Taylor's Blog

Getting Rid of Student Loans

Credit Trauma — Thu, 23 Jul 2009 13:42:14 -0500

Getting Rid of Student Loans - The Cold Hard Facts

Did you know that taking out a Federal Student Loan is just as real as taking out an auto loan or a home loan? Because it’s backed by the Federal Government, they won’t let you declare bankruptcy to get rid of it, nor will they let you off the hook because you lost your job, or you didn’t get the education you expected either. In fact, getting rid of a student loan, short of paying it off, is pretty difficult.

Although your credit history was not taken into account when you received federal student loans, your credit history will be affected if you do not repay your federal student loans under the repayment plan you agreed to when you entered repayment.

Assuming you have some Federal Student Loans that you are having a hard time repaying, let’s look at what your options are for getting rid of student loans.

What Do I Do If I Can’t Make My Student Loan Payments?

Your student loan debt is a legal obligation and can be a 10- to 30-year financial commitment. This type of debt won’t go away by ignoring it. You need to contact your lender or servicers immediately to get help and discuss what your options are.

There are many ways to get help, including changing your payment due date, repayment options, deferment or forbearance.

What Happens If I Miss A Student Loan Payment?

If you start to miss payments or you don’t make them on time, as of your first missed or late payment, your student loan will be considered delinquent and you can be assessed late fees.

After 270 days of making no payments, your loan will go into default and your credit score will plummet. This can affect you well into the future since derogatory credit remains on your credit report for 7 years. You may no longer qualify for any future student loans that you may need and you may not be able to rent an apartment, buy a car or own a home.

What Is A Student Loan Deferment?

If you meet certain requirements, you may be able to qualify for a student loan deferment. This is a period in which repayment of the principal balance is temporarily postponed to a later date.

If the loan is subsidized, the government pays the interest charged during the deferment.

You are responsible for the interest that accrues during the deferment period for all unsubsidized loans, including PLUS loans. At the end of the deferment period when you resume making payments, your principal balance will increase by any unpaid interest that has accrued.

Now, if you do not meet the requirements for a deferment, you may still be eligible for forbearance.

How Does A Student Loan Forbearance Work?

Under certain circumstances such as a financial hardship or illness, where you are unable to make your scheduled loan payments for a limited time or specific time frame, you may be able to get a student loan forbearance. This will allow you to postpone or reduce your monthly payment amount.

You’ll go about requesting a forbearance directly from your current lender or servicer.

For all loan types, you will be responsible for all the interest that accrues during the forbearance period. That unpaid interest will be tacked onto your principal balance as soon as you resume making payments once the forbearance period is over.

If you are serving in an AmeriCorps position for which you are receiving an education award, or if you are serving in a medical or dental internship or residency program and meet certain other requirements, your lender is required to grant you forbearance.

Federal Student Consolidation Loans

You can consolidate several Federal Student Loans into one loan to help make the loan payments more manageable with a federal consolidation loan. There are several types of federal consolidation loans to choose from which offer loan repayments from ten to thirty years, depending upon the amount of your debt.

The interest rate is a fixed rate for the life of the loan for both Direct and FFEL Consolidation Loans. The fixed rate is based on the weighted average of the interest rates on all of the loans you consolidate, rounded up to the nearest one-eighth of 1 percent. However, the interest rate will never exceed 8.25 percent.

What Is The Downside To Consolidating Student Loans?

There are some instances where consolidating student loans may not be the best choice for you, even though it may help you lower your overall monthly payments.

Certain benefits may be lost (such as cancellation benefits, interest subsidies, etc.) that were offered on the loans being consolidated.

Extending your payments or consolidating your loans may not be in your best interest if you are close to having those loans paid off. If you lengthen the term of your loan, interest will continue to accrue during this time, which increases the total amount of repayment.

Student Loan Forgiveness

Some schools may forgive a portion of your student loans if you perform certain types of service such as teaching in a low-income school. This program must be set up in advance, and not be relied upon say if you get a job as a teacher then default on your loan.

If you’re an employee of state or local government, you may qualify for loan repayment in return for working in a job that is in great demand.

Make sure you check into these options by asking about them at your school or job.

Student Loan Discharge

A student loan discharge means your student loan will be cancelled and will no longer require repayment by you. You will qualify for your student loan to be discharged for these reasons, even if you’re currently in default:

If the school you attend closes before you can complete your program, you are not responsible for your student loans, and do not need to repay them. The loans are cancelled in full, and your credit report is not harmed by this.

False Certification – If you can prove that the school misled you into thinking that you would benefit from their program and the loans or debt you took out was a result of such promises; under certain guidelines, you loans can be discharged.

Your death

Total and permanent disability

Student Loan Bankruptcy

In most cases, a loan, whether in default or not, cannot be discharged in bankruptcy.

However, you can request a special "hardship hearing" where you present your case to a special judge, explaining why repaying the loans would be an undue hardship. Only a very small percentage of people successfully discharge their loans, so it would be wise to consult a bankruptcy attorney for more information on this option.

Helpful Tips To Pay Off Those Student Loans

Whenever possible, buy use books instead of new ones.

Activities sponsored by your school are free and can save you money versus going out.

If you don’t stay within your free minutes on your cell phone plan, these costs can add up. Make sure to know what your plan is, and stay within the allotted minutes.

Eating out can be very costly. If you have a prepaid meal plan at school, use it instead.

Let’s face it, Starbucks is expensive. Get yourself a coffee pot and some flavored creamer.

Use coupons when you shop and try to stick with a plan of buying just what you need and not what you want on impulse.

Don’t get more than one credit card and make sure you only use it for emergencies. These charges and monthly payments can add up very fast and get overwhelming in a very short period of time. If you do charge, only charge what you can pay-off every month.

Links For Free Grants & Scholarships

2009 Free Education Guide to over 1,900 colleges and universities and step-by-step instructions to obtaining free financial aid and government grants.

Classes and Careers - Classes and Careers is a free college information service. You can request information about financial aid options, tuition costs and career paths. Career and Classes can also help match with a College that meets your area of concentration.

Free College Scholarships - Thinking of going to college or university? Make things a little easier, sign-up now and enter for your chance to win a 10K Scholarship.

10K Scholarship - Want to go to school but can't afford it? Surfers who participate in this offer can enter for a chance to win a 10k scholarship.

Winning Surveys - Win a $50,000 Scholarship - Get your college paid for? Surfers who participate in this offer can win a $50,000 scholarship.

$100,000 Eliminate Your Debt Sweepstakes - enter to win a $100,000 sweepstakes to pay off your debt.

Derogatory Items Remaining After Credit Repair?

Credit Trauma — Mon, 13 Jul 2009 20:11:17 -0500

Once you have gone through the initial process of disputing negative items on your credit and have gotten the results back from the credit bureaus, you may find that you have some negative items remaining that should be dealt with.

Deal With Each Negative Item Individually

It is very important that each questionable item is dealt with individually, except for erroneous personal data. If you attempt to have the credit reporting agency correct several items at once, it will be easier for the agency to claim that your request is frivolous or irrelevant. If disputing multiple items, send each letter at different times, and each in a separate envelope.

