If you feel as though your credit score is some sort of mysterious secret, then you are not alone. While there is no verifiable statistic as to how many people feel this way, the fact that the credit reporting agencies don't readily reveal their calculation methods makes easy to see why people are in the dark about it. You may not need to know the exact formula, but it's still smart to have an understanding of how they come up with your credit score so you can whatever possible to maintain or improve your score.
After all, if you don't know what goes into your credit score, there is no real way to do anything about it. Having a better idea of what elements go into determining it and how it's calculated allows you to have more control over your financial health. With that in mind, here is a breakdown of what the credit score is made of.
1. The most important part of your credit score is based on your history of making payments. Believe it or not, this counts for a staggering 35% of your overall credit score. Now, if you have a spotless record of making payments on time, then this is actually good news. However, if you occasionally forget to pay a bill and are routinely a few days late, then this could be bad news. I say 'could be' because different creditors have different policies on when they will report a late payment to the credit agencies. However, you don't know what that threshold is, so it's best to pay all of your bills and loans on time.
2. Your blend of credit adds up to 10% of your score. Having a mortgage, car loan, credit card and perhaps a store account that you pay on is a sign to the agencies that you are able to handle a variety of credit options. Be sure that you are able to handle all of them, though, as not paying on time on even one type can count against you.
3. 15% of your credit score is determined by how long you have had a credit history. Of course, the better you have handled that credit over the years, the better it will be for your score. But it's still better to have a more established credit record than a shorter one.
4. Second in weight to your payment history is the total amount you owe. This factor accounts for 30% of your score. The total amount you owe is compared to your income in what's known as the "debt to income" ratio. The lower, the better. You should aim to keep your total debt at 25% or less of your annual income to have the best effect on your rating.
5. New inquiries into your credit are a warning sign that you may be overextending yourself and account for 10% of your total score. The one exception is if you are the one looking at your credit report.
As you can see, there is no real mystery when it comes to your credit score breakdown. Knowing how much weight is given to each portion of your score can help you decide where to first focus your efforts when you start trying to improve your credit score.
Here's a quick question: What is the average U.S. credit score? The answer is 690. So, how close did you get? If you were pretty far off, that's okay. Before you can make an accurate guess, you need to know a few things. You need to have some idea of how the economy is doing. You also need to know what the full range of credit scores is.
On the first point, a declining economy can have a negative impact on credit scores. However, as of now the downturn in the economy has not had as much of an impact...yet. It's possible that it could still affect credit scores, so it makes sense to do what you can to maintain or improve your score, in spite of a sluggish economy.
Now onto the range of credit scores. A perfect score is 850, and the worst possible score is 300. A bit of quick math tells us that the average of those two numbers is 575. That's what the math tells us, but the national average credit score is 690. This is mostly due to the fact that no matter how tough things get, people still do their best to pay their bills, and pay them on time. Perhaps that can be attributed to the American spirit and the desire to keep one's word. Whatever the reason, the actual average of 690 is significantly higher than 575.
More confusion is added by lenders who do not disclose what the cutoff point is for different terms of loans. Not to mention that these points can change at any time, and for a variety of reasons. For example, while you may have had an easy time getting a good loan with a credit rating of 680 (10 points below average) just three years ago, it would be very difficult to get those same terms today.
So what kind of score do you usually need to get the best terms today? Again, each lender is different, but overall you will need a credit score of 720 or better to make sure you will get the best terms. That's quite a leap from 680, and 30 points above average. Lenders may have more stringent standards because the economy is affecting them as well, or it could be because they see everybody as a higher risk than they used to. Of course the reason doesn't really matter if you can't get the best terms for a loan, or if you can't get a loan at all.
You should also know that each state has its own average credit score. This means lenders have different numbers to work with in each area. States where the average score is 700 or higher are Iowa, Minnesota, New Hampshire, Massachusetts, Vermont, Montana, North Dakota, and South Dakota. States with the lowest averages (around 660 to 670) are Louisiana, Texas, West Virginia, Georgia, Michigan, Alabama, North Carolina, Nevada, New Mexico, Alaska, and Arizona.
Christian debt reduction services have helped thousands of people all over the United States become debt free and they can help you too. Just like with any of the many debt consolidation companies out there, research the Christian organizations to get yourself the best deal.
Some of the benefits the debt reduction company you choose should offer you are no hidden or upfront fees. If they tell you you need to pay upfront, steer clear of them and keep on researching other companies. Christian or not, giving up your hard earned money without any work being done is unethical and downright wrong.
A good Christian debt consolidation company should tell you they can get those high interest credit card or loan rates reduced or outright eliminated along with all the over-the-limit fees and late charges and negotiate lower interest rates. Just by accomplishing this the debt consolidation company can help you reduce your debt by up to 70%.
Lower interest rates mean lower monthly payments and if you choose to consolidate your debt you will only be required to make one low monthly payment to pay down all the credit card or other unsecured debt you may have, like overdue medical bills.
How nice would it be to be rid of all the late fees and stop getting all those harassing collection phone calls every day? I think that would help reduce not only the debt you have but your stress level as well. And if your stress level is decreased then you will sleep better and be able to function better in your daily life.
You also do not need an excellent credit rating to be accepted into a Christian debt reduction program. Good, bad, or ugly, it doesn't matter, they will help you no matter what. And some Christian organizations do not require you to have a minimum amount of debt to qualify for their assistance.
If you are finding it increasingly difficult just to maintain basic needs like house payment, food and utility bills each month and are considering filing bankruptcy because you cannot pay on any of your outstanding debt, check out Christian debt consolidation services first. They may be the answer you have been looking for, you really do not have anything to lose by checking them out.
