debt management

Do I Repay Debt Or Invest?

December 15, 2015 by illinois

The time has come, you got a big chunk of cash say from taxes or a big check, now you are faced with the desicion to decide whether to repay debt or invest. It can be a daunting decision, nevertheless it’s one that must be made. You have not only your future but your family’s future to think about. It’s never an easy task. When choosing whether you should repay debt or invest what needs to be taken into consideration? Well there’s many things to take into consideration here, let’s take a look at some of them.

[Read: Controlling Your Personal Debt]

How to Decide?

There are my things to consider when you get some extra cash and are faced with the decision to repay debt or invest. Such things include:

1. Back up Stash.

Imagine you and your family take a road trip to go visit family, on the way back from the trip you hear a pop then the vehicle starts making a thumping noise. You get out to check everything over only to find you have a flat tire. Guess who forgot to put a spare tire in the back, yup you did. Do you have a back up stash of money to get another tire to get you and your family home? There’s something to take into consideration when deciding whether to repay debt or invest. Every person who has a sensible head on their shoulders should have a back up stash of cash set aside. When deciding whether to repay debt or invest they should consider their back up plan if they run short of cash.

2. Credit Card Debt.

The next thing to consider when faced with the task of repaying debt or investing obviously would be to take a quick (or long) peek at your credit card debt. What does it look like? Do you have any outstanding credit card debt? If so, the decision is pretty clear, you should repay your debt. But what if it’s not a lot. Should you repay your debts or invest? In all fairness you probably should repay this debt, if not to get it out of the way, then to put your mind at ease, you will feel so much better when you have that paid off. It will be a burden taken of your shoulders you didn’t even know existed. Let’s move on to see what’s next on this quest.

3. Kids College Funds.

Assuming you looked over your debt and have enough emergency money stashed away to get you by in case of an emergency, how do your kids college funds look? Do you even have a savings account open for them? It’s wise to set this up for your children so you are setting up their future for success so they are not faced with the decision to repay debt or invest as you are. You will be setting a phenomenal example for them and teaching them responsibility. If you are wise with money they are likely to follow the example you have set and not accumulate debt, but instead put it away and pay their bills on time. They won’t be forced to get a student load, ultimately getting themselves into debt as well.

4. Loans.

When deciding whether to repay debt or invest you need to look over all of your debt, yes, that means your loans. Are you behind on any loans you have taken out? You see if you don’t repay your loans we all know that you can lose your house or car if you don’t repay your loans. It’s a wise choice to repay those if you are behind on them once you get behind not only is it not fun playing catch up, but it’s hard to get caught up to where you need to be.

5. Retirement Fund.

One of the best things you can do for yourself when deciding wether to repay debt or invest is investing in your retirement this way when you can no longer work you have something to live off of. It’s a smart move that guarantees you will be taken care of no matter the circumstances in the future, you need to think about it now while you’re young and making money.You want to make sure that when you are old and frail you can live the life you had worked so hard to have. Imagine sitting in your beautiful lake side home, sipping a nice hot cup of coffee overlooking the lake, not having a care in the world because you decided to invest in your retirement. It’s not just a dream you can have that, you deserve that.

[Read: Strategies to Get Out of Debt]

No matter what decision you decide to make, make sure when you do decide whether you should repay debt or invest, make sure you consider all the options, you wouldn’t want to make a mistake, because these are big mistakes that affect your entire life ahead of you.

How to Handle Delinquent Debt

November 27, 2014 by illinois

America can be considered the land of a variety of things. It can be called the land of opportunity or the land of freedom. It can even be referred to the land of financial freedom. Unfortunately, America can also be considered the land of frivolous spending and delinquent debt. It is sad, but completely true. In fact, there are more than a third of American citizens who are currently struggling with financial debts. The debts include the inability to pay current bills on time or in the full amount, pay off loans or credit card bills, or having items repossessed due to non-payment. Most of the debt is sitting in collections with creditors constantly contacting debt holders in an effort to collect payments. If you are eager to handle your delinquent debt, keep reading for more information on delinquent debts and how to handle it.