The bureaus may attempt to bully you into believing that your request is frivolous, or even unlawful. But the credit reporting agencies are required to assume that all disputes are bona fide, unless there is clear and convincing evidence that it is not. A blanket dispute (i.e. all information is challenged) may be considered evidence that the dispute is frivolous, if you fail to provide any allegations concerning your specific file.

If You’ve Got Proof To Back-Up Your Claim, Send It In

I don’t recommend that you send in proof of a disputed item during the initial dispute process. This is because the dispute will be entered into the credit bureau’s system and a request will be sent electronically to the creditor to investigate the item in question. If it's not corrected once the creditor responds, this is when you should supply written documentation to support your claim.

What If You Know They're Wrong, But You Can't Prove It?

If you do not have proof, but are absolutely sure of your position on the matter, then ask the bureau to furnish you with proof from the creditor instead. As long as you're not abusing the service, they will work with the creditor to provide that proof for you. If that doesn't get you the results you are looking for, you can add a Statement of Dispute to that account or your credit report overall. Click Here for sample letter.

Accounts With Late Payments:

If you have accounts remaining with legitimate late payments, then calling your creditor and asking for a courtesy removal of the payment(s) might yield you results. If you've been a good client in the past, they just might do you a favor and agree to remove the late payment from your credit report. It's certainly worth a try.

Click Here for sample letter.

Collection Accounts:

Paying off collection agencies or other debt from more than two years ago won’t help you much.

This one is pretty strange because it seems like the right thing to do, and in fact, paying down your current debt can definitely help out your credit score.

However, credit scoring systems look at the last date of activity on your account, and if the collection (charge-off is how it’s usually called) is over 2 years old, it starts to lose its negative power.

When you make that partial or full payment, guess what happens?

The date of last activity clock resets to the day you make the partial or full payment on the charge off, causing your credit score to plummet!

In this case it’s better to not pay anything, or negotiate a one time settlement with the collection agency in exchange for removing all derogatory information.

If you choose to settle these debts, you basically have three choices:

“ Let's Make A Deal” is the name of the game when you have a collection account. Know that If you want to play this game, then the only way they'll play with you, is if you have the money to pay as soon as you negotiate the reduced amount. Most collection account companies can/will take as little as one-half of the amount you owe and call it “settlement in full”. This is not always the case, but it's true more often than not. Start low and if you have to, work your way up in small increments at a time until you come to an agreement that you both can live with.

(If you call closer to the end of the month, they'll be more eager to cut a deal with you, because collection agents work on monthly quotas of what they can collect by the end of every month.)

If you do not have the money to pay immediately, then try to set up payment arrangements with the company for a reduced total amount, to be paid back within a certain period of time. If you do this, after you've paid it off, it will no longer carry a balance on your credit report, which will help with your overall score.** Sample Letter

You can just leave it alone and it will get deleted automatically seven years after the original date of delinquency of the original account. There are two things to note if you decide to do this. One, the balance this account carries, reflects negatively on your score, and heavily for the first two years. After that, it has less of an impact, but it still does have an impact. Two, if the account has a large enough balance, the company may choose to go to court and sue you in order to get a Judgment against you. If they do that, it becomes a public record item as well and has an even worse impact on your score.

**Note: If you choose either option #1 or #2 above, GET IT IN WRITING before you pay them a dime. This way you have proof of your negotiated agreement in case they don't update the credit bureaus to say you've paid the account. I've had clients call the company back after the fact, only to find out that the person who made the arrangement, no longer works there and no one has any idea what you're talking about.

By making sure you get this letter up front, you can use it, along with proof of your payment (cashiers check, money order, etc.) to send into the bureaus as proof that you paid them per the arrangements that you both agreed to.**

Judgments and Tax Liens:

Both judgments and collection accounts continue to accrue interest for the entire time you have an outstanding balance, and it's not cheap, so make sure you also take that into account when making your decision as to what to do with it.

If you own a home, a judgment will attach to the county in which you live, so if you refinance or sell during the seven year period this is on your report, you'll have to pay it anyway and it'll be a much higher amount then. Judgment creditors aren't all that eager to play "Let's Make A Deal" when they know you are refinancing or selling your home, because they know they will get paid off no matter what. Make sure you keep that in mind, and try to take care of the situation before you're put into the position of having no choice but to pay the full amount.

If you have any judgments or tax liens remaining on your credit report when it comes back to you from the bureaus after you've tried to dispute everything you can, then the only thing you can do is negotiate pay-offs or repayment terms of these items, hopefully at a reduced amount.

For judgments, you'll need to contact the attorney who originally filed the judgment and see if they'll agree to a lesser amount. (Their contact information will be listed on the top left corner of the original judgment paperwork.) Again, be prepared to send them money immediately if you're going to attempt this approach. No one is going to play “Let’s Make A Deal”, without knowing you have the financial resources to pay-off the negotiated amount immediately. Don’t forget to make sure you get it in writing before you send them a dime.

Once the attorney has received your payoff, they are required to send you a Satisfaction of Judgment immediately. Remember, it is your responsibility to file this document with the County Recorder’s office in the original county that the judgment was filed. This Satisfaction will show up on your credit to counter-out the original judgment. This is the ONLY way to counter it out on your credit report, so be sure to take care of this important step.

As for tax liens, you'll need to get a hold of the correct taxing authority and see if they're willing to negotiate a reduced payoff, or at least set up payment arrangements with you. Tax liens also continue to accrue interest and it's not cheap, so you really should take care of these as soon as possible.

Once each lien is paid off, the tax authority will issue you a Release of Lien, for you to record to counter out the original lien on your credit. After that, it's just a waiting game for them to drop off of your report. They'll have less of an impact as time goes by, and a zero balance always looks better than an outstanding balance.

Note : ALWAYS keep copies of Satisfaction of Judgments and Release of Liens. These are your only proof that matters, anytime they come into question. This is very important!

Summary - Credit Myth To Remember

“Negative items have to legally stay on your credit report for at least 7 years.”

Collection agencies and other companies have been saying this for years, but nothing could be further from the truth.

These companies can remove any information they want, whenever they want. There is nothing legally stopping these companies from removing inaccurate information at any point of time.

They do have to remove it after 7 years, but it could possibly be sooner with your intervention, so let’s get busy!

For a Simple 8 Step System to Repair Your Credit, visit http://RepairCreditTrauma.com

Can You Sue A Car Dealer For Excessive Hard Credit Inquiries?

Credit Trauma — Mon, 13 Jul 2009 20:02:22 -0500

I came across this question, “Can I sue a car dealer for excessive hard credit inquiries?” when reviewing search terms on my blog and thought this is a good topic for further discussion.

First Of All, What Is A Hard Inquiry?

There are two types of credit inquiries, hard and soft.

A hard inquiry is a credit inquiry pulled for the purpose of obtaining credit. These types of inquiries are usually pulled for things such as a home, auto or personal loan. Landlords and tenant screen services credit inquiries are also considered hard inquiries.

A soft inquiry is a credit inquiry requested for informational purposes. If you request your own credit through a site such as AnnualCreditReport.com, this is considered a soft inquiry and does not deduct points off your score. Additionally, creditors whom you currently do business with can pull a soft inquiry to do an account review and evaluate your current credit worthiness. Offers for “pre-approved credit are not counted as hard inquiries. Credit inquiries for insurance and employment also fall into this category, as they are not made for the purpose of granting you credit.

How Many Points Can Be Deducted For A Credit Inquiry?

Each "hard" credit inquiry (meaning the consumer has applied for some form of credit, prompting the creditor to check the credit report or score) that is counted normally subtracts no more than five points from a person's score.

Auto Loan Inquiries

Auto loan and home loan inquiries are treated a little differently since 2004. Due to the fact that most folks like to shop around for both home and auto loans, the credit bureaus recognized the fact that each inquiry was having a negative impact on credit scores because of the multiple pulls. This practice was hurting the consumer’s credit score and not allowing the consumer to shop around for the best rates and terms.

So, Fair Isaac changed the rules a bit for Auto and Home Loan credit inquiries:

The credit-scoring model recognizes that many consumers shop around for the best interest rates before buying a car or home and that their searching may cause multiple lenders to request their credit report. To compensate for this, multiple auto or mortgage inquiries in any 14-day period are counted as one inquiry.

In the newest formula used to calculate FICO scores, that 14-day period has been expanded to any 45-day period. This means consumers can shop around for an auto loan for up to 45 days without affecting their scores. But the old 14-day rule might still apply at some lenders that aren't using the new version.

The newest FICO version went online at all three credit agencies -- TransUnion, Equifax and Experian -- in 2004, Typically it takes lenders months to adjust their processes so they can accommodate revised formulas -- and some lenders never adjust.

The FICO score ignores all mortgage and auto inquiries made in the 30 days before scoring. If you find a loan within 30 days, the inquiries won't affect your score while you're rate-shopping.

How To Avoid Multiple Hard Auto Inquiries

If you want to avoid multiple hits to your credit while you’re shopping for an auto loan, you’ll need to set aside a two week period to completely concentrate on getting your financing in place.

Find Out What Your Credit Score Is

In order to shop for a loan without being dinged for multiple credit inquiries, you’ll need to know what your credit scores are. This will also help you to determine whether you are “bankable” or if you’re going to have some difficulty getting financing.

You can get an estimate of your FICO Score to give you an idea of the current range of your scores, or you can purchase a 3-in-1 Report with FICO in one easy to read report for just $39.95 so you’ll know exactly what your credit scores are.

Get Preapproved At A Bank:

Now that you know what your credit scores are, call around to local banks in your area and ask, “What is the minimum credit score one needs to have to be pre-approved for an auto loan?”

If you know that your credit scores fall into their “approval guidelines”, then ask what are their interest rates and terms, such as how much down payment are they going to require.

Once you’ve determined the lender with the most favorable terms, go into that bank and apply. Some banks even have an 800 Phone Loan Center or on-line application process available so you don’t have to go anywhere.

Once you have been pre-approved by the lender of your choice, you normally have 30 days before the pre-approval expires.

If you decide to go this route, not only are you getting the best interest rate around without generating multiple credit inquiries, but you’ll also find out how much you’re approved for, which will make shopping for an auto easier in the long run.

Getting Auto Financing If You’re Not “Bankable”

If your credit scores fall below what you’ve found to be “bankable”, you’re going to need to find financing elsewhere. There are several ways you can do this:

You can go through an on-line Vehicle Financing Network. These networks have access to multiple lenders and their guidelines. They will have to pull your credit in order to find out what your scores are themselves, but then they have access to many auto loan financing companies specializing in consumers with “less than perfect credit”. Once they’ve determined which lender you have the greatest chance of being approved with, they’ll forward your application along.

Go auto shopping and when you find the car you want, the dealership will be more than happy to submit your loan application to multiple lenders. Remember, if you decide to go this route, you have 14 days of unlimited credit pulls to count as 1 pull.

If you continue to do this month after month, you’re going to see about 5 points deducted off your score every time your credit is pulled.

The Answer To The Original Question – “Can You Sue A Car Dealer For Excessive Hard Inquiries?”

Civil liability for knowing noncompliance: “Any person who obtains a consumer report from a consumer reporting agency under false pretenses or knowingly without a permissible purpose shall be liable to the consumer reporting agency for actual damages sustained by the consumer reporting agency or $1,000, whichever is greater.”

What this boils down to is…..READ WHAT YOU SIGN! If you applied for financing with a car dealership, then you must have filled out a loan application. Did the paperwork that you signed say that they would submit your application to multiple lenders?

If you did not grant them permission to pull your credit, then you may have a case to sue for $1,000, but in my view, it’s going to be way more hassle than it’s worth. The easiest way to handle the situation to your benefit, is to dispute the inquiries with the credit bureaus that are reporting them.

If the creditors that pulled your credit cannot prove “permissible purpose”, then the credit reporting agencies will remove these inquiries. If the creditors come back stating they had permissible purpose, you have every right to ask them for the documentation to prove it. Again, if they cannot come up with that documentation, the credit reporting agencies will have to remove the inquiry.

Once the inquiry or multiple inquiries are removed, you should see an increase in your credit scores. It’s a tiny bit of work on your part, but way easier than trying to sue for $1000.00.

What Is A Loan Modification?

Credit Trauma — Mon, 15 Jun 2009 13:53:38 -0500

A Loan Modification is a negotiation between a lender and a borrower whereas the loan terms are restructured without refinancing. The rate and terms of the loan are restructured to fit the current financial situation of the borrower.

Banks and lenders would rather take less money and keep homeowners in their home making a payment that they can afford, rather than go through the expense of foreclosing on the home, hiring a listing agent, rehabilitating the home, and letting it sit empty on the market for months, only to lose thousands in the process.

A loan modification is a good solution for those who cannot refinance, are behind on payments or struggling to make the payments, have experienced a genuine hardship, and want to stay in the home. A loan modification is a permanent solution and is not meant to be used as a temporary stop to the foreclosure process.

Are Lenders and Banks Really Willing To Negotiate?

Absolutely! In these market conditions, banks and lenders have been mandated by the government to do everything they can to work out a payment plan with their borrowers. This is a great thing for today’s borrowers especially for those who are running late on their payments or are having trouble making them on time.

Lenders do not want to foreclose on your home unless they have no other alternative. If you can present them with a realistic proposal that makes sense, they are very open and receptive to the loan modification process.

Who Qualifies For A Loan Modification?

Anyone who can prove they are having a tough time or “hardship”. Especially those who are at least one month behind on a mortgage payment, hose with negative amortizing loans, those with loans that are about to adjust, those who are upside down on their loan and those who would rather keep their home than do a short sale. One of the perks when doing loan modifications is that there are no credit checks so everyone qualifies in that respect.

The bigger the hardship you are having, the more negotiating power you have with your lender. Remember, they don’t want to foreclose on any more homes. They would rather keep someone in the home and create a solution that will be affordable rather than go through the cost and expense of foreclosing on the property.

Should I Hire A Professional To Negotiate A Loan Modification?

There are several advantages of hiring a professional, but you must also be very careful if you choose to use a loan modification company that takes a fee up front to negotiate your loan modification for you. It can end up costing you another month’s mortgage payment in exchange for false hope. No one can ever guarantee a successful modification, so NEVER spend any money with any company unless they can guarantee your money back if they’re not successful with the modification.

Whatever you do, don’t ever give up without doing all you can to save your home. You have several options you may or may not even know about. Don’t just let the bank take your home. You do not want a foreclosure on your credit report.

My book, Surviving Your Credit Meltdown, goes into detail in regards to what your options are and how you can get help for free. Visit: www.RepairCreditTrauma.com

Bad Credit Auto Loans

Credit Trauma — Thu, 11 Jun 2009 18:48:16 -0500

Are you afraid to go shopping for a car because of the embarrassment you may face at the very real possibility of being turned down due to bad credit?

If this is you, you’re not alone. More than ever before, millions are faced with bad credit right now.

What you need right now is a little “credit score infusion”. Your score needs to be high enough so you can qualify for that auto loan you so desperately need.

I Can’t Wait Months To Increase My Credit Score!

I totally understand. In today’s world an auto is a necessity. If you’re lucky enough to still have a job right now, you gotta have a car to get to work.

If you’ve been laid off or just can’t find a job, you need a car to go look for a job.

You need to pick up your kids from daycare, you need to go to the grocery store (jeez…nothing worse than trying to lug 6 grocery bags a mile down the road…)

Whatever the issue is, you won’t get far without wheels, so here’s a few tips you can use to infuse your credit score immediately”.

What’s A Good Score For An Auto Loan?

Different lenders have different criteria in relation to what they deem to be a “good” score. Really, what it all boils down to is “What interest rate am I going to have to pay?”

You can still probably find a lender who will give you a car loan with a credit score of 580, but you’re going to pay a really high interest rate for it.

Get yourself bumped up to over 600 and better yet, over 620, and you have a few more options, but the rate you’re going to pay is still not going to be pleasant.

If you have scores in the range of 650 to 680, interest rates are going to be decent.

Get yourself over 700 and you’ve got shopping power baby!

So, Where Do I Get My Credit Score?

There are many scoring models out there, so don’t be fooled.

There can be a 50 to 100 point difference from one credit scoring agency to another, so your best bet is to stick with your FICO Score. This score is derived by Equifax and is the credit score that most lenders use, so you can be pretty confident with the score you receive.

You can get your FICO credit score for $9.95 if you sign up for their Score Watch program. This is the quickest way to get your score, and a great way to monitor how it’s going to shoot up after I teach you a few tricks later in this article.

You can access all three of your credit reports for free at www.annualcreditreport.com as well, but you will then have to pay around $7 to $10 to purchase your score from each of the three major credit reporting agencies.

You can only do this once a year for free, and in my book Surviving Your Credit Meltdown, I walk you through an 8 Step System to erase negative marks off your credit, so you might want to save the one chance you have this year, until after you read the book. (You can still apply my system if you’ve already accessed www.annualcreditreport.com once this year, but you’ll have to do it all through snail mail.)

How Do I Get My Scores Up Quickly?

You’d be surprised at how much inaccurate information is reported without you even being aware of it. If you don’t check your credit on a regular basis (once a year), then I’m sure you’ve got some mis-information being reported on you as well.

Go over every account that is showing on your credit.

If you have accounts showing late payments that were never late, dispute those baby! Even if you’re not sure if they really were late….dispute it anyway!

If you have multiple collection accounts showing for the same debt, dispute ‘em!

If you have recent inquiries that are showing up that you do not recognize, dispute ‘em!

What Is The Best Way To Dispute?

Again, you can do this all on-line through www.AnnualCreditReport.com, but you only get one shot a year to dispute everything you can on-line and there is so much more you can do than what I’m outlining right here.

If you want take the hour or so and do a really thorough job the first time, I’d recommend getting Surviving Your Credit Meltdown and going through each step to make sure you’re optimizing your report as best as you can the first time. If you purchase the System, you’ll also get a video tutorial walking you through the dispute process in Equifax, Experian & Transunion while on AnnualCreditReport.com, so you know exactly what and how to dispute and what to expect.

If you don’t have time to do it right now, there’s a host of creditor and credit bureau sample letters you can use to send in to the credit bureaus that will accomplish the same thing, and you can save your free yearly check until you have a little more time to spend on it. These letters just take a day or two longer because you have to send them via the mail.

Don’t worry about sending in any kind of proof to the credit bureau’s of anything you’re disputing. (Just eliminate that part out of the letter template.) They don’t keep it for the first-time dispute process anyway because on the first go-around, all they’re going to do is contact the creditor in dispute and ask them to validate the information.

If the creditor finds a record of what you’re disputing, it stays on, if not, then it comes off. You’d be surprised how many items just come off because of lousy record keeping or laziness on the part of the human involved.

There is much more you can do after the first go-around with the bureaus, but this is a quick and efficient way to increase your scores quickly when you’re in a hurry.

Now….let’s get that car loan!

Okay…..with minimal effort and a little luck, you’ve increased your credit score higher than it was before…..good job!

Now, you need financing…..but where to go?

If you go directly to auto dealerships, you need to know that in order to get a loan, your credit report will be pulled, and pulled, and pulled…..you get my drift right?

This will result in multiple “hard inquiries” on your credit report, and by going to the dealerships first, you will never find out why you are not being approved and the inquiries will just keep adding up. (For more info on “inquiries, click here)

**You do however have a 14 day grace period when shopping for an auto loan. Your credit can be pulled multiple times within that 14 day period and it will only count as one inquiry, so you need to be sure that you’re seriously ready to buy that car once your credit starts being pulled. If you keep having your credit pulled after that, kiss your new score good-bye…

What you really want is to be pre-approved. That way you can walk into ANY dealership with a loan that you can afford already in place and you’ll know exactly how much you can afford.

Next Step: Go Visit Your Local Bank

If your new credit score is 620 or higher, the best thing you can do for yourself is go to your local bank and apply for an auto loan there first. (I’m talking about walking into your branch and talking to a live human.)

You want to speak with someone who can pre-qualify you for a loan based on the banks guidelines.

Maybe you don’t have enough income to qualify for that Ferrari you wanted……(yeah, probably not…) Yet, the loan officer will be able to advise you how much you can qualify for, as long as this is your only issue.

If you’re turned down because of your score, you can ask what is the minimum score they require to get approved. This will tell you whether or not you’re going to need sub-prime financing or not.

What If I Can’t Qualify For A Bank Car Loan?

If you’re not “bankable” just yet, don’t worry…..there are still lenders out there that will give you a loan, but the rate isn’t going to be as pretty.

I’d first ask the loan officer at the bank if they have anyone they’d recommend to refer you to.

If you're ready to pocket all the extra cash you pour into your gas guzzler, Gas Saver Auto Loans can help you get a loan on a fuel-efficient vehicle. You can easily apply for a loan in seconds, even if you don't have credit, have bad credit, or have filed for bankruptcy in the past.

You can also do a search on the net for “bad credit auto loans” and you’ll get a slew of links to click on. Some of these sites will search multiple lenders for you and could save you some time.

If you like a more personal approach, you can look in your local yellow pages for “finance companies”, like Household Finance or American General. Word of caution here though, finance companies usually carry much higher rates, so be sure to shop around.

What If The Payments Aren’t Affordable?

Most people worry about whether or not they’ll be able to make the monthly payments on a loan without taking into account the loan’s term, total interest paid, and loan origination fees or pre-payment penalties.

Generally, the lowest rates on auto loans are available on short-term loans, from 12 to 36 months, which mean a large monthly payment but lower amounts of interest.

Longer-term loans often come with higher interest rates.

When you calculate the total price of your new vehicle, include the interest costs over the years.

If it seems like too much for you, try to renegotiate the interest rate, offer a larger down payment, or shorten the term of the loan.

What Is Imminent Default?

Credit Trauma — Mon, 01 Jun 2009 15:55:26 -0500

Imminent Default Loans

I get asked “What is Imminent Default?” quite a bit in relation to mortgages and home loans, so I thought I’d explain this in a little more detail.

If you break down the two words in a basic sense, “imminent” means: likely to occur at any moment, impending, near, at hand, about to happen.

The word “default” means: failure to act, inaction or neglect, failure to meet financial obligations, to fail in fulfilling or satisfying an engagement, claim or obligation, failure to account properly for money in one’s care.

So, what this term boils down to is: Borrowers in jeopardy of “imminent default” cannot continue to make full monthly contractual loan payments.

Are you in danger of Imminent Default?

If you are having a hard time keeping up with your monthly mortgage payment, then yes, you are in danger of imminent default.

Most lenders are taking a proactive approach to these types of borrowers. Lenders would much rather figure out a way for you to keep your home if at all possible, rather than foreclose on it.

If this sounds like your situation, you should contact your lender the very first month you cannot make your mortgage payment.

What will the lender require if you’re at risk of imminent default?

You will be asked to provide financial and other supporting information to determine default avoidance and/or possible loss mitigation options.

If you qualify, the lender will negotiate payments and determine the optimal workout solution and as applicable, work with other departments or vendors to document and implement the workout solution, which may include temporary or permanent modification of loan terms.

Will modified loan terms affect your credit?

Normally, as long as you “pay as agreed” to the new terms, your credit should not be affected.

I would however, question the lender as to whether or not they are going to report the account as being late if the workout solution is temporary. Because you are not paying what was originally “contractually agreed to”, this may affect how updates are made to the credit bureaus.

Make sure to get any arrangement in writing, including how the modification will be reported to the credit bureaus so if you run into issues later, you have documentation to dispute any mis-reported information.

For more information regarding mortgages, and getting the help that you need, please visit: http://MortgageCreditTrauma.com

Short Sale Guidance

Credit Trauma — Tue, 21 Apr 2009 13:21:54 -0500

If you need to sell your home in today’s market, you may be in for a big shock if you discover that the current market value of your home is in the toilet, and you now owe more than your home is worth. If there is any possible way you can postpone selling right now until the market begins to turn around, that would be your best bet. However, if you find yourself facing a certain financial hardship that you know you can’t recover from or you’re facing a divorce or you’re relocating to a new job and have no choice but to sell, here is some information to help guide you through the process.

Will Your Lender Object To A Short Sale?

Most lenders are only interested in 2 things:

1. How much do you owe?

2. How much can you sell your home for?

The reason you are considering a short sale is not of primary concern to your lender. If you’re currently making your payments on time and your loan is current, more than likely your lender isn’t going to be all that cooperative. They want your money and they’re getting it….what’s the problem?

Now if you’ve lost your job, your mortgage payment has adjusted upward to an amount you can no longer afford and you can’t qualify for a loan modification, you’re facing a divorce or your tenant is no longer paying you rent for an investment property resulting in late mortgage payments or complete non-payment of your loan, then you just might entice their cooperation in a short sale. Your lender would much rather get “something” of what you owe versus becoming the new owner of your home.

Complete a Short Sale Package

All lenders will require you to submit to them a Short Sale Package. Usually included in this package is:

3^rd Party Authorization (to deal with your realtor directly)

Listing Agreement

Purchase Contract

Hardship Letter

Estimated HUD Settlement Statement

Current Financial Statement

3 Months Bank Statements

Previous Year’s W-2’s & 3 Consecutive Paystubs (if employed)

Previous Year Tax Returns, Year End P&L & Current P&L (if Self Employed)

If you are considering a short sale, contact your lender’s Loss Mitigation Department immediately to see if you can send in all items required, with the exception of the Purchase Contract and Est. HUD Settlement Statement, in order to be “pre-approved” for the short sale. For some lenders, approval of a short sale can take up to 3 months or more and if you can get the process going before you even receive an offer on your home, can cut back this timeframe considerably.

You may want to submit this information by fax, mail and email just to make sure the lender has received it. Immediately follow up with the lender to be sure they have it in their hands and get an approximate date on when you can expect a response. Make sure you document every conversation and get contact names and phone numbers.

Find an Experienced Short-Sale Realtor

Agreeing to accept a “Short-Sale Listing” is no picnic for a Realtor. You need to find one that is experienced in short-sales. Often this process can be long and drawn out and requires constant follow-up with the lender….this is one instance where “stalking” is considered okay.

When interviewing realtors, make sure they have short-sale experience. You should ask them what is their short sale closing ratio and if they charge for their service. Find another agent if they want to charge you anything. A seller should never incur any costs associated with a short sale.

How Much Should I Sell My Home For?

This is not a question you as the seller should be answering. Current market value is determined by the most recent sales in your neighborhood that are similar to your home. Yes, this data will include short-sales and foreclosure sales unfortunately, but these sales must be used if they are the most recent, relevant sales. Your realtor will complete a market analysis of your home and discuss with you what these homes are selling for. Whatever you do, do not try to list your home with a sales price higher than what it can actually sell for in your current market. You want to attract an offer immediately, so get input from your realtor as to what the asking price should be.

Keep in mind that the selling price of your home is not the end price to the lender. There will be closing costs, property taxes, liens and realtor commissions that will also have to be paid. These costs must come from the sales proceeds, so the lender will end up with even less than the selling price.

Okay, I’ve Got an Offer….Now What Do I Do?

If haven’t already sent in your short sale package, now is the time to do so. Make sure you include EVERY single item the lender is requesting or your file will be marked incomplete, and you’ll probably end up on the bottom of a very high stack of files.

If you have already sent in the package, you’ll now need to send them the signed purchase contract with an addendum that clearly states that the “Sale is entirely conditioned upon current mortgage holder(s) acceptance of the contract and agreement to pay all agreed costs of sale including commissions, closing costs and costs of Notice of Default.” (If applicable)

You’ll also need to have an Est. HUD Settlement Statement prepared by the title company. This is a breakdown of all costs that will be incurred and how much the lender can expect to “net” from the sale after everything has been deducted.

After you’ve submitted all the paperwork required, start stalking them baby! Some lenders can take 30 days or more to respond or even acknowledge that they’ve received your package. Follow up constantly and make sure you document every phone call and every person that you’ve talked to.

Once your short sale offer is approved, you will receive a Release of Lien. This is the document that states what the lender will accept as the net payoff.

Will the Lender Come After Me For The Difference?

Most banks will not come after you unless you have excellent credit, significant assets or are not delinquent on their loan.

At the end of a short sale transaction, a lender will send you a release. There are two types of releases:

Release without Prejudice: The lender releases all liability of the seller.

Release with Prejudice: The lender will reserve the right to attempt collection of the deficiency balance.

If your approval is subject to prejudice, try to negotiate a promissory note with the lender for a lesser balance. If you owe $50,000, offer them a promissory note for $10,000 instead as “payment in full”. Whatever terms you end up with, make sure you get it in writing before you ever pay a dime. This way you’ll have a record of your arrangement in case any disputes arise down the road. Make sure to keep copies of all paperwork and payments made.

You’ll want to negotiate terms that you can financially live up to. Some lenders will agree to zero interest and up to a ten year term. You’ll also want to be sure that this agreement eliminates any negative hit on your credit for the deficiency balance. Because you are willing to give the lender a promissory note, this will placate most lenders enough to accept your short sale offer. Just remember to get every term you negotiated on with the lender IN WRITING first.

Once you receive the release, you can forward this to the title company handling the short sale transaction and this should be all they need to close the sale.

Will the IRS 1099 me for the Amount of Debt Forgiven?

If the short sale is on your primary residence, you could be protected by the 2008 Mortgage Relief Debt Act. Under this new law, there is no federal income tax due on debt forgiven on a loan that is secured by the seller’s principal residence, provided that the loan was made to acquire, construct, or substantially improve the principal residence. However, if you just pulled money out of your house to pay for a vacation and got debt relief on that loan, you would be subject to income tax. The exemption applies to any portion of loan debt forgiven beginning January 1, 2007 through December 31, 2009. Therefore, it doesn’t matter when the loan was made; what matters is when a portion of the debt is forgiven.

IRS Income Taxes on debt relief due to foreclosure is NOT automatic though…

You have to file IRS Form 982 “Reduction of Tax Attributes Due to Discharge of Indebtedness,” and the form has to be attached to the federal tax return.

Do I Get Any Money From The Sale?

Come on….what do you think? You’re asking the lender to eat some of the balance that’s owed to them, along with paying the closing costs, taxes, liens and realtor commission. Do you really think you’re going to get any money after that? I don’t think so!

Is My Credit In The Toilet Now Too?

Well, maybe yes, maybe no…it depends. If you had late payments on your mortgage or stopped paying it entirely prior to the short sale, then you’ve already done damage to your credit and depending upon how late you were will determine how damaged it is.

If the lender has filed a Notice of Default which tells that “foreclosure proceedings were started”, this will further damage your credit.

Unfortunately, there is nothing you can do about this issue but wait it out. After two years, it will no longer have much of an impact on your credit scores, although the late payments and other derogatory remarks will remain on your credit for 7 years.

Most mortgage trade lines will report your credit as “mortgage paid” after a short sale. An actual “foreclosure” will not report. If you’ve received a Release with Prejudice from the lender, hopefully you negotiated with the lender from reporting the mortgage as a loss, therefore preventing further damage to your credit.

Please share your short sale experience with me in the comment section below! I'd be very interested to her about how it went for you.

For more info, visit CreditTrauma.com

The Use Of Credit While You’re Unemployed

Credit Trauma — Sun, 12 Apr 2009 20:18:57 -0500

If you’ve currently found yourself unemployed, don’t get discouraged….you’re in good company. The unemployment figures in the US are higher than they’ve been in decades. Now that the unplanned and unwanted event has arrived, if you have a savings account, regardless of how much you’ve put into it, and you have some available credit lines, you’ll have two tools that will be a huge help to you to get through this time without damaging your credit. Let’s look at some steps that you’ll need to take.

Time To Recalculate The Family Budget

Sit down with your family, including your children, and discuss the situation. You’ll need to talk about temporarily reducing expenses to keep in line with your now reduced income. Do not be embarrassed to talk with your kids about this situation. Children need to be aware of issues that are now going to affect the family and they’ll also learn an important lesson of how adults deal with difficult situations and work together to overcome them.

Get Help From Credit Counselors If Needed

If you’re afraid you’re just not going to be able to make ends meet during this difficult time, look for an “accredited” credit counselor early on. A legitimate, certified credit counselor may be just the help you need to begin resolving your financial concerns. A credit counseling agency serves as an objective third party to help you sort through your problems, give you some credit education, offer personalized budgeting advice, and design a customized plan to get you out of debt at no charge or a very nominal fee.

Severance Pay From Your Employer

If you’re lucky enough to be getting severance pay from your employer but have not received it yet, talk to your HR department and ask them to increase your “withholding exemptions” up to the maximum allowed. This will reduce the amount of tax that is withheld from your income and give you a little more cash in your pocket. Be aware that you may have more taxes to pay because of this strategy, but with reduced earnings and job hunting expenses that you may be able to write-off, you may offset this amount somewhat.

Stay Away From Cash Advances

Whatever you do, do NOT use cash advances on your credit cards as a way of generating income. The cost of using money this way is much greater than using the credit card to pay for it. Cash advance almost always come with extra fees and usually have a much higher interest rate associated with repayment.

Looking At Credit From A Different Perspective

Prior to becoming unemployed, you used credit to spend your income in a different way than carrying around your paycheck in your pocket. You also used it for purchases that took you some time to pay off because they cost more than you could initially afford. When you’re not working, you don’t have that paycheck coming in, so you may need to use credit for basic living and job-hunting expenses only. Remember, this is NOT the correct way to use credit on a regular basis, but as an alternative to getting through this temporarily insolvent time in your life.

Save Your Cash Until Last

Your cash cannot be replaced once it’s gone, so use your credit first and save your cash for last. Pay with credit for your necessities as much as possible. Make sure you follow your new budget so you keep these charges to a minimum which will make your credit last as long as possible.

Employers May Pull Your Credit

Prospective employers often pull your credit report as part their requirements in order to offer you a job, so to maximize your chances of getting a job, you’ll want the best credit you can possibly have.

Preserving Your Credit While You’re Unemployed

Keep your balances at less than 30-50% of your high credit limit. This will help keep your credit score as high as it can be. The closer your balance gets to your available credit limit, the lower your credit score drops, even if you make your payments on time every month.

Make all credit card payments on time. Making credit card payments by no later than the due date has a 35% affect on your credit score. If you start to get behind on your payments, this could attract the attention of other creditors who begin to get nervous that you’re going to do the same to them, and they may freeze, suspend or even close your account. If this happens, you will have less credit available to use during this time and it will also impact your credit score for two reasons. The first is the late payment and the second is if the account is closed, you no longer have the high credit limit on that account and that will also affect your overall debt-to-limit ratio.

Pay the car loan first. A car can be repossessed in as little as two weeks. If you lose your car, how will you get to job interviews and eventually get to work in order to keep a roof over your head by paying rent or a mortgage payment?

Pay your rent or mortgage second. You don’t ever want to get more than 60 days behind on your mortgage. If you do, the foreclosure process will begin and this is a very difficult process to stop once it’s started. If you’re having trouble paying this bill, contact your lender immediately (preferably before your even 30 days behind) and see what programs they have to offer to help you during this time.

What To Do When You Run Out Of Credit And Options

If you aren’t able to make any payments on maxed-out credit cards or credit lines and you still have no job possibilities coming up, something will have to be done. You only have three avenues to work with….income, expenses and credit. If credit is not an option, then income and expenses are your only other alternatives that you can change.

You’ll need to revamp the budget that you prepared when you first became unemployed. Take a look at each and every item and determine where you can make some drastic steps to reduce these amounts. Can you move to a smaller place? Can you move in with friends or family? Can you sell things around your house to bring in some additional income? Consider taking a side job in the interim to tide you over until you can find something in your field. If you need income, you may have to take what you can get for awhile.

This time can be very stressful, but try to keep in mind that you will come out stronger that you went in, given time and perseverance.

http://CreditTrauma.com

Cool Tool - Advertise While You're Driving!

Credit Trauma — Tue, 07 Apr 2009 16:31:24 -0500

Check out this COOL TOOL I found to help you get more exposure!

http://www.primelinx.com/krpp/index.htm

Imagine the impact of having your web site address, e-mail address or company name seen hundreds or even thousands of times every day in major city traffic.

Promo Plates Are an exciting new way to use your car to promote your corporate brand, business or practice. Whether you are a professional, small business owner, or individual; Promo Plates can actively promote your website, email address, phone number or personal message every time you drive your car.

Promo Plates work so well, many of our customers immediately re-order more name plates for their employees and associates. The positive feedback has been astounding!

Hope this helps you to increase your exposure in this tough economy!

http://www.primelinx.com/krpp/index.htm

Which Credit Inquiries Lower Your Score?

Credit Trauma — Wed, 17 Dec 2008 16:52:51 -0600

Excessive Inquiries Can Lower Your Credit Score

Excessive inquiries to your credit can drastically reduce your credit score, although certain types of inquires don’t affect it at all. You need to know which types negatively affect your credit, so you can keep them to a minimum in order to ensure optimal credit scores on a consistent basis.

The Hard Inquiry

When you fill out a credit application you authorize a bank, credit card company or lender to view your credit history. This is known as a hard inquiry and is done with “permissible purpose”.

Collection agencies may also pull a hard inquiry. Hard inquiries can take points from your credit score. Many hard inquiries are also viewed negatively by creditors and can be used as a reason to deny you credit.

The Soft Inquiry

A soft inquiry may not have been authorized by you. Your existing creditors pull your credit reports to see how you are paying your other bills and if any problems exist. They also do this as an excuse to invoke “universal default” which can raise your current interest rate. Lenders and credit card issuers also pull soft inquiries in order to screen you for pre-approved offers. Soft inquiries do not take points away from your credit score and are supposedly only viewable by you.

Pre-Approved Offers

When you receive a “pre-approved” offer in the mail, this means a bank or credit card

company has screened your credit and made a soft inquiry. However, even when you receive a pre-approved credit offer in the mail and you respond, a hard inquiry will most likely be pulled. This means a hard inquiry will be added to your credit files and points will be deducted from your credit score.

You can opt out of these types of inquiries by visiting OptOutPrescreen.com. You can opt-out of these types of offers for 5 years with an on-line submission. If you want to permanently opt-out of these types of offers, the site will provide you with a letter you can print, sign and mail in which will eliminate you from these types of offers forever.

Why Hard Credit Inquiries Are Bad

Credit grantors view too many credit inquiries as a sign of financial trouble. The creditor has no way of knowing if you were approved for all of the credit you applied for. Your credit inquiry does not indicate approval or denial. They may assume you received the credit lines that are showing as inquiries. Additionally hard credit inquiries take away points from your credit score. Too many hard inquiries could result in a denial of credit and bring down your credit score.

Mortgage and Auto Loan Inquiries

It is wise to shop around for the best interest rates when making a major purchase such as a house or automobile. But shopping around for the best rates may result in many inquiries during the shopping phase. The credit reporting agencies supposedly have a buffer to prevent your credit scores from taking a dive for too many inquiries when shopping around for interest rates.

All inquiries related to a mortgage loan or auto loan done within a 14-day period are counted as one inquiry. The issue with this is that the inquiries are supposed to indicate a mortgage or auto inquiry on your credit report, but there is no way of knowing if a lender or bank has noted that inquiry correctly. Just be informed and ask your lender before applying, especially at a car dealership. They may run your credit through many lenders in order to get you approved.

How Long Do Inquiries Remain On Your Credit Report?

All credit inquiries remain on your credit report for two years and should drop off automatically when the two years as expired.

All “hard” inquiries show up when a lender or creditor request your credit, whereas “soft” inquiries only show up when you request your own credit reports.

Most credit granters disregard credit inquiries after 6 months. While they do remain on your credit reports for 2 years, they are not heavily weighed in decisions to grant credit.

Erasing credit inquiries

The credit reporting agencies will tell you that credit inquiries are just a statement of fact and cannot be removed. This is not true. FRCA Rules state that “Any information can be disputed and must be investigated”. You need not worry about soft inquiries as they do not count against your credit score. Credit inquiries made without “permissible purpose” should be disputed.

The FCRA states you can sue for damages in the amount of $1,000 for each instance a company pulled your credit report without your permission.

Credit inquiries made without your permission may indicate fraud, in which case the credit reporting agencies may put a fraud alert in your files. A fraud alert will make it difficult for anyone, including you, to access your credit report without your permission.

Permissible purpose would be if you applied for credit, one of your current creditors may pull a hard inquiry or a collection agency holding a debt may pull your credit report.

Is Disputing Credit Inquiries Worth The Time?

If the credit inquiry is really a mystery to you and you don’t recall requesting credit then you really should initiate an investigation with the credit reporting agencies. It could be a matter of fraud and you want to handle that immediately. A fraud alert may be put in your files in order to protect you. Fraud alerts will also keep you from applying for credit easily.

Your time may be better spent disputing other types of information that would significantly raise your credit score if deleted.

For more information, visit: http://www.RepairCreditTrauma.com

Behind On Credit Card Payments?

Credit Trauma — Wed, 19 Nov 2008 15:45:11 -0600

Job losses Are Going To Affect Credit Card Payments…

The news is riddled lately with massive lay-offs of employees. It’s also taking anywhere from 3 to 6 months to get another job, and even then, the salary may not be as much as you were previously making. What is going to happen in the interim? Do you have enough saved to pay your rent or your house payments, along with those never ending credit card bills? More than likely, you don’t. What is going to be the first thing to go? Yup….you guessed it, the credit cards.

What Happens If You Can’t Make Your Payments?

If you let the bills go unpaid for too long, they’re going to end up in “charged-off” status with the original creditor and then the account is going to be sold to a collection company. The collections agency will then pursue payment of the account more aggressively. This is considered a very negative occurrence for your credit scores, short of filing for bankruptcy.

If the balance is large enough, the creditor may consider taking you to court and obtaining a judgment against you. Not only will the judgment be recorded against any property that you own in that county, but the judge can also order that your wages be garnished from your employer, or they can order that your bank account be levied to pay for the debt. If you've ever had this happen to you, it can be devastating to find out your bank account has been sucked dry and whatever money you did have in the account, is now gone forever.

A judgment is also going to become a public record item which will stay on your credit report for 7 years, and interest is going to continue to accrue until the account has been paid.

What Are Your Options?

If you know you’re not going to be able to make your credit card payments anytime in the near future, you have a few options:

1. Contact your creditors, explain the situation and see if they can work out an arrangement with you, on terms that you’ll be able to meet financially. Make sure to talk to them about the possibility of not reporting the payment reduction to the credit bureaus, so your account does not reflect late payments.

2. Contact a bankruptcy attorney and find out if you will be able to pass the 2005 Bankruptcy Means Test, in order to qualify for a Chapter 7 bankruptcy, which is a discharge of all unsecured debts.

3. If you do not qualify for a Chapter 7 bankruptcy, discuss a Chapter 13 bankruptcy with your attorney and find out what the repayment terms will be.

4. Contact a legitimate debt counseling company. The company you choose should counsel you regarding your debt and finances, as well as work with your creditors to reduce your interest rates and set up a structured re-payment plan to pay off all of your debt within a certain period of time.

Which Has Less Negative Effect On Your Credit….BK 13 or Debt Counseling?

If you do not qualify for a Chapter 7 bankruptcy, which a complete discharge of your unsecured debts, you might want to consider repayment arrangements through a debt counseling company versus filing for Chapter 13 bankruptcy.

Both of these options require that you repay your debt for cents on the dollar, and both are accomplished in a set period of time. You’ll need to compare both options and weigh the savings between each, but if the difference is not significant, then as far as your credit is concerned, you’re better off with a debt counseling company.

If you know you’re not going to be able to make your credit card payments, contact a debt counseling company immediately and find out what they can do for you. If they can work out arrangements with your creditors before you ever get behind, your credit report may never feel the effects of your situation. That is the ultimate goal.

By filing for Chapter 13 bankruptcy, this is about as negative as it gets on your credit, not to mention that the public record stays on your credit report for 10 years.

For more information, visit: http://BankruptcyCreditTrauma.com

Raise Your Credit Scores Using This Simple Method

Credit Trauma — Wed, 19 Nov 2008 15:40:18 -0600

Too much credit card debt results in low credit scores.

It seems as though you’ll never get out from under all those credit card bills doesn’t it? You make a $50 minimum payment on one card, only to see the balance drop by a whopping $5.00 or so….wow….talk about discouraging. At this pace, you’ll possibly have your bills paid off by the time you reach 70! That’s of course assuming you never charge another dollar, which you know is a fantasy. It’s a great goal in a perfect world, but probably not gonna happen.

Once you have multiple credit cards with high balances, you are stuck in a vicious cycle. If you can only afford to make the minimum payment, then 7/8^th’s of your payment is going to go to interest and you’re never going to get anywhere in reducing your principal balance. You know you need to do something about it, but what?

Contact your creditors…

It can’t hurt to call all your creditors and ask if they’ll please be kind enough to reduce the interest rates they’re charging on your account. Right now, even the credit card companies are in the midst of a meltdown and they’re cutting back credit limits right and left because some folks are completely defaulting on their debts.

If they hear that you’re working on a plan to try to pay them off, hopefully they’ll be inclined to work with you and possibly reduce your interest rate to help you out. The lower your interest rate is on all your accounts, the faster you’ll be able to pay them off.

Click Here for a Free Script on Negotiating Lower Payments with Creditors

Start by evaluating your expenses…

You got yourself into this mess because you’re charging more than you earn. While it’s fun to go out and buy whatever you want, whenever you want it, at some point it all has to be paid back…..with interest…..that’s kinda like taxes…you just can’t avoid it.

Do you really need that Venti White Mocha, non-fat, no whip, 180 degrees, every day on the way to work? Yeah, yeah, I know…..it wakes you up…..but guess what? You can turn on your coffee pot and fill up your travel mug before you leave, or if that’s too much work, the grocery stores have those coffee singles now. Just boil some water, dip the “tea-like” coffee bag in there, and off you go with portable caffeine…..easy schmeezy. You just saved $3.50 or so…..times 5 = $17.50 a week….times 4 = $70 a month! Hey….you could use that money to pay extra on a credit card bill and see a bigger principal reduction!

How about that $6.00 Guacamole Burger they sell at Carl’s Jr.? Isn’t that the best burger you’ve ever tasted? Throw in some fries and a coke and not only will you get hardening of the arteries, (though the avocado is really good for your hair I’ve heard) but you’ve got about a $9.00 lunch. If you cut that out every day, by the end of the week you’ve saved $45.00 and by the end of the month, you’ve saved $180.00! That’s a nice chunk of change! Just imagine how much principal reduction you’re going to see now!

Are you starting to get the picture here? Just cut out those two things and you have $250.00 extra every month! That can put a good dent in those high credit card balances. Imagine how much more you could save if you just think about the things you buy that you don’t really need. Remember, you don’t have to do this forever….it’s kinda like a diet…..just loose the weight, then you can snack once in awhile within reason, without putting all the weight back on.

Make the “Withdrawal Symptoms” less acute…

First you have to break the “habit” of charging all the time. This in itself is something that requires conscious effort. To help you do this, budget yourself around $100 a month that you’ll put aside in CASH if you want to splurge on lunch or that Pumpkin Spice coffee that ONLY comes out during the holidays. I know you have to have your “fix” once in awhile or else this whole concept is going to go down the drain. Use this money when you are having a “craving” and you just “gotta have it”. This will help alleviate those withdrawal symptoms and make it easier for you to stay on track. Just remember, when that $100 for the month is gone…..no more treats for you, so space it out.

Second tip….carry just one credit card in your wallet for emergencies only. Leave the rest at home. If you don’t carry them with you, even if you do get the urge to spend, you won’t be able to! Oh, by the way, an emergency is defined as something like your car broke down….not Macy’s “one day” sale. Trust me….there are sales going on all the time. Besides….you’ve got enough shoes to wear for the next 10 years I’ll bet!

Pay down the credit card with the lowest balance first…

Work on paying off your debt by making payments on the credit card with lowest balance first. Once you have that account paid off, