The Basics of Credit Repair

By having a credit, you are using someone else's money as payment for your
purchases. In addition, it also indicates that you are swearing to repay the
money to the agency or person that loaned you the amount.

If you are applying for a loan, credit card or mortgage, it is normal for the
agency to check your credit worthiness. This is essentially based on the
assessment of your credit history, thus helping them determine the possible
risks of the deal and decide the terms of the loan. Positive assessment means
good financial background, which increases your chances of applying a credit.

The Credit Repair

The process wherein consumers with poor credit histories try to reestablish
their worthiness is called the credit repair. It involves procuring the credit
report from agencies and taking careful and appropriate steps in addressing
apparent issues, including omissions, misreporting, misinterpretation or other
inaccuracies.

If there are any discrepancies found in the credit report, the consumer is
entitled to dispute the errors that unjustly harm their financial healthiness
and credit worthiness. There are several laws and regulations that are designed
to guarantee fair and legal undertaking of the credit report process. These laws
can be used to legally and formally start the process of credit repair.

Every consumer is entitled to one copy of credit r eport each year from each
credit reporting agency. Investigations with regards to the real nature of the
inaccuracies and errors are possible and necessary for a successful credit
repair.

What influences your purchasing power and eligibility of availing any credit
facilities in the future is your credit record. You should keep in mind that a
good credit score can help in several purposes, such as: mortgaging a home,
buying a car or applying for a job. On the other hand, a bad credit score can
make you vulnerable to exorbitant interest rates and unnecessary loan terms
from several companies. These two facts are important in helping you understand
why maintaining a good credit score is vital.

How to Repair Your Credit

The process of credit repair can be achieved through hard work and discipline.
Easy methods, which can help you get out of poor credit history, can be quite
tempting. However, these easy way outs can only lead to further difficulties in
the future especially if they are done illegally.

In case your poor credit history is caused by circumstances beyond your
control, you can always request for an upgrade in your credit rating to your
creditor. However, this can only be done if you were able to make amends to
your credit records after the circumstances.

Creditors do not normally trust consumers who default on their payments. This
can pose a difficulty to you in obtaining a new credit. However, once you are
able to demonstrate enduring stability in your income and prompt patterns in
your payments, the situation can improve in the span of two to three years.
This way, even though there is a case of bankruptcy, you are likely to be
eligible for credit cards within two years if the steady income is maintained.

Keep in mind that there are no quick fixes in repairing your credit. By
contacting credit bureaus, creating your own corrections, budgeting and
consolidating your debts can improve your own score.

How to Safeguard Your Financial Life

Several financial planners would agree that one of the foremost and important
steps that you should take to protect your financial stability is to set aside
funds as emergency reserve. The concept that you have the fund for emergency
and unexpected events is enough to help you stay away from using your credit
card and drown yourself in debt.

How to Get Started

Everyone must stash a little extra cash in case of emergencies. However, how
much money should you keep? Although the topic of exactly how much money is
needed for your emergency fund is open to debate, the minimum amount should be
enough to cover your expenses for daily living for at least three months. It is
also wiser to save for six months though most financial planners agree on a full
year worth of cash.

Your personal circumstances and what it takes to provide you with a peace of
mind are the elements to help you determine just how cautious you want to be.
If for instance, you have well-off parents who have always been supportive and
willing to help you in a financial crisis, an emergency fund for three months
will be sufficient. On the other hand, if you had reach for you credit card for
help and end up paying 15% in interest on the debt, you would be better off
saving enough money for your expenses that would last for at least six months.

If by any chance you are thinking about where to place your money, emergency
fund, paying off the credit card debt or funding your 401(k), you can always
start with your credit card debt. Next, you can contribute to your 401(k). This
step is especially useful since you can later borrow money from your 401(k).
However, as soon as all those are finished, return to your project of setting
up your emergency fund.

If you do not feel like you are required to make your entire funds this week,
you can start like everyone else. Begin by setting aside a monthly amount, like
for instance, 5% of your paycheck or other amount that allows you to build one
month's worth of living expenses over the course of a full year. It is also
advisable and helpful to make this automatic. You can do this by asking your
bank to do an automatic program for deduction from your checking account to
your savings account.

