www.annualcreditreport.com
2. Identify the lenders that do report. These are the ones that you want to pay off (or pay down) as soon as possible.
3. Then, if possible, don’t use your credit cards for the next 30 to 60 days (the time period it takes most lenders to report your payments to the credit reporting agencies).
4. Don’t apply for credit or credit increases during that same time period. Credit inquiries lower your credit scores.
5. When you reach that 60-day mark…purchase your FICO scores again at www.myfico.com/12 (inquiries from this site will not lower your credit scores).
6. Apply for credit if your scores are high enough to get you approved for the credit you seek.To speed things up—consider a service that monitors all three of your credit reports. When you use a credit monitoring service, instead of you having to constantly monitor your credit reports, the service monitors your reports for you—and you’ll know exactly when something changes on your credit reports. This way, you’ll avoid playing the extended waiting game. 

Stephen Snyder is the founder and president of the After Bankruptcy Foundation, a non-profit organization that provides free bankruptcy information and recovery steps.

He is the author of the highest selling bankruptcy recovery book, “Credit After Bankruptcy: A Step-by-Step Action Plan to Quick and Lasting Recovery After Personal Bankruptcy“.

 

 

By:  Stephen Snyder

 ”I was just informed the interest rate on my credit card is jumping from 10% to 29%. I’ve never made a late payment. I called my bank and they told me it’s because some of my other credit accounts were highly utilized.” 

That’s exactly what happened to my friend Kyle recently. Because he was close to his credit limits on unrelated accounts his bank legally jacked up his interest rate nearly 200%.

The practice is generally referred to as a “universal review.” And more and more lenders are using this trick to fill their pockets at the expense of an unknowing public. 

Kyle didn’t have late payments with the credit card that raised his rates. In fact, he didn’t have any late payments on any credit cards. However, his lender simply decided that because Kyle was using his other credit, he somehow became a greater credit risk to them—so they nearly tripled his interest rate. 

And this situation hasn’t only happened to Kyle. You see, I have several friends that hold high positions within the banking industry. Here’s a recent comment from one subscriber who works as a credit analyst for a major national bank. This information is so hush-hush he’s asked us to keep his identity secret: “…Everyday in my job as a credit analyst I see so many mistakes people make with their credit. You are right, most all lenders do a universal review, especially credit card companies. When we review a card member’s credit bureau report (CBR) we are assessing risk to the bank and our goal is to reduce risk and exposure. When we find risk we either lower the credit line, increase the APR, or close the account. That is why account performance and utilization of revolving trades is so important…”  As you can see, Kyle’s situation could have been worse. The lender could have closed the account or lowered his credit limit. As you can see, Kyle’s situation could have been worse. The lender could have closed the account or lowered his credit limit.

As you can see, Kyle’s situation could have been worse. The lender could have closed the account or lowered his credit limit.

As you can see, Kyle’s situation could have been worse. The lender could have closed the account or lowered his credit limit.

As you can see, Kyle’s situation could have been worse. The lender could have closed the account or lowered his credit limit.

And the credit analyst went on to say…

“…A lot of times we are using old income information when making a decision. Usually, when we see something that doesn’t fit the card member’s profile, we will call to try and get updated information such as current income and reasons for recent delinquency on their credit reports or their account with us. If we can’t get them on the phone the moment we call we have to make a decision with the information we have. And that information can be several years old. If the income we have on file is older than six months I can’t use it and need to call. If I don’t get the card member I have to make my decision right then—I can’t wait as we review thousands of accounts a month. So it is in the card member’s best interest to call the credit card company and give them updated income information and any explanation for delinquency or increased utilization.” So what do you do? So what do you do?

So what do you do?

So what do you do?

So what do you do?

First of all, if this has not happened to you, I wouldn’t get overly concerned just yet. Just be aware that nearly half of the credit card lenders do some sort of universal review and it’s a growing trend. To be on the safe side, whenever your income increases you should call your credit card lenders and let them know make sure they note it in your file. If your credit card lender does conduct a universal review on you and you’re negatively affected by their decision here’s what to do: 

• Contact your lender immediately and determine why the lender feels you’re a greater credit risk…and then fix it, if it’s fixable. It could be as simple as giving them updated income information.
• If the lender’s answers don’t sit well with you, begin interviewing new lenders. Call and request credit card applications.
  To determine if a credit card lender uses universal review, do this: go to the disclosure form and find the headline “Other APRs,” then look for the term “default rate.” That should tell you what you need to know. And if you’re comparing credit cards you already have, and cannot locate the original application you signed…call each lender and ask them for a copy of your application with your current account’s terms and disclosures. You need to know your current terms, as they may not be the same as the original offer you received.
• After you have compiled your list and found a lender that will give you acceptable terms and rates, contact your original lender and tell them you are considering closing the account.

Remember, before you begin this cat & mouse game, have a “Plan B” in place. Just make sure “Plan B” doesn’t use the same or worse practices as your original lender.

Just be aware of card tricks. Not all lenders use them (thank God), but be careful of the ones that do. Lenders have lowered the bar on their ethics. It’s up to us to read the fine print and play their game.

Stephen Snyder is the founder and president of the After Bankruptcy Foundation, a non-profit organization that provides free bankruptcy information and recovery steps.

He is the author of the highest selling bankruptcy recovery book, “Credit After Bankruptcy: A Step-by-Step Action Plan to Quick and Lasting Recovery After Personal Bankruptcy“.