Remember that debt reduction services only cover unsecured debt. Your home loan and car loan are considered secured debt and you will still be responsible for making your monthly payment to these loan holders.
Usually, paying down your debt through a debt reduction service will take any where from 48 to 60 months and you will be required to make monthly payments to an escrow account. Make sure that the escrow account is an FDIC insured trust account. You can be debt free and learn to budget your monthly expenses effectively with the help of a debt reduction service.
It is recommended that you review the monthly statements you receive from your creditors each month to make sure the payments are being received according to the plan agreed upon between you, your creditors, and the Christian debt reduction company.
As an increasing number of people are finding out, you have to be very careful when dealing with credit cards. One of the things that makes it so easy to need credit card debt help is they are so convenient and safe to use. In many ways they are better than cash, especially if your purse or wallet is stolen. Also, there are many things that require the use of credit cards. In short, they are close to a necessity in today's economy. However, all of their benefits come at a potential cost. Even the most careful consumers can quickly find themselves in trouble, due to no fault of their own. If you count yourself amongst this growing majority, there are several options you can use to get back on track.
Balance Transfers
Credit card companies know what they're doing. they know if they get you to switch a balance to them, they will make money from you. At the same time, they would rather have some of your money than none of it, so they often offer very attractive rates for balance transfers,. This can be a good way to get your debt under control. however, it's very important that you check all of the terms and conditions for any balance transfers to make sure you will be getting a good deal once you are done paying off your balance. One thing they like to do is offer a low rate, but only for a few months. Once this time is up, your rate will go up. Whatever the case may be, it's up to you to make sure. You may still get a better deal than your current cards offer, but the only way to know for sure is to calculate the numbers.
Consolidation Loans
The prevailing attitude amongst most people is that debt consolidation loans are a quick and easy way to get credit card debt help. In some cases this may be true, but don't automatically assume it's true for you. On the surface you may see one payment instead of many, a chance to repay several creditors at once, and a lower monthly payment. But if you dig deeper you may discover that those supposed benefits come at a bigger expense. You may have to pay more interest over the life of the loan, which will put you further behind. Another common tactic is to give you a low monthly payment but to make the loan last longer, again, resulting in more money out of your pocket. You will have to look over all the terms of any consolidation loan to see if you can live with the terms. Whatever you decide, be sure you are making a well-informed decision.
Credit Counseling Agencies
These agencies are a good option if you are looking for credit card debt help. They will deal directly with your creditors to get better deals on the debt you owe. The typical arrangement is that they will calculate the total monthly amount for these new terms (plus a nominal amount for their service), then you send them that total amount each month. Once they receive your payment, they will distribute it to your creditors as needed. Not only can this be more convenient, but you also avoid having to take out a new loan.
It's easy to dismiss someone with bad credit as 'irresponsible' or a 'deadbeat' but the reality is that bad credit can, and does, happen to good people. All it takes is one long term illness, an unexpected repair bill, or lost time at work and you may well find yourself in the same situation. Finding good methods of credit history repair can also be fairly easy, you just have to know what to do, and what not to do.
Many people will tell you to cut up your credit cards and if you find that you just don't have the discipline to have available balances on your cards and not use it, this may be a good option for you. Ultimately you want your financial situation to be under control and that's as important, or even more important, as worrying about your credit score.
You see, one factor in your credit score is the ratio of available credit to your credit limit. That means that if you have one credit card that has a $1,500 limit and you only have a $200 balance on that card you still have $1,300 available credit. That will reflect positively in your overall credit score. On the other hand if you had that same $1,500 limit on your card and you owe $1,500 you are maxed out and that does not reflect positively on your score.
If you close an account it can actually hurt your score since you will not have the same ratio of available credit. Still, that is a small price to pay if you simply aren't able to resist the temptation to use the card.
Another thing you have to get in the habit of doing is to check your credit reports at least yearly. Make sure you get one from each of the three major credit bureaus: Experian, Equifax, and Trans Union. Don't assume that the information will be the same on each one, it won't be. If you discover a mistake contact that bureau immediately in writing with any documentation you need to back up your claim that a mistake has been made. The credit bureau has to make the corrections to your credit report within 30 days which can result in an almost immediate boost in your credit score.
Since it can often take much more than 30 days to get a desirable credit score you should start now. Don't wait until a few months before you want to apply for that new car loan or a new mortgage. If you go into your local bank with a strong credit score you will not only have a much easier time of being approved, you will also qualify for much, much better interest rates which can save you big bucks over the course of the loan. It will also make your monthly payments smaller and easier to handle.
If you choose to hire someone to help you with your credit history repair just make sure that you are careful who you choose. Take time to read the fine print and find out what, if any, the charges will be to you for the help. Sometimes a loan consolidation may be a good option, sometimes not, ask questions so you can make the best decision for you.
Having poor credit may seem a little like you are stuck in quicksand, no matter how hard your struggle you just get sucked in deeper. Dealing with your credit issues is the only way out of the quicksand once and for all and the first step is to find reputable credit repair programs. There are simple things that can be done that can improve your credit almost instantly, and other things that will work but it will take months to see the results.
Having a poor credit record affects so much more than just whether or not you'll be able to get a loan or how high your interest rate will be if you do get one. A low score can increase your car insurance premiums and even prevent you from getting a new job or a new apartment. It's time to get proactive about your score and do everything you can to raise it.