Additionally, monitor you spending habit each month and always search for areas
that you can develop. If by any chance you receive a promotion, bonuses, or
other unexpected windfalls, always think about including them to your emergency
fund.

Where to Keep the Cash

Keep your emergency fund somewhere that is both easily accessible and safe
because you might be required to get the cash in a hurry during emergencies.
Remember not to put your cash in the freezer but do not tie them up together in
stocks whose worth may have declined by the time you need them.

The best option you have is to open a savings account or money market account.
However, always examine their offer with regards to the minimum balance,
interest rate and other terms.

By time you think you have saved enough, learn how to stop. You can now sleep
easier and try to start placing your additional saving into higher-interest and
usually less accessible investments or accounts.

Building New Credit Habits

Repairing your credit entails getting rid of the negative credit report
information and catching up on your overdue bills. This could raise your credit
score but might not be enough to make you credit worthy again. However, to raise
your credit score high enough to entitle you to a loan, you have to rebuild your
credits. Doing so would only prove that you have the capability to handle credit
responsibility.

Although it might be difficult to start, but once you achieve that momentum you
need, you will be sashaying to a good credit score. You can always begin by
developing the required credit habits.

The Do's of Using Your Credit Card Wisely

Although many people are born without the skill it requires to use credit
cards, it is important to learn the rules of the game. All you need to do is to
remember simple do's and don'ts of credit card usage and in time, you would
welcome healthy spending habits in your financial life.

The first thing you do want to ever do is to use your credit card to make your
everyday purchases, especially food, gas and clothing. It is bad enough not to
have cash-on-hand but buying simple everyday items can develop into a habit
wherein you may tend to substitute a credit card with cash. It is always
advisable not to take your credit card out of your wallet for everyday
purchases but instead use your cash or a debit card.

The next thing you do not want to do is develop a habit of making minimum-only
payments. If you make minimum payments each month, you are only increasing the
length of time it will take for you to pay off your debt. Additionally, it will
also increase the amount of interest you could end up paying.

If you are one of those people who usually buy things that are way off budget,
remember not to use your credit card to buy things you cannot afford. One way
to get into debt is living off borrowed money. You might end up waking one day
realizing you are so much indebt that you wish to return your expensive
purchases back to wherever you bought them from.

The Do's of Using Your Credit Card Wisely

Learn how to make correct decisions when it comes to buying items you need
against those you simply want. Everybody knows what a "need" is and what a
"want" is. Remember not to substitute need from the want and vice versa. If you
are using your credit card wisely, it only means that you are being responsible
in recognizing what things you need and which you only want.

Next, always let your creditor know in advance if you would not be able to pay
your monthly payment on time. Since most creditors offer assistance with your
payment if you give them a heads up, it is important not to simply forget about
the payment for no reason at all. You can do this by simply calling your
creditor, explain the situation and ask if th ey allow late fees to be waived.

Lastly, do not exceed with your credit limit. The safest is to stay within at
most 30% of your credit limit. Because the major part of your credit score
reflects on the quantity of debt you actually have, it is important to keep
your balance low in order to preserve a good credit standing.

Taking Care of Your Debt Situation

You can determine a financial emergency once you experience a situation that
can render you moneyless, homeless or without any important property. You
should differentiate this kind of emergency from a threatening phone call or
letter from a bill collector.

When experiencing such emergency, it is crucial to act immediately and begin by
contacting the creditor. Doing so enables you to work out a temporary solution,
which can help you keep your properties. However, it does not always work and
if so, getting in touch with your lawyer to negotiate with the creditor is
helpful.

Face the Problem

The common misconception in debt problems is "the less you know, the less it
hurts". However, you must learn how to face your debt problems. You must be
able to do this since rebuilding and repairing the credit will not take place
when you do not know exactly where your money goes or where it must go instead.

Although it is not harmful to overestimate your debt, it is always beneficial
to know how much money you really owe. You can do this by taking a look on the
bills you have received. In case you have thrown out your bills without even
opening them, you can still call customer service and inquire about the bills.