Facts about Delinquent Debt

When it comes to delinquent debt, there are a few statistical facts that may shock you. These alarming numbers and facts may come as a surprise to you, but to finance professionals, these numbers and facts are typical and pretty much expected.

Total Americans with Debt in Collections = 77 million

There are about 35% of adult individuals that have debts in either collections or reported on their credit statements. That percentage totals to 77 million people. That number does not even include mortgage debts. The only debts included are credit card debts, bill debts, and other consumer debts.

The most common victims of delinquent debt are low-income individuals.

This may not be as surprising to know that low-income individuals are the majority when it comes to delinquent debt, and the explanation comes as no surprise either. Typically, the areas that house the high-income earning individuals do not suffer as much from being in debt. Low-income individuals struggle most with debt because they do not have the earnings to cover making payments toward debts and making a living.

Many are unaware of debts that are in the collections stage.

This may be shocking, but most people do not even know that their debt has reached collections. Most creditors place your account in collections without informing you first. Then, when you find out, it is usually by letter or phone call informing you that your debt has been taken over by a certain company in an effort to collect a debt. Sometimes, you do not find out at all until you are attempting to get a loan or make a big purchase.

How to Handle Delinquent Debt

Now that you have some information on delinquent debt, it is time to inform you of ways you can handle your debt. The bad news is that the process could be a bit lengthy and will involve tons of hard work, determination, and patience. The good news is that there are a variety of people and companies who are willing to help you solve your delinquent debt situation. Below is more information on handling delinquent debt:

Request a copy of your credit report from the Annual Credit Report website. This site is approved by the government and is the perfect place to get your credit report every year. Your credit report will let you know of any debts currently in collections and the contact information of creditors.
If you see a debt that you do not recognize, report the entry to the credit bureau immediately. They will be able to direct you on how to properly report the entry. You may also need to contact the creditor to tell them about the entry and inform them that because it has been added in error, you are working to get the debt removed.
If you discover that you owe some or all of the creditors on your credit report, you have limited options on how to get rid of them. In some cases, agencies in charge of collections will allow a portion to be paid instead of the full amount. The collections agency may even allow you to take care of the debt by paying installment payments. Before you decide on any method of paying the debts, make sure that what you think the debt is matches or comes close to the amount that is currently in collections.

With the help of collections agents, the debt numbers for Americans have decreased over the years. In turn, that means that the overall American economy has improved. However, debt still remains a big problem for the country and more help is needed in an effort to decrease debt as a whole. You cannot control what others do, but you can take care of your own delinquent debt in an effort to help the economy. Take into consideration all of the suggestions given to help you eliminate your debt, and do your part in making the economy better.

You Could Be One of 800,000 People in the United States to Benefit from HARP

August 31, 2014 by illinois

Brought in back in 2009 by the federal government, the Home Affordable Refinance Program, or HARP was designed to assist those individuals or families having a rough go of managing their mortgages in these tough economic times. The HARP essentially allows qualified homeowners to refinance their mortgages with the idea of coming up with better terms and lower, more manageable payments.

Who Can Qualify for HARP?

According to the Federal Housing Finance Agency, to qualify for the Home Affordable Refinance Program (HARP), you must;

First and foremost, your mortgage must be owned by Freddie Mac or Fannie Mae and must have started on or before the date of May 31, 2009.
Your mortgage must be current and up to date. You cannot have had any late payments in the last 6 months and no more than one in the last year.
The home in question must be your primary residence, a one unit second home or a one to four unit investment property.
Your current loan-to-value or LTV ratio must be greater than 80%.

Who’s Missing Out and Why?

It would appear more and more people are becoming overly sceptical about offers to save them money or incentives to help them manage their financial affairs better. This of course, due to the ever increasing scams coming at us from those who abuse both the internet and the telephone. Quite often targeting those most vulnerable in our society. This well founded lack of trust by consumers, is unfortunately, believed to be one of the main reasons thousands of people are missing out of the benefits that are there for the taking through HARP. It has been estimated that just about 800,000 qualified homeowners in the United States are missing out on the Home Affordable Refinance Program. On average, that is about a $200 a month savings per qualified homeowner.