Of course, just paying your bills on time will help enormously, and not just your loan payments. All your bills can be reported to the credit bureaus if you don't pay on time. Utilities, cable, your satellite dish company, etc. Pay everything on time every month. If your circumstances have changed and you just don't have enough money for all your bills monthly you will have to find a way to make more money or get rid of some of your bills, such as cutting back on the number of channels you get from your cable provider or increasing the deductible on your home owners insurance.
There are a lot of issues involved in making up your credit score and that's where a program can help. If you are able to sit down with a trained professional who knows all the ins and outs of rebuilding your credit they can help you accomplish more than you could on your own. Just be careful before you sign on the dotted line that you've read over everything very carefully. A credit specialist won't help you much if all they want you to do is to get a loan and take on additional payments.
Something as simple as checking your credit report for mistakes can be done by you for free and it can show up on your report in as little as a month. You can realistically (if you correct a lot of mistakes on your report) raise your credit score by a hundred points just by sending a letter to the credit bureau along with proof that the item on your report is a mistake.
If you do find a mistake and report it to the the credit bureau, they have 30 days to repair the mistake on your credit report and your new score should reflect that correction. If you find more than one mistake your score might go up quite a bit in just one month. That may well be all you need to do. From that point on just pay all your bills on time and you should be able to maintain your great credit score.
A lot of credit repair can be done by you fairly easily. Just cut back on your debt or increase your income or both and just keep paying all your bills in full every month. If you need more help take your time finding credit repair programs and make sure you fully understand what they offer and how much, if anything, they will charge
Most people don't realize it but there are actually several credit repair secret tips that you can use to help undo the damage that's been done to your credit score. None of this information is widely advertised, I mean, why would it be? An uninformed consumer is a sitting duck to all the threats and harassment of a debt collector. Don't ever forget though, that you do have rights and that debt collectors have strict rules they have to follow.
The first thing you want to do is make sure that whatever negative things are on your credit report are accurate. It's important to check your credit reports, from all three credit bureaus, at least once a year. If you find a mistake, contact the credit bureau immediately in writing and request that it gets corrected. This simple tip can help you raise your score and get rid of inaccurate information that has been costing you money in higher interest rates.
When you contact a credit bureau keep a detailed file as to the date you sent the letter, sending it certified may be a good idea, as well as a copy of the letter you sent them. Unfortunately sometimes the credit bureau isn't right on top of everything and it's a good idea that you keep track of everything in case they try to jerk you around.
When you are requesting that something gets changed or corrected you don't have to be timid. Don't treat them like you are a servant requesting a favor. Of course you want to be polite and professional but you aren't asking them for a favor you are asking them to correct a mistake. Don't let them push you around.
Don't expect this process to happen quickly. By law the credit bureau has up to 45 days to get back to you (but I've personally seen it take much longer). This is a process and you have to let the process work it's way out no matter how long it takes and how aggravating it can be.
If you want to work on your credit because you are contemplating buying a new home or car and you want to get approved, don't wait until the last minute. Start right now on repairing your credit. Remember, this is a process and it will take time.
In the meantime, while you are waiting for the process to work, make sure that you make all your payments on time. That includes all your household bills such as utility bills and not just your loan payments. You may not realize it but utility and cable companies report to the credit bureaus too and late payments can affect your credit.
You can rebuild your credit without resorting to underhanded tactics if you're willing to devote the time and consistency it will take and that may well be the biggest credit repair secret of all. Don't forget, the sooner you get started the sooner you'll qualify for a great rate on that new car loan or mortgage, and that will be great!
Many people who are overwhelmed with credit issues want to just throw up their hands and let someone else take care of it for them, that's where credit repair specialists come in. There are a lot of companies that will help you sort out all your credit issues, but before you go out and hire one, here are some things you need to take into consideration.
For one thing, before you pony up any money you should just take matters into your own hands and do it yourself. At least get your own credit reports and check for errors. If you want help after that point you can always hire someone. Make sure you get a report from all three credit bureaus: Experian, Equifas, and Trans Union. Don't assume that they will all have the same information or that if one report is accurate they will all be accurate. Information can vary greatly from one company to another so check all three, carefully, for any mistakes.
If you are convinced that hiring outside help is the only way to go, keep this information in mind:
1. You should steer clear of any company that 'promises' you that they can remove negative items from your credit report if they are accurate. No matter how painful it might be you have to face the fact that accurate information stays, sometimes up to ten years. If a company claims they can remove accurate information keep looking, they are lying to you.
2. Make sure that you have a written contract in place that explains all the things the company will do for you as well as how much it will cost you. Some companies charge a one time up front fee, other's will set up a monthly payment plan. Just make sure you read over the contract and that everything is spelled out. You have three days to cancel a contract, in most states - check with yours, after the day it's signed.
3. Be sure that before you waste time and money you are committed to the plan to get your credit back on track. In almost all cases, it will take determination and even a little sacrifice to improve your credit score. If you're not 100% committed to taking all the steps necessary you'll just be throwing good money after bad. It's gut check time, if you're not ready, don't pay for someone to help.
4. Don't let a company try to tell you that they can set up a second credit file. That is fraud and even if they were able to do it (which in most cases they can't) you could get in serious trouble.
When it comes to getting back on stable financial ground, you really can do it yourself with a little time and effort, but if the process just seems too overwhelming and you want to hire credit repair specialists, just keep the tips above in mind so you don't jump from the frying pan into the fire.
There are many places online that would love for you to sign up for some expensive program to improve your credit. In some cases and for some people this may be a great option. Just make sure that you carefully investigate all offers before signing up for them. You also need to realize that most credit repair can be done simply by you right at home for free, and that is the number one credit repair tip I can give you.