There are several creditors that use automated telephone systems. This can
provide a balance and information regarding the payments automatically.
Additionally, information about your account might also be available on your
creditors' Web sites. After acquiring the necessary details, sum it all up,
especially those past due installment bills and your monthly obligations.

Options Available for Your Debts

There are several options available when dealing with debts. One is to do
nothing. This option is probably the most popular approach used by those who
are deeply in debt. Most often, these people have very small income and
property and do not normally expect any change in their lifestyle. If you do
not anticipate any steady income any time soon, you can consider this option.

However, if doing nothing does not help, you can find money to pay your debts.
You can do this by, first, selling a major asset, like a car or a house. This
can be a good choice if you can no longer afford your car or house payments.
Instead of waiting for a repossession or foreclosure to happen, selling a
property is always a better.

The proceeds you gain from the sales can help lessen your debt and enable you
to pay off anything you still owe. More so, you should remember to pay off the
liens placed by the creditors and use anything that is left to aid you in
paying your other debts. However, before taking this step, make sure that you
already came up with an alternative for your housing or transportation needs.

Another way, which can help you pay off your debts, is to cut your expenses.
Not only will this eventually aid you in the payment but also in negotiating
with your creditors. Try to shrink the cost of your food by clipping coupons,
purchasing generic brands, buying when there is a sale or shopping at outlets
with discounts.

Yet, if you cannot seem to cut your expenses, you can always borrow money from
a tax-deferred account. Tax-deferred retirement account, like IRA or 401(k),
can help pay off debts by withdrawing money from them before retirement.
However, since you may need to pay a penalty or taxes, this should only serve
as your last resort.

Breaking the Habit: How to Stop Using Your Credit Card

You know your debt is rising, but still cannot stop using your credit card for
purchasing items. Several people get easily dependent on credit cards for
everyday expenses and impulsive buys. The fact that you are borrowing money
from the creditor for your purchase might be tempting, but the truth is: you
must be able to pay it off on time. Neglecting those bills can cause headaches
in the future. You might get malicious letters from your creditors, or even
receive threatening telephone calls.

Close, Shred and Leave

If you really want to avoid those from happening all together or if you are
starting to drown in your debt, you have to stop credit card usage.
Fortunately, there are several ways on how to.

Firstly, many people would agree that closing your credit card account is the
best way possible. One and simple call to your cardholder is sufficient enough
to inactivate your credit card. Doing so might even quiet down that nagging
feeling and desire to purchase items using a credit card. Just think that there
might be one situation wherein the clerk says your credit card has been denied;
the embarrassment from that situation is reason enough for you to inactivate
your credit card.

Shredding is also an excellent way to break the habit completely. You can use
an office shredder since it works great on plastic as it does on paper. Since
your credit card is shredded into pieces, there is no way that you can swipe
it. However, if you do not have a shredder, scissors are great too. Just cut
the card into small pieces and make sure that the credit card number cannot be
identified by potential thieves.

Another excellent way to stop using the credit card, especially when you go out
of the house, is to leave them. If closing or shredding is not your style, try
taking your credit card out of your wallet when you are about to go shopping.
In this way, if you have the urge to buy something you really do not need, you
have to think twice before buying it since you are about to use your own money.

The Shock and What Your Can Do About It

You have been using your credit card for your expenses but have you ever
thought about the total amount of cash you spend in interest alone each year?
More so, the duration of time it will take you to just pay off your credit
cards might shock you. It is all about the numbers and these will put you into
shock and can make you think twice before using that credit card again.

For instance, if you have a balance of $1,000 and an interest rate of 14%, it
will take you about four and a half years before you can pay it off; that is,
if you are making $25 in payments every month. By the time you pay off the
balance, you will have paid a total of $347.55 in interest.

Since you know what credit cards can do, you might want to stop using it once
and for all. Learn how to say "no" since this kind of discipline can help you
stop impulsive buys, thus stopping the use of credit cards. Always think twice
about swiping that credit card for your purchases and you would not have to
think about repairing your credit in the future.