Another Possible Factor for Not Taking Advantage

It is very possible that some of these 800,000 consumers have applied for HARP but found themselves, at the time of application, not qualified or denied for any number of reasons. As a result, many of these consumers may believe they are not able to re-apply or still don’t qualify.

Program Changes

Like many new programs implemented by both government and private organizations, a little tweaking is usually required to the program after a short trial period. It was found after the first couple of years HARP was running that the qualifying rules were excluding a good number of applicants. As a result, updates were made to the program which can overturn many of those decisions previously made denying applicants the benefits of the Home Affordable Refinance Program. Some of the changes made to the program include the following;

Extended Application Deadline: For those that have been previously denied and for those that have yet to apply, the deadline to receive the benefits of HARP has been extended to December 31, 2015.
No Appraisals or Underwriting: In most cases, the homeowners will not be required to have a property appraisal completed or have their loan underwritten. This will definitely speed up the process of refinancing.
No Underwater Limits: Loan-to value (LTV) limits were previously set at 125%. With the new changes, regardless of how far the home has fallen in value, qualified borrowers will be able to refinance.
Less Paperwork: A lender now has the option to qualify a borrower just by documenting he or she has at least twelve months of mortgage payments in reserve. Lenders will also not require so much paperwork verifying a borrower’s income.
Modified Fees: Some risk based fees for borrowers who refinance into shorter term loans have been reduced.

Protecting Yourself From The Scams

If you receive a telephone call from anyone claiming to represent a government agency, they should have no problem at all providing you with information regarding whatever program they are trying to inform you about. As a practice, when you receive a telephone call from anyone claiming to save you money or help you manage your current financial situation, adhere to the following steps;

Never provide them with any personal information at any time during your call.
Ask for the name of the person calling and a phone number which they can be reached at.
Ask them to verify the name of the program they are providing information for, what, if any agency is sponsoring the program.
Ask for a mailing address as well as the website URL for the company or agency they are representing.

Take similar precautions from any email you may receive claiming to save the day. From the information you gather from your own inquiries, conduct more research. Call the numbers you receive and talk to others. Check out websites and reviews of the programs. The more information you have, the better decisions you can make.

Ways to Improve Your Finances This Year

August 21, 2014 by illinois

No matter how much you take pride in your financial management skills, there is always room to learn more. Take some time to try some new methods this year. Let’s explore a few ways to improve your finances.

Look for the savings

Try to make a game finding the best bargain that you can. Cut coupons; download your favorite store’s app and sign up for their promotions. You will be amazed by how much money you save.

Make a budget

One of the ways to improve your finances is to set up a budget. Even if you don’t think you have any trouble with money, it’s still a great way to make yours go further and to prepare for retirement earlier.

Save for a rainy day

If something were to happen and you were to lose your job, how long would it take before you were in real financial trouble? Make sure that you are putting money into an account for just those types of things. Ideally, you should always have enough money set aside to pay for three to six months of living expenses.

Take care of money you owe

No matter who you, or how much money, one of the ways to improve your finances is to slowly chip away at that debt and pay it all off. This will not only free up your money for other things, but it’s good for your credit at well.

Set more aside

If you increase the amount that you contribute to your retirement account by only two percent each pay period you will see some significant increase without really noticing the change to what you are bringing home. This can mean the difference between living comfortably in your twilight years and just getting by.

Work on your credit

Take a look at your credit report and take steps to start cleaning up your credit. Pay everything new in full and on time to avoid any other problems from arising.

Stop eating out

Not only will cooking more dinners at home be a good way to improve your finances, your body will also appreciate this healthy change. You can save some serious cash by not picking up food on your way home every night.

Better yourself

If you feel like you have hit a plateau with your career choices, now is the time to make some changes. Go back to school, look for better job opportunities or take part in some training courses. Never stop trying to improve your position in life.

Consider refinancing

Every once in awhile it can be a good idea to look at your auto loan or your mortgage in order to make sure that you are getting the best deal that you can. A good way to improve your finances can be refinancing loans with a high rate of interest and getting a better deal on them.

Look at credit unions

Think about using a credit union as opposed to a bank. They often have much better rates for their customers.