A lot of times people like to hire some credit counselor primarily because they are overwhelmed with everything and just want someone to take them by the hand and tell them what to do. It can seem easier to turn the reigns over to someone else than to have to deal with it all themselves. While totally understandable, it can also be expensive.
The first thing you need to do to take charge of your credit is to get a copy of all three of your credit reports (for those who didn't realize, there are 3 major credit bureaus and they can all have different information on their reports so it's wise to get a copy from all three: Experian, Trans Union, and Equifax).
When you get your reports scour them with a fine tooth comb to find any and all mistakes. You might be surprised at all the wrong information that is on your reports. If you find any mistakes contact the credit unions immediately, in writing, to have the mistakes corrected. They have 30 days to comply. Make sure that you send along any information that you have that will prove that the item is question is a mistake.
That one single thing can help many people increase their credit score by a dozen, or even, a hundred points in just one month. That is huge!
The next step is to pay your bills on time: each bill each month. If you find that you've gotten overextended and just don't have enough money every month you can do one of three things: make more money, decrease your monthly bills, or talk to your creditors and see if they will lower your payments or interest rate so you can handle the bills.
In many cases they will agree to lower your interest rate, particularly now with so many people struggling in this bad economy. In the short term that will still leave a mark on your credit report but in the long run it may make it easier for you to get back on track and get things paid of more quickly.
If you just feel lost and want someone to act as your guide through the credit jungle, you can find a counselor to help you out. But for most people, all they need to do is take charge and make a commitment to do it. The number one credit repair tip is to start right now, whether you do it yourself of hire someone to help. The sooner you start, the sooner you'll be able to get all the perks that come with having a great credit score.
There are three main credit score agencies in the USA, they are Experian, Equifax and TransUnion. These companies are the ones who gather, for all intents and purposes, the financial information on consumers. When you apply for a credit card or loan, they are notified; when you close an account, they are notified; when you are late with a payment, they are notified; and the list goes on. Basically any financial exchange of note that you participate in is noted by at least one of the big three credit reporting agencies.
Each agency may have slightly different information because some creditors only report to one or two agencies. However, some creditors report to all three, so it's best to operate as though any negative activity you engage in will be picked up by all three agencies. Not that it will happen, but it should help to keep you on the right track.
You may be surprised to learn just how often your credit score can affect your life. The obvious example is getting a loan. If you don't have good credit, you may not be able to get a loan. However, if you have just okay credit, you may be able to get a loan, but with less-than-ideal terms. Then we get into other cases where your credit score can affect you. Based on your credit report, employers may make their decision to hire you, landlords may not rent to you, your insurance rates could be set and utility companies may charge you a hefty deposit before connecting your services.
Because your financial well-being is so dependent on the credit score agencies, it's a good idea to get a free copy of your report at least once a year. You can get your free report from each of the three agencies at AnnualCreditReport. Once you get your reports, go over them carefully and look for any errors or discrepancies. If you find any you should report them right away and add a note to your report. Errors on credit reports are more common than most people think, and it would be silly to lose out on a loan, job or place to live due to somebody else's mistake.
There are other things you can do to keep your credit in check besides looking into your credit report. Paying all of your bills on time and in full (or at least the minimum amount due for credit cards) is the single biggest thing you can do to maintain or improve your current credit score. Do your best to pay down any outstanding debt you owe, as this will help your income to debt ratio. Finally, don't overdo any unnecessary activity on your credit cards; this includes opening new accounts or closing old ones. Doing these things will prevent most of the potential red flags and help to keep your credit score higher. The key is to take a proactive approach to your own finances.
If you have overwhelming, uncontrolled debt non profit reduction companies are one way to get help reducing that debt. If you have tried and tried on your own and just cannot seem to get a handle on your debt and you feel like if one more person calls you with threats and intimidation you will absolutely lose your mind, stop, sit down for a minute and breathe. There is a way out of this mess.
There are non profit debt reduction companies available to help you manage your finances by providing guidance and support without charging you a fee. They offer programs that are tailored to allowing you to consolidate your debt and pay off that debt over time by making one payment a month.
It does not matter how the debt you are overwhelmed with accumulated to begin with. Whether you got injured or sick and the medical bills piled up or you lost your job, debt is debt and if you find that you can't pay it, you could find yourself in a jam.
No matter the amount of your debt non profit reduction companies will work with you to get your debt paid down quickly. Some for profit debt reduction companies say you have to have $10,000 or more in credit card debt to qualify. Non profit debt reduction companies will help you even if you have less than $10,000 in unsecured debt.
You will be assigned a counselor to help you decide on a plan of action and then your counselor will contact your creditors and negotiate on your behalf to get interest rates, over limit fees, and late fees reduced or even eliminated. Basically, the snow ball method is used and when one debt gets paid off, your payment will probably not change and more money will be applied to each of the other debts and so on and so forth until all debts are repaid.
Debt counseling services are offered to teach you how to manage your finances so you stay out of trouble in the future. Counseling services will teach you how to handle unexpected situations, how to plan for purchases, and how to create a budget that includes a savings plan that is possible with the money you currently make. There is no need to go get a second job to maintain your current lifestyle. You can live within your current means, it just takes some discipline.
Initially, your credit rating will take a hit because of the negotiation to reduce or eliminate high interest, over limit and late fees but if you make your payments on time month after month your credit rating may actually improve over time. Do not worry about the initial hit, you have other things to worry about that are more important right now. Besides, if your debt is a long standing problem, your credit is probably trashed right now anyway.
If you are serious, and you should be, about getting out of debt non profit reduction companies are ready to help.