Credit Repair: The Do-It-Yourself Way

Negative remarks on your credit report can cost serious money. You do not have
to despair though, since it is never too late to become credit worthy again.
However, always remember that credit repair do not happen overnight. It
requires serious dedication and perseverance to start in a clean slate once
more.

How to Get Started

You should know what the three credit bureaus are and what they are saying
about you. Since creditors do not have to report to Equifax, TransUnion and
Experian all together, they generally only report to one or some to which they
are subscribed to. This only means that each report from each bureau is
slightly different from one another.

The first thing you need to do is to order your credit report. Remember to
order it from each bureau because you would only waste time and money if you
only order a credit report from one bureau. The cost of the credit report might
vary from state to state though it is estimated that the cost of your credit
report is around $9.

However, you are entitled to a free copy of yo ur credit report from the agency
if you have been denied of employment or credit due to your credit report. You
can ask the company to provide you with the name of the credit bureau,
telephone number and address.

Once you get a hold of your credit report, examine it carefully. Since the
credit bureaus create your credit report basing on the information they receive
on your creditors, they are never verified. It is your job to maintain your
credit report a good reflection of you. Be on the lookout for errors on typing,
incomplete information, and outdated and inaccurate histories of your account.
After examining the report correctly, list all the errors you want to dispute
and the reasons why.

Since bad reports cost money, remember to be thorough. You have two choices,
which is to either complete the argument form supplied with your credit report
or write a letter. It is also recommended to send a photocopy of your report
with the errors circled to the credit bureau who supplied the report.
Additionally, do not forget to include supporting documents with your report.

After sending the documents and report, do not forget to keep copies of all the
forms and the date you sent it. Normally, the bureau will investigate the
dispute in the span of thirty days prior to receiving your letter. More so, any
item that is proved to be inaccurate is removed.

Stability in Your Credit Life

Another way to repair your credit is to show that you can still work on adding
positive information and stability in your credit life. Even if you have the
credit, there can be a time when you get denied of credit due to insufficient
credit file. There are several creditors that do not report your credit history
to the credit bureaus. What you can do is to try asking the grantors to report
the information of your account and the history of your monthly payment to the
credit-reporting agency.

You can also try building a solid credit history through the use of secured
credit cards. These kinds of credit cards are offered to those with no credit
or in the process of repairing their credit. Additionally, it is advised to
open a savings account in your bank. Doing so, would show your creditors that
you are trying to save and that you are reserving money to pay off your debts.

Good Credit Maintenance

Maintaining a good credit is important to your financial life. There are people
who experience poor credit report due to neglect and improper report reviewing.
There are even others who went through the process of repairing their credit
and somehow managed to maintain good credit after. If you do not want to ever
need a credit repair, good credit maintenance is advisable. Luckily, simple
steps can help one in proper maintenance of a good credit.

The Importance of a Good Credit

Credit history plays in important role in determining whether you are qualified
for a loan or not. The credit is really worth a thousand words and it says so
much about the consumer. Not only can it affect your finance but other aspects
of your life as well. Several counselors and services agree upon on thing:
maintaining a good credit is important in leading a fit financial life.

Most people do not realize that landlords, employers and companies checks
credit scores before making a decision on whether or not they can grant a
contract or a job. The scores and credit report can help companies decide
whether you pay your bills on time or if you have filed for bankruptcies. By
doing so, they can use the information on your credit report as a future marker
of your credit worthiness.

What You Can Do

Although maintaining a good credit can be quite a challenge, there is no better
way to keep you safe from debt than by carefully following your spending and
always sticking on a budget. Budgets are important as they can aid you in
controlling your finances, decreasing your debt and building a strong credit
history.

In the topic of managing your debt, the first thing you can do is to keep track
of your spending habits. You can do this by creating drafts of what you spend
and track anything that you might owe. Monthly statements should be reviewed
when they arrive and always check for any possible inconsistencies.
Additionally, always remember to report them immediately.

To keep your account in good standing, always remember to pay the creditor on
or before the due date normally printed on the statement. Do not skip on any
payments and strive to pay more than the minimum or, if possible, pay the whole
balance each month.

Another step you can take is not to exceed your credit limit. The available
credit is the amount left on your credit usually represented by the difference
between your credit limit and your outstanding balance. Always remember to
maintain the balance lower than the limit of the credit. Additionally, make
sure to add any charges you made after the closing date to your Outstanding
Balance included in the monthly statement; doing so can help you find out just
how much credit you have left.

Sticking to a budget is also important. Typically, 10% of your monthly income
should be used in paying your credit lines, bills or personal loans. However,
in case you are paying more, it is time to reconsider your habits of spending.
Keep out of impulsive buying since they are especially hard to pay off.

Lastly, control your finances. It is advisable to create a payment plan, which
can help you get on the right track. This kind of scheme should incorporate
those whom you need to pay and the amount of the payment each month. Normally,
other people limit their credit usage until the finances are under control;
this is an excellent method of controlling your finances.

Cleaning the Mess in Your Credit Report

An important factor that plays an important role in maintaining a clean credit
report is actually the contents of your credit report. The credit report is
pretty much the story of your financial life, contained in a detailed document.

The credit report carries the credit score, which is a numeric ranking usually
between 300 and 850. Several lenders use the credit score to help them decided
whether you are worthy of a credit. More so, the score is also used to
determine your capability of paying a loan. The credit report is important and
cleaning or maintaining a good credit report is vital to your financial
survival.

A Look inside the Credit Report

In a credit report, the first entry is normally your personal information. It
includes your name, listed telephone number/s, previous and current addresses,
reported differences of your Social Security Number, past and present employer
and the date of birth.

The information regarding your credit accounts follows your personal
information entry. This is also listed in detail and normally includes loans,
the maximum loan amount, and information of any joint account holders or
co-signers. The credit report also incorporate a section, called Inquiries,
which lists any person who has recently requested a copy of the credit report.

There are some states, wherein the credit report contains public record
information. This information can feature overdue payments, bankruptcies or
other judgments in the court. Normally, these entries can last for up to ten
years and may affect your chances of obtaining a loan negatively.

How to Start

Firstly, in order to clean your credit report, you will need to order a copy of
the report. You must determine what is out of date or inaccurate, after which
you can submit a letter to the bureau requesting fixes to the information. This
process may take a long time and you may be required to do several follow-ups
with each bureau before achieving a clean credit report. However, to perform
this correctly, you must be aware of the information the credit agencies are
allowed to report and the duration.

Ordering a credit report can be easily done and accessible to everyone, since
at least one free report can be obtained by the consumer e ach year; this rule
is also included under the FCRA or Fair Credit Reporting Act. More so, the
consumer is also allowed to obtain a free copy of his or her credit report each
year from each of the three major companies handling credit reporting, namely
the Experian, TransUnion, and Equifax. However, in case you have already
obtained a copy of your credit report this year, you may be required to pay an
additional fee if you want another copy.

Once you have obtained your report, review it carefully. Every detail must be
inspected since bureaus can sometimes confuse names, addresses or employers.
Most often, people who have common names have credit reports that may contain
information on other variations of their name.

Additionally, it is important to perform a periodic check on the credit report.
It is advisable to order a copy of the report once a year and dispute any
possible inaccuracies. Always take careful steps in handling your payments and
make sure not to make any late payments. Time is of the essence and even
minimum payments should not be neglected. Remember that carefully managing your
credit can add as much as fifty points to your credit score per year.

Avoiding the Scam

In the issue of repairing your credit, it is best to do it yourself. Most
often, you may hear or see advertisements claiming outstanding credit repair
services offering you "legal" and "guaranteed" solutions for your credit
problems. These services may use mottos that are quite enticing to those who
are in dire need of credit repair. There are even others who get easily
convinced after reading "authentic" testimonials from several customers, who
might not actually exist.

When you are really in need of credit repair, the first thing you want to do is
to act immediately. You should remember that this action should be done by you
and not anyone else. Luckily, there are several factors that can help you avoid
scam credit repair services.

The Fraudulence

Day after day, several companies appeal to consumers who have awful credit
histories. Often, they promise to tidy up credit reports, for a price, to help
consumers loan a car, mortgage a home, or even get a job. The horrible fact is
they cannot deliver; you should keep this in mind especially if you do not want
to worsen your debt. These companies would only take the cost of the services
with them and vanish into thin air.

The Signs of a Scam

If you had responded to a credit repair service, there are warning signs that
can help you determine an authentic credit repair offer from a fraud. Firstly,
be aware of companies that wish for you to pay the cost of the repair before
providing any services. In addition, avoid those companies that do not divulge
any possible legal rights you are entitled to and what processes you can do
yourself without payment.

There are companies that advise consumers to directly contact a credit
reporting agency -- you should avoid such companies. More so, if the company
you have responded to suggests that you to create a new credit identity and
then make a new credit report by applying for an Employer Identification Number
to use rather than you SSN, you should immediately stop contacting that company.

Lastly, those that advise you to argue all information included within your
credit report or take actions that may seem illegal, i.e. generating a new
credit identity, should be avoided.

Remember that you could be prosecuted for wire or mail fraud if you use the
telephone or mail to apply for credit and give information that are not
authentic. Lying on a credit application, misinterpreting your SSN and
acquiring an Employer Identification Number from the IRS under false pretenses
are all federal crimes.

Most importantly, you should remember that included within the Credit Repair
Organization Act is the rule that credit repair companies should not require
you to pay until the services they have promised are complete.

The best possible way to avoid poor credit history, and totally keep you safe
from fraudulent credit repair services, is to do a periodic credit report
review. Reviewing your credit report is important because the information in
your report affects your chances of getting an insurance or loan. Make sure
that the information is correct, complete and regularly updated before applying
for a loan. Lastly, by doing periodic check-up on your credit report, you can be
safe from identity theft, which can create a major problem not only in your
credit report.

The Secured and Damaged Credit

Most people end up with a damaged credit when they experience a financial
difficulty. Having a damaged credit can make it hard for you to obtain a new
one. Those credit mistakes you made in the past can be nearly impossible to
live with, especially when your new creditors and lenders are reluctant to
provide you with a second chance. And so, in order to reestablish your credit,
but cannot obtain a credit card, you only need to get a secured credit card.

The Secured Credit Card

The secured credit card is not that different from the regular credit card. It
operates just like the usual credit card but it requires you, the cardholder,
to make a deposit against the credit limit of the account. The deposit is
utilized by the creditor as a security in case you default on your payments.

Usually, secured credit cards have a credit limit of 50% to 100% of the deposit
you make. For instance, if you make a $1000 deposit for the secured credit card,
the credit limit will be between $500 and $1000.

More so, these kinds of credit cards normally have fees that regular credit
cards do not have. These fees will include processing fees, application fees,
and annual fees. However, always be on the lookout for those cards with high
fees since they can significantly decrease your deposit and eventually your
credit limit.

Taking Advantage of the Secured Credit

Damaged credit is the effect of having poor payment habits, most of the time.
If you cannot obtain credit through traditional methods, secured credit can
greatly help you demonstrate improved habits in your payments. Since you cannot
prove a renewed capability to make payments on time until obtaining a new credit
card, having a secured credit card is a big help.

However, before applying for one, you must guarantee that the creditor reports
to all the three major bureaus for credit. Otherwise, the card would not be
beneficial in the issue of reestablishing your credit for the reason that
future creditors would not have a process of looking at the history of your
payment. Additionally, it would not be incorporated in your credit score or in
your credit report.

If your application gets approved, always keep in mind that your sole purpose
for the card is to rebuild your damaged credit and eventually create a positive
credit history. It is important not to use the card to incur debt and instead,
use the card to buy small things that you can actually pay full in a month.
Moreover, it is important not to charge any item that you cannot afford to pay
on the card.

Managing your secured credit card and developing good habits in payment can
help you move into an unsecured credit card. There are several credit card
companies that allow a consumer to convert to an unsecured credit card after
the course of one to two years of timely payments. Even though you cannot
change your secured credit card, you can still submit an application for an
unsecured one with another company.

Remember not to repeatedly apply for credit cards after you have been denied of
an application; this would only make you look desperate. What you can do instead
is to continue to make your payments on time on your secured credit card and
apply again after the span of six months.

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