Look at your insurance

It’s easy to get used to paying what you pay for everything every month, but don’t get stuck paying more than you have to. Every year or so go through your insurance policies and see if you can get a better deal.

Avoid instant gratification

Another financial game for you to work on is to see how often you can make yourself wait for something you want. Try to get out of the habit of just using your credit card if you don’t have the cash right at this moment and save yourself some interest payments.

Lower your payments

Evaluate your expenses every month and consider if you have more than you really need. It’s ok to move to a smaller home or trade in your car for a less expensive one if it helps you save some money every month.

Consider help

If you are really just at a loss about how to proceed, than one of the ways to improve your finances is to consider a financial planner. They can help you get everything in order and make it simple for you to follow your dreams.

Make extra money

If you have some free time and really want to make some headway on your debts and savings then you should look at getting some side work. Try to find a part time or temporary job and see how much more you can do with a little extra money.

We all want to do the best we can in life and be able to retire with comfort and ease when the time comes. In addition, no one wants to deal with financial stress every day. If you follow these guidelines you can find yourself more in control of your money and put yourself in a better position.

Your Rights With Credit Reports

August 3, 2014 by illinois

When you want to buy a new car, move into a new home, start new utility service, take out a loan or even get a cell phone, your credit is always going to be a factor. The companies that offer these services and products will pull a copy of your credit report to determine just how much you will have to spend based on your past spending history and your debt to income ratio. Even though the reporting agencies hold your credit scores, it’s important that you realize that you have rights with credit reports, as well.

You are allowed to see your report.

It wasn’t always the case, but now there are laws in place that give you more rights with credit reports, including the right to be able to see exactly what is in your credit report. This means that you are more able to maintain your credit score yourself.

You have the right to see who has viewed your report.

You are able to see everyone that has made an inquiry on your credit score just by looking in the right section of your report. You will only see the most recent ones if you are enrolled in a monitoring program.

A free credit report is available to you once a year.

Once every year you are actually able to get a copy of your most recent credit report with no cost. It is one of your rights with credit reports to get this from a certain website, so make sure that you don’t get taken in by any scams.

Free credit reports are available some other times.

In addition to your free annual report, you also have the right to get one anytime you are not approved for something because of your credit score. Make sure you request it within sixty days. Your rights with credit reports also allow you to get a free copy if you are trying to find employment while out of work, you have been affected by fraud or you are receiving assistance from the government.

You have the right to know if your report was used negatively.

If you have been turned down for something based on your credit, then you have the right to know the specific reason why.

You can fight against things that are incorrect.

Anytime you find things that seem incorrect, it is one of your rights with credit reports to dispute that information with the credit bureau. This means that they then have to investigate the issue and fix any inaccuracies. You also have the right to dispute the erroneous data with the creditor in question.

Information is only relevant for a limited time.

Most negative items can stay on your credit report for between seven and ten years, depending on what it is. However, after this time, it must be removed. If you see that they are still on your report after that period of time passes, then it is within your rights to get it removed by disputing it with the credit bureaus.

Your credit score is available to you.

Not only are you able to examine your credit report, you are also able to ask for a copy of this score. It is not included on your free annual report, but there are services that you can order it from. You also might get a copy of it when you apply for a loan.

You have the right to reject pre-screened offers.

Another one of your rights with credit reports is that you can avoid getting those offers that can fill your mailbox offering you certain credit cards. These offers are based on information that companies have gotten from your credit report and you can request that you no longer get them. If you decide at some point that you want to see them again, you always have that choice.

You can go to court against companies that violate your rights.

If any business or company violates nay of your rights with credit reports, you might be able to take them to court for damages. You are also able to submit a complaint with the Attorney General in your state and the FTC if you have run into an issue of noncompliance.

It used to be a lot more difficult to manage your own credit report and your credit score. However, now, because of laws set in place to protect consumers you have many more rights with credit reports. Take advantage of your rights and make sure that you keep everything neat and tidy on your credit report. If you obtain your free annual report each time it is available, then you can really get a handle on your financial situation and come out on top of your debts.

What is Debt Snowflaking?

May 18, 2014 by illinois

Have so much debt you don’t know what to do with it? How can you make a kink in that debt? Are you and your partner constantly arguing over the best method to use? There are many different ways to get your debt under control. One of the most popular methods is Debt Snowflaking. This is a simple method that shows you how to use your extra money to pay down on your loans. We’ll explore what it is and how it can help you.

How Does Debt Snowflaking work

This method is a spinoff of the Debt Snowball method. Put all your debt totals together, organizing from smallest to largest balance wise. You can then start making small payments which will help clear out your debt faster. Instead of making large payments once a month (the snowball effect) you make smaller payments (snowflakes) as often as you can. If you have extra money from selling something, or an extra job use that extra income to pay for debts. By paying more frequently in the long run you lower the interest rates. This also speeds up your payoff and you get a confidence booster because you’re finally making a dent. This method is all about taking small steps to get to that big win in the end, being debt free.

Steps to Begin Debt Snowflaking

Once you’ve figured out which method of debt recovery you’re going to us you can start using these steps:

Collect all you debts and list their totals from lowest to highest
Find a few ways to make extra money (sell things you don’t need, get a weekend job, do freelance work when free).
Put all that extra money toward your debts as often as you can.
Continue using snowflake payments until you’re debt free.

You can use this method with pretty much any strategy you use, just make sure you’re covering the monthly minimum. It can make it easier spreading those payments out throughout the month instead of making one large payment all at once. You’re paying the same amount but it’s in smaller chunks throughout the month. This is a great way to prevent “snowball fights” with your partner. Basically this is just making smaller payments to get your debt down quicker. These small payment allow for less interest in the overall loan, and you’re making payments toward the principal instead.

A Few Things to Know About Debt Snowflaking

With any debt payment method there are some things to be aware of when it comes to Debt Snowflaking. Listed below are a few things that you should know about snowflaking before you start using this method to get debt free.

Check for payment limitations – Some of your lender might have a limit on how many payments you can make in a month toward your loan. Check with them to see if you will get an extra charge for making multiple payments. Requesting that your payments go to the principal balance. If it doesn’t you’ll be paying for more interest than anything else. If there are no limits then feel free to make as many little payments toward your loans as possible to get them down little by little.
Use online payment methods and online banking when you can. With all the little payments you’ll be making a lot more transactions are going to be made. By using online banking you can process a payment through for free. However, not everyone will let you do this, so it’s a good idea to use online payment methods whenever you can. Using online methods also allows you to keep track of how much you’ve paid toward a loan and where that money is actually going.
Small steps aren’t always progress. Of course taking small steps is much better than jumping right in, but taking small steps can be like a giant leap too. You may not believe that small steps have a big impact on your debt relief but constantly throwing money at your loans will gradually get you to a debt free place you want to be. By making these small debts you will reduce the amount of interest you have to pay on a loan, allowing you to make small progress toward no more debt.

This is a simple method that can help reduce your overall debt. The Debt Snowflaking method is not for everyone but for those who can use it, it is a great tool to use. Just arrange your debts from smallest to largest and make as many little payments as you can. Always check for monthly limitations when making payments on a loan, use online banking, as it is free, and just allow yourself to take small steps. These small steps will eventually lead you to small progress and then to debt freedom.

Reverse Mortgages in 2014

April 3, 2014 by illinois

Recently, reverse mortgages are harder to get, due to the tight rules that have gone into effect. Seniors facing heavy debt problems are the first to be affected by these rules. The changes were made to support the product, by the Federal Housing Administration (FHA). Many retirees consider this option due to the many advantages. However, due to these changes many things have altered, which may actually result in more cons to pros. Listed below is a rundown to how reverse mortgages now work:

Overview

The basics remain the same. A reverse mortgage is referred to a loan that lets senior homeowners borrow money against the evenhandedness in their house. Until the homeowner dies, moves out for at least 12 months or sells the house, the loan doesn’t need to be repaid. With a reverse loan, you yourself, and not the bank own the house. This means you are still responsible for things like insurance, repairs and property taxes.

Eligibility

In order to be eligible for a reverse mortgage, you need to be at least 62 years of age, own your own home (or even a small balance), and you currently need to be living there. A financial assessment also needs to be undertaken in order to define whether you can afford to make the necessary insurance payments and tax, over the expected life of the loan.

Lenders will view your credit history, assets and sources of income. It all depends on your financial status whether you need to put part of your loan into an escrow account, for the payment of future bills. If it is found by the assessment that you are unable to pay your taxes and insurance, you will be denied.

Loans

The majority of reverse mortgages offered today are Home Equity Conversion Mortgages (HECM). These are insured by the FHA and are offered through banks and private mortgage lenders.

Loan Amounts

The amount you receive through a reverse mortgage depends on the main interest rates, your age and your home’s value. Usually, the older you are, the more your house is worth. Also, the lower the interest rates, the more you can borrow.

Loan Costs

A number of up-front fees are involved. Included in these is the two percent lender initiation fee, which is for the first $200,000 of the value of the house as well as many others. You also need to pay a yearly mortgage insurance, premium of 1.25 percent of the loan amount.

Payment Options

You can receive the money either in a line of credit, regular monthly checks or a lump sum. In the majority of cases, you cannot take out more than 60 percent of the loan during the first year.

Why You Should Avoid a Reverse Mortgage

Many retirees think of this as a solid idea. However, as part of your retirement plan, there are many reasons to why a reverse mortgage should be avoided. Before you think of reverse mortgaging, you may want to consider the five reasons to why they aren’t always a good idea:

High Fees

It’s a loan, which means you will face loan-related fees. These tend to be high and could be a potential risk for the lender.

High Interest Amount

Compared to a more traditional home loan, the loan on a reverse mortgage tends to be much higher. It could also be that you are spending more than how much you are getting.

Your Inheritors May Not Get the House

The loan for the mortgage is actually paid off when you sell your home. Once you die, the home needs to be sold in order to cover the loan amount. This means your heirs cannot have the house unless they pay off the mortgage after your death.

The Loan Needs To Be Repaid When You Move Out

If you have not lived in the home for a year, you are considered ‘moved out’. If you are living in a care home, you are also considered ‘moved out.’ This means if you cannot stay at your home you need to begin repaying the mortgage.

Responsibility for Home Costs

During all this, you are still in charge for your home costs. This means you need to keep up with the homeowners insurance, pay property taxes, as well as the maintenance on the home.

The situation is tough, so be sure to think it through properly so you don’t end up regretting anything. Many difficulties may arise and you will also have to face many high costs. If you wish to move out at some point, or want to leave the property to your heirs, the mortgage will give you far more trouble than you think.

A superior resolution would be to set your retirement number and search for creative solutions. This is to help you retire without any negative baggage of a reverse loan.

What You Need to Know About the Information in Your Credit Report

October 19, 2013 by illinois

The information in your credit report is one of the two determining factors that affect the quantity and cost of credit available to you (the other being your income level). In today’s modern consumer society, the use of credit is ubiquitous. Credit cards, automobile loans, installment loans for new appliances, and home mortgages are just a few examples of the way credit is commonly used. To say the least, life would be quite different without these various forms of credit. While the use of credit works well for the great majority of Americans, there are some who, for one reason or another, develop a history of not repaying their debt obligations in a timely way. Your credit report and credit score are intended to be an objective measurement of your personal credit worthiness – a measure that is completely independent of your race, gender, age, or place of national origin. Your credit report and credit score are intended to ensure that you will be treated fairly when you apply for credit.

Where Does The Information In Credit Reports Come From?

Many businesses see the ability to sell their products and services on credit as being a significant advantage. To minimize the obvious risks of extending credit, many businesses sign up as “data furnishers” to at least one of the country’s three major credit reporting agencies (Equifax, Experian, or TransUnion). Using software provided by the selected reporting agency, the businesses enter identifying information about you, the borrower, and then make regular entries regarding the timeliness of your payments, and whether or not you completely repay the loan. Being a data furnisher for a credit reporting agency is presumed to have a deterring effect on persons likely to not repay their loans. That advantage, however, carries with it an obligation to report all credit related transactions fairly and accurately.

Credit reporting agencies may also collect information from the public record. Public record information comes from courts, and includes liens placed on property, collection activities, bankruptcies, real estate foreclosures, etc.

The collected information is then passed to companies such as FICO which aggregates information from credit rating agencies, court records and a variety of other sources into your personal FICO credit report.

How Does FICO Use The Information In Your Credit Reports?

FICO presumes that the information they receive from credit rating agencies is accurate. Individuals have the right to review the information in each credit report provided to FICO by the three credit reporting agencies, and contest any information they believe is inaccurate or untrue. Information not successfully contested is then used to calculate credit scores. FICO scores for consumers take into account:

Payment history (35%) – Were monthly payments made on time and in full?
Debt (30%) – This category considers both the amount of debt and types of debt incurred. Types of debt include Revolving Debt (Credit Cards), Installment Debt (Auto or Appliance loans), and those debts which must be paid in each month (some store credit cards and the original American Express Card).
The length of your credit history (15%) – This is determined two ways; how long your credit file has been open, and the average age of the accounts on your credit file.
Account Diversity (10%) – Your credit score will benefit by showing successful repayment of a diverse set of account types on your credit file
Recent Authorized Credit Inquiries (10%) – So-called “hard Inquiries” indicating that you have been actively applying for one or more new lines of credit. A few are OK, but too many too fast can indicate a problem.

When you authorize a potential lender to “pull a credit check on you”, FICO provides the requested information to your lender for a fee. Presuming that your credit score is high enough, and information behind it is accurate, you realize the benefit of an objective analysis of your credit worthiness.

How Do I Make Sure The Information In My FICO File Is Accurate?

By law you are entitled to one free credit report per year from each of the three major credit reporting agencies. One of the principle intentions of this country’s credit reporting system is to protect your rights as a borrower. Credit reporting systems only works correctly in this regard if each individual takes responsibility for checking their own individual credit reports periodically. Errors do occur, including:

The inclusion of potentially injurious credit related transactions engaged in by persons other than you. These errors may be the result of outright identity theft, miss entry of identifying information by the vendor issuing you credit, careless in recording your payment history, or even simple confusion arising from chance similarities between your identifying information and that of other individuals with similar names, addresses, or other elements of personal information.
Inaccurate reports of late payments.
Failure to include information that a loan has been paid in full.
Failure to note closed store or revolving credit card accounts.

What Do I Do If I Find Mistakes?

If you find inaccurate or incomplete information in your credit report you need to:

Contact both the credit reporting agency (Equifax, Experian, or TransUnion) and the company that provided the information to the CRA.
Tell the credit reporting agency in writing what information you believe is inaccurate. Keep a copy of all correspondence.

Under The Fair Credit Reporting Act, the information provider is required to investigate and report the results to the credit reporting agency within 30 days. If the information is found to be incorrect, the information provider must notify all nationwide credit reporting agencies to correct your file. If the data provider’s investigation does not resolve your dispute, request in writing that notice of the dispute be included in your file, and reported every time the disputed information is released. If carelessness played a role in reporting inaccurate or incomplete information, the provider may be liable for civil damages. In most cases, however, the dispute resolution process ends successfully.

A Debt Management Plan – Is It Best?

September 10, 2013 by illinois

When your debt becomes difficult to manage one way to take control of it is through a debt management plan. It is important no matter what way you get out of debt that you know all the facts about the program you choose. Each program will have good things and bad things, knowing how to navigate through them will help anyone interested in getting out of debt. This is also true of a debt management plan.

The Basics

A debt management firm can help you create a debt management plan. This is commonly where an account is set up and you’re required to make monthly payments into. Then once this is complete the debt firm will negotiate with the creditors to lower your payments or pay off the amount owed to the creditor. The debt management plan is completed by allowing the debt firm to make the payments to your creditors on your behalf.

To Choose or Not to Choose

It is important to know if a debt management plan is the best choice for you. Sometimes an individual desires so much to have financial freedom that they can forget to look at both the good and the bad of a program.

The Good: When working with a debt management company you will gain some help with your planning, as well as a liaison to your creditors. The liaison will be able to talk to the creditors about the reduction on interest rates, the reduction of your monthly payments, as well as the elimination of previous fees. With a debt management plan you will see the benefit within a short amount of on time payments, and your debts will become paid in full. You will have a less negative impact on your credit as well as being able to stop collection activity on your debts.
The Bad: There are also some negatives when working with a debt management plan. Some creditors will not participate in programs like this one. The biggest downside to a debt management plan is that you have to make the payments on time while in the program or the program can be withdrawn. Most importantly you can’t add any debt of any kind.

Reality of Promises

Many debt management companies will promise ways to fix your debt that seems unreal. They may promise that they can do things that just aren’t possible.

Debt firms will tell you that you’re unable to create or follow through with a debt management plan on your own. This isn’t true; you can choose to create your own plan. Examine your expenses, which mean the bills, the debt, as well as the non-essential expenses. Then determine which items are unnecessary or that can be trimmed. For example reducing the cable stations you use or pack lunches rather than eating out. Take any extra money that you will have and apply it to the debt management plan that you created.
Empowering yourself can be an important step to financial freedom. This can be done through negotiating a debt settlement on your own. This many sound like something that can only be achieved through a debt relief firm, however you’re able to do this yourself. Contacting your creditors when you are behind in payments can be your first step to creating your own debt management plan based on settlements. Tell your creditors what you are going through to cause your financial hardships and that you’re in need of help. If you are willing to offer a lump sum or discuss a new payment plan many creditors will work with you. As with any debt management plan the creditor does not have to agree even if the debt firms promises that they will.
One important thing to remember is that each company is designed to stay in business. Sometimes individuals can become deeper in debt than when they started the debt management plan process. This can sometimes happen because the debt firm doesn’t make the payments on time or doesn’t make them at all.
A debt collection firm can’t promise that you will be able to have all of the delinquent accounts removed from collection agencies. They are able to try to negotiate this with the creditor, however this is a promise that no debt management plan can make.
Debt relief firms can promise lots of ease, however that ease can come with a price tag. They are able to help you with your credit card debt but you may not realize the enormous fees that you are being required to pay.

When you’re in debt one of the most important things is gaining financial freedom. Not all plans are the same, and there isn’t one plan that will fit everyone’s needs. Be sure to shop around, determine the best debt management plan for your needs.

Credit Card Use Tips: How To Keep The Balance From Burying You

June 20, 2013 by illinois

Credit cards have every potential to ruin you. If you are not careful in how you use it, you can end up like the millions of Americans who are currently battling their credit card debts. Things have gotten so bad that some baby boomers who are about to retire are quite sure that they will be carrying their credit card problems to retirement. So before you swipe your card, you may want to learn how you can use it without acquiring so much debt.

Believe it or not, there are people who own credit cards but are not in danger of declaring themselves bankrupt for it.

First of all, you have to put up some rules as to what you will use your cards for. It is not advisable to use it for daily purchases as you can rack up a certain amount at the end of the month. Keep it to emergencies or the expensive one time purchases if you want. But still, it has to be a well thought out restriction.

The next tip is to know the billing cycle of your card. This means knowing the cut off of your monthly expenses and the due date of your bill. We all know that all payments (or at least the minimum) must be paid before the due date. This is to avoid incurring late payment fees. It is the cut off date that is a bit more complicated. You have to time your purchase around the cut off date so that you can maximize the grace period. This is the period between your cut off and your due date. If you pay your purchase within the grace period, you only pay for the actual amount that you charged. No interest. The interest rate is only added when a balance is carried over a cut off date.

The cut off is the marker for the credit card company to compute your billing statement. Usually, your due date is 21 days after the cut off period. For instance, if your cutoff is January 31, purchases between January 1 to January 31 should be paid on February 21. So if you use your card on January 29, you have to pay for that before February 21. Otherwise, you get to be charged with interest. But if you wait a few day to make the purchase on February 1 or 2, you get to pay for that on March 21. That is more than a month of saving so you can pay for the balance in full before the interest kicks in.

That is the key to keep your cards from accumulating too much debt. That and the regulation on your expenses of course.

In case you have some credit card debts already, you may want to pay that off through debt management. This type of debt relief will keep you from using your cards while putting your balance on a structured payment plan. A debt counselor can help make your payments more simple and keep you on track towards debt freedom.