The benefit of a debt reduction loan (or debt consolidation loan) is it makes it possible to combine all your debts into one and only have one monthly payment. Usually you can get a lower interest rate and be able to save some money that way. Getting a loan to pay off all past due bills and outstanding debt will get the unfavorable reports off of your credit report and you will only be responsible for making the one payment each month to the lender.
How do you know if a debt consolidation loan is for you? It all depends on your situation. Keep in mind that your debt is not reduced in any way, you have just put them all together and are only making one payment. The size of the payment you are making depends on the interest rate the lending institution gives you and the term or length of the loan.
You will find that a debt reduction loan may not get you out of debt any faster but if you have the determination and the ability to pay off the debt with only one payment then the time it takes to pay it off will be a lot less stressful. Just be careful not to incur any more debt after consolidating your present debts. Cut up those high interest credit cards and do not use them again. If you do continue to use them you will only exacerbate the problem. You are trying to make your situation better not worse.
Also keep in mind that with a debt consolidation loan from a lending institution you are trading unsecured debt for secured debt. This means that the debt you incurred by using a credit card is debt that has no collateral behind it and the credit card companies have very little recourse to get the money owed to them if you cannot make your payments on time.
Secured debt has collateral behind it and if you fail to make your payments on time the lending institution who extended the loan to you can and will take the item put up as collateral. If that item happens to be your house, then you most assuredly will be looking for a new place to live. Do whatever you can to make the payments on time if you consolidate your debt and get a secured loan from a lending institution.
If your debt is relatively small and you have a long standing relationship with your lending institution, ask them if they offer an unsecured consolidation loan. Unsecured consolidation loans are given in smaller amounts and could be the answer if your debt is lower and you have no collateral to put up. An unsecured debt reduction loan will have a higher interest rate than a secured loan, and is harder to get, but the lower amount borrowed will not take as long to pay off so it is a decent trade off and there is basically nothing to lose.
If you are at your wit's end and have exhausted every other option available to you to try to reduce your debt, short of filing for bankruptcy, debt reduction negotiation may be the solution to your debt problem.
Obviously, your situation is dire, otherwise you wouldn't be researching debt settlement options. Stress and worry is mounting and you just want everything fixed and fixed now.
This is the time you will need to be very careful. When researching and choosing a debt reduction negotiation firm do not just go with the first one that comes down the pike. Be diligent and ask questions to make sure they have your best interests in mind and not theirs. If you are not careful you could find yourself in deeper than you were when you started.
The company you choose should be a member of The Association of Settlement Companies, or TASC. The Association of Settlement Companies holds their members to strict industry standards and is the leading trade association of the debt negotiation industry.
Beware of companies that ask you for their fee upfront. Some debt settlement companies charge their fees based on a percentage of your debt and do not guarantee results. Which means you pay whether or not they help you at all. You should only have to pay when the debt company gets results for you and negotiates a settlement you agree to. Ask the company you choose if they can guarantee they will save you money and get that guarantee in writing. If they will not give you the guarantee in writing then do not hire them.
A non-reputable company may tell you they can definitely get your creditors to stop calling you. Sounds good, doesn't it? But, a reputable company will tell you they will try but may not be able to stop all creditor calls. A reputable company should also be honest enough with you to tell you they cannot promise that you will not get sued by one or more of your creditors. If they are worth their salt though they should promise to continue to negotiate a settlement even if a lawsuit is filed.
You may have heard that dealing with a debt reduction company has a negative impact on your credit rating. This is true but in the grand scheme of things your credit report is the last thing you should be worried about right now. Your focus at this point should be on eliminating that pile of debt you have been buried by for so long.
Since everyone's situation is different it can be difficult for a company to pinpoint how long it will take for you to receive a settlement offer and to completely pay down your debt. Look for settlement offers to start coming in from your creditors any where from 3 to 12 months after hiring a debt settlement company.
Also beware, if the debt settlement company you are looking at tells you to send them the money that is supposed to go for paying down your debt. The money should be held in an FDIC insured account with a third party escrow company and should stay there until a debt reduction negotiation is completed and agreed to.
With so many debt reduction plans available, how do you find the one company that will fit your needs? The obvious first step is to research several companies at once and make a list of the ones you like the best. Then you can call the BBB (Better Business Bureau) and ask if any of the companies on your list have ever had any bad reports from any of their customers.
You can ask family or friends for referrals. This does not mean you need to air your dirty laundry all over the countryside but if you know someone who has been in your situation then discreetly ask them to refer you to the same company that they hired to help them, if they had a favorable experience.
Even if you do get a referral, do your due diligence and get as much information about the company you have been referred to as you can then call them for a consultation or fill out the form on the website and they will get back to you when they can, usually in 24 hours or less.
Having too much debt can be overwhelming and scary. Not knowing if or when any of your creditors will file a lawsuit to try to get their money and knowing that even if they do you will not be able to pay the court costs and other possible fees associated with that whole process. You are doing all you can and the debt just keeps piling up.
Stop the stress, worry, and fear by hiring one of many debt reduction companies and tailoring one of their debt reduction plans to fit your needs. They can help by stopping most or maybe all of the calls from your creditors that you get every day that make you not want to even answer the phone.
Be aware that working with a debt reduction company to reduce your debt and get it paid off will take some time. It will not happen over night. You will have to make sure to make your monthly payment on time. The debt reduction company will deal with the creditors and arrange everything. They will work out a deal to lower the high interest rates of the loans and credit cards you have, stop the late charges and over the limit charges and in most cases you will only be required to make one low monthly payment to a third party escrow account that is FDIC insured.
You will still receive statements from the credit card and loan companies you have accounts with. Look these over every month and make sure the payments are being made and credited as they should be and if you see anything on your statement you think is wrong, call the debt reduction company and ask them to look into the problem and fix it.
Debt reduction plans can save you hundreds of dollars in interest and finance charges and not only decrease your payments but decrease the level of stress you are under as well.
If anything good comes out of this recent recession it might be that people will learn to not rely on credit as much for day to day purchases and that is one of the most important debt reduction tips anyone can learn. Of course, many times people get into trouble because of circumstances beyond their control such as a job loss, medical issues or other unexpected expenses. No matter what the cause, it's never too late to take control of your financial destiny and get yourself out of debt. The sooner you start the sooner you'll be able to breath again.
First and foremost you need a plan and when it comes to your money the best plan is to make a reasonable budget. I say reasonable because many people get very motivated and sit down and make up a really strict budget, the only problem is that they aren't going to stick with it because it's simply too strict. You want to be strict with your budget but you also have to be somewhat realistic about what things you're willing to give up and what things you aren't going to give up.
For example, if you absolutely love your expensive cut of gourmet coffee everyday on your way to work it might not be realistic to plan on going without. You might be better off on cutting something that you don't enjoy so much from your budget. Of course, to make your finances work you will have to be willing to make some sacrifices, just make sure that the things you plan on sacrificing are things that you really can live without,this is one of the best debt reduction tips.
So, step one is to determine the exact amount of money you make every month. Make sure to include all the money coming into your household. If your pay varies from one month to the next just take 3-6 months worth of pay and average it. That will give you a very good idea of an average months worth of pay.
Once you know what you have coming in, you need to make a detailed list of what you've got going out, all bills and expenses for every month. Again, it may be necessary for you to average out certain expenses that may not be made every single month or may not always be the same amount. Start first with the 'easy' things such as car payments, house payments, and utility bills, then include the cost of gas and groceries (make sure to include prescriptions too). Then expand out to include more obscure things such as your daily cup of coffee, pet care costs, dry cleaning, subscriptions, health club dues, etc.
To make sure you haven't forgotten anything look back over you check book register for the last several months. Your budget will only be as good as the numbers you've plugged into it. If you forget a lot of things your budget will be virtually worthless.
Getting a handle on your monthly expenses by making up a detailed, and realistic, monthly budget is one of many worthwhile debt reduction tips I can give you and it's the best place to start.
There are three major credit reporting agencies in the U.S., they are Experian, TransUnion and Equifax. Apart from collecting financial data on virtually everybody. Each of them also are responsible for generating a credit score. So, there is the full-blown credit report which lists all of your creditors, how often you pay, what you owe, and so on. This part of it can fill up page after page of data. Then there is the credit score. This is a single number that attempts to encapsulate the entire report into an objective score that applies equally to everybody.
When it comes right down to it, the three big credit agencies are responsible for the information that is shared with those who request access to your credit report. In turn, your creditors will use that information to decide what terms they will offer you. To put it bluntly, these credit score companies have a lot of power when it comes to American consumers. For this reason, it's a good idea to do your best to maintain a good credit rating and fixing any errors on your report.
While it's a serious thing, and can have a big impact on your life, it's relatively easy to understand the basics of getting a good credit score. Here's what you need to know:
The most important thing you can do for your credit score is to religiously pay all of your bills on time. As soon as you get credit or another loan, start making the payments right away. you may even want to make them a few days early to ensure they will be processed on time. You should pay the full balance of any bills that require it (such as telephone and utilities), and at least make the minimum payment on those bills that are intended to carry a balance. Pay as much over the minimum whenever possible. Your payment history accounts for the largest part of your credit score, so don't take it lightly.
After making all of your payments on time, the next best thing to do is to spend less than you earn. This extends to not buying things that are too expensive. When making a purchase on credit, do not look at the monthly payment, but what the total cost to you will be. A common mistake is to see something you can't afford, say a $5000 hot tub, then calculate the monthly payment. You may be thinking you can afford $200 a month, but not the $5000. Be careful! That $200 month is probably for 4 years, and that adds up to $9600! Surely, if you can't afford a $5000 hot tub, you can't afford to spend nearly twice as much on it. Living within your means will also keep your debt-to-income ratio lower, which is also good for your credit score.
The final thing you can do is get a copy of your credit report from each of the big three credit reporting agencies on a regular basis. Check for any errors and report them right away. If the agency finds you are correct, they will remove the mistake from your report. You have to check all three as not all creditors use all three agencies. Each one will have slightly differing records, and it's best to be thorough.
There was a time when complicated math problems had to be figured out with nothing more than a paper and pencil. Next came the slide rule to simplify things (once you learned how to use it). Then came calculators; they were quite remarkable inventions for their time. Now we have computers, but calculators have not gone anywhere.
In fact, there are more types of calculators available than ever before. While the first calculators could perform mathematical functions, and they still exist, today we have situation specific calculators. There are calculators that estimate how much energy you use, how many calories you burn, how healthy you are and even how romantically compatible you are with someone else.
There is no doubt that all of those calculators can play a role in our lives, there is one that probably has a bigger impact than most people realize. That is the credit score calculator. But what is it? At it's most basic level, it's a tool for estimating your credit score. This is important because the credit agencies do not make this number freely available. You enter different data based on what the calculator needs to know, then it runs the numbers and gives you an approximation of your score. Of course, it's accuracy is largely determined by what you enter, so take the time to answer as best as you can.
A credit score calculator does its best to give you your FICO score. This is the number lenders use when deciding whether or not to extend credit to you or give you loan, as well as what terms and conditions will be placed on you as a borrower. The better your credit score, the better your terms will be. Even slightly better terms can add up to a lot of money over the course of a loan.
You will need to gather some information before you use a credit score calculator. In most cases, they will ask you questions that you won't know off the top of your head. Here are some of the more common questions you should prepare for:
What kinds of questions will a credit score calculator ask you? You will answer questions that are related to the main criteria for determining your credit score – the length of time you have had credit, how much debt you have, how often you have been late with payments (if at all), and the like. Some common questions are:
Have you ever had a judgment or tax lien filed against you?
How many of your debts are thirty days late or more?
How many open credit card accounts do you have (regardless of the balance, even if it is $0)?
How much money do you owe, in total?
Have you ever filed for bankruptcy?
How many types of credit do you currently have?
How much is your gross salary?
How many of your credit cards are at their limit?
There is no question that the current state of the economy could be better than it is. For that reason, it's more important than ever to have your credit rating under control. If you think your score is too low, then you need to do something about it now. However, if you have tried to improve or correct your score in the past, you know it isn't always the easy, quick or stress-free.
While a lot of people know they have a credit score, and some know exactly what their number is, what a lot of people don't know is that there are three separate agencies that do credit reports. These companies are Experian, TransUnion and Equifax. To make things a little more more straightforward, each of these three agencies will often have different scores for you. The reason for this is that they don't always collect the exact same information as not all creditors report to all three agencies.
As mentioned earlier, the economy is not in great shape and because of this lenders are setting higher standards before giving out loans. However, the better your credit score, the better your chance of getting a loan, and getting a loan with the best terms. Experian uses the Fair Issac scoring method, TransUnion uses what they call the Empirica score, and Equifax uses the Beacon score. So, when people talk about their credit score, they are referring to the number provided by one of these three companies. It is also possible to have a combined credit score which is the average of all three agency's numbers. Regardless of the company, your credit score is nothing more than an attempt to objectively rank your creditworthiness.
As mentioned, part of the reason for the difference in each company's score is that they don't all get the exact same information. The chances of them having differing scores goes up as you have more creditors for them to get their information from (or not get it from). There is another aspect to the difference in scores, as well, and that is that they each have their own formula for calculating their scores. While this usually doesn't make that much of a difference, it could have a negative impact if one of the three agencies has inaccurate information that lowers your score.
So, how do you get your credit score? There are a few basic ways, and it's a good idea to do so before you get a loan so you know where you stand before going into it. If you want your Beacon score, then you can go to the Equifax website and pay to get it. You can follow the same basic process to get your report from the other credit reporting agencies, too. If you don't want to pay to see your credit report, you can, by law, get a free report from all three agencies once a year at AnnualCreditEeport.
Being able to actually see your full credit report from all three agencies gives you an opportunity to see if there are any mistakes or discrepancies on your report. If there are, you can send a correction to the agency. They will then place a note on your file, and update it if they can confirm that the information was inaccurate. Doing this puts the power of your financial future back where it belongs...in your hands.
Unfortunately, anyone who finds themselves behind the eight ball can be a potential victim of a scam or just plain unethical treatment. Having a poor credit score is no different. There are a lot of bottom feeders out there that love the opportunity to line their pockets at the expense of desperate people. That's why it's so important for you to be careful who you turn to to help you clear up your credit issues. National credit repair has a reputation for providing personalized one on one counseling to all their clients to help them get their credit back on track as quickly as possible.
When it comes to relying on a paid professional to help you with your credit, it is definitely a case of buyer beware. Do your homework so you don't get hooked up with the bottom feeders I mentioned above.
Here are some things to keep in mind:
1. Don't let anyone tell you that they can remove accurate, but negative, items from your credit report. They can't. If the information is incorrect it can be removed, but if it's accurate it will stay on your report for up to 10 years (bankruptcies). Even if you've paid off a bill the late payments will stay on your report.
2. A credit repair company, by law, must provide you with a written contract explaining all your legal rights. You also have 3 days to cancel the contract after it's signed if you have second thoughts. If you are dealing with a non-profit group, or the creditor directly, the same rules don't apply
3. Don't respond to an email unless you're the one who initiated the contact. Many disreputable companies will try to catch desperate consumers off guard. Make sure that you do detailed research on any company before you hire them to help with your credit issues. You don't want to get yourself in more trouble by spending a lot of money on 'credit help', money that you might have just used to pay down some bills.
4. Don't forget, a lot of credit repair can be done by you. It's not that hard. Just request a copy of your credit reports and your FICO score from all three credit bureaus. Check them over carefully for any mistakes and make a written request that those mistakes be corrected. The credit bureau must comply within 30 days. Be prepared to provide proof that what you say is true and that a particular item really is a mistake. This one step can raise your score significantly in as little as a month.
Even if there are no mistakes, if you can explain why you fell behind on your payments that may make a difference. You can request that an explanation be added to your credit report. For example, if you had a good history until you got sick and got overwhelmed with medical bills you can request that that information be added to your report. It may help mitigate some of the negatives on your report in the eyes of a potential lender.
If you choose to hire a credit repair company keep the tips above in mind so you don't get involved with an unscrupulous company who will just make things worse. National credit repair has a solid reputation of helping their clients finally get back on solid footing financially, maybe they can help you too.
It seems as if nobody is immune to credit problems these days. While there is some disagreement as to whether the economy is growing or shrinking at any given moment, everybody agrees it's not growing fast enough. With the lackluster economy and increasing number of people are having a harder time dealing with their debt. Once the monthly payments get out of hand, most people start thinking about some sort of debt consolidation. You may be able to lower your monthly payments, interest rates or duration of your loans. However, you should also know that there are both for profit, and non profit debt consolidation agencies.
It's vital that you understand this form of debt consolidation is not the same as a traditional debt consolidation loan. Whether it's for profit or non profit, a consolidation agency (also known as credit counseling agencies) do not give out loans of any kind. So, you will not be getting a large loan from them to pay off each of your creditors. But that's okay, because debt consolidations can sometimes make your financial situation even worse. For one thing, they still count as an additional loan which can have a negative impact on your credit score. How do they help you then? Let's take a look.
As mentioned, they don't give you a loan. However, they will negotiate directly with the companies you owe money to. They will try to get lower interest rates, forgiveness of fees, or even a reduction in the total amount you owe. Once they have taken care of this step, they calculate how much a single monthly payment you need. You will send this payment to the non profit debt consolidation agency and they will then distribute it based in the individual arrangements they have made on your behalf. And, because you are not getting a loan, using an agency may leave your credit score unscathed.
A lot of people choose these agencies to get their debt back under control. While they do a lot for you, and make things more convenient, you still need to understand what they're doing with your payment. Also, both for profit and non profit agencies will collect a fee of some kind for their services. In general, the non profit debt consolidation agencies will charge less than the for profit ones. However, this is almost always added into the monthly payment so you still have one payment.
Once you choose a consolidation company, you will get a full explanation of how they will allocate your payment. If they don't do so, ask for one. In fact, ask ahead of time if they will provide you with such an explanation, if they say no then move on; even if it's a non profit debt consolidation agency. You should also expect to get some sort of basic financial plan and budget. That's where the "counseling" comes in. They are not only there to help you get out of a sticky financial situation, but also to prevent you from getting into a similar situation in the future.
More and more people are having problems with debt, and with the economy not improving at a decent pace, the problem is only getting worse. It's no wonder that so many people are looking for ways to reduce their monthly payments. If that sounds like you, then online debt consolidation may be one viable way to help you attain that goal. The internet is a wonderful resource for many things, and finding help and advice for your financial obligations is one of the things its useful for.
That being said, you should know that even though the internet can be a useful tool, there are a lot of companies selling online debt consolidation services. Unfortunately, not all of them are legitimate, so you need to be careful. at the same time, don't let that scare you off, because there are also a lot of good companies that are ready to help.
Knowing that some online debt consolidation companies are better than others leads to the question of how can you tell which is which. A good start is to see how long they have been in business. The longer their track record, the more confident you can be in using their services. Just as more and more people are getting deeper and deeper into debt, so too are more and more online companies sprouting up to meet the demand. However, when a company is brand new, they may not have the same clout as well-established companies do when dealing with your creditors on your behalf. And that's assuming a brand new company is legitimate and able to fulfill any promises they make.
Some of the online debt consolidation companies try to match you with a large loan to pay off all the different people you owe. Then, instead of paying several monthly bills, you pay only one. This single payment should be less than the total amount you were paying. However, don't automatically go with the company that gives you the lowest monthly payment. While the monthly payment may be lower, the interest rate and length of the loan may be greater; meaning you will end up paying more in the long run.
Not all online debt consolidation companies work that way, though. Instead of getting a big loan for you, they will negotiate with each of your current creditors to reduce how much you, forgive fees, or reduce your interest rates. You will then give them a single monthly payment which they will distribute to those you owe. These are also known as credit counseling services as they usually help you set up a budget and give you other basic financial advice. This type of service is a good option for you if you don't want to take out a brand new loan. They will charge some type of a fee, but this is invariably a part of the monthly payment you send them
Online debt consolidation may be just the thing you need to get out of a sticky financial situation. Whichever method you decide to go with, be sure to read the fine print and do your best to determine of they are a good company to deal with.
With all of the talk about people facing financial difficulties, it's no surprise that they want to know what the average American credit score is, and how they compare to it. There are many reasons for wanting to know the average and where you stand. If your credit score is lower, then you may want to work on bringing that number up before you try to get a loan. On the other hand, if it's higher than average, you may want to get a loan right away, just in case your score were to go down. While it's true that most people are familiar with the idea of a credit score, far too few really understand how it works.
The lowest possible credit score is 300 and a perfect score is 850. So, does that mean the average score is right in the middle of those two figures at 575? Common sense may lead a person to believe that's the case, but 690 is the current average American credit score. However, with the economy suffering the way it has been, that average is set to be on a downward trend. The sad part is that your credit score could be headed in the same direction, unless you take the necessary steps to protect and improve it.
Now, the other main question about the average score of 690 is, "is it good enough?" In a word, no; at least if you want to receive the best available terms from lenders. The higher your score, the better the terms, generally speaking. So a score of 690 isn't going top give you great terms, but it should, in most cases, be enough to get you a loan. However, you have to not only consider your monthly payment, but also how much you will spend over the life of the loan. Just a bump up of 10 points could shave off a fraction of a percent on your interest rate, which could translate into a huge savings.
One of the difficulties when it comes to credit scores is that every lender has different rules about who will or won't get the best deals when taking out loans, and they do not publicly disclose what those rules are. The good news is that there is a pretty good rule of thumb that can help. If you have a score of 720 or higher, your odds of getting the best terms on most loans is quite high. As you can see, there is a gap between the average American credit score of 690 and the preferred score of 720. If at all possible, do what you can to get your score to 720 or higher before you try to get a loan.
Just to be sure we cover the other end of the spectrum, if you have a score of 620 or less, you will tend to get the worst terms available; assuming you can get a loan at all. While bumping up a score of 690 is optional, if your score is 620 or lower, it's almost critical to get it to at least 690 if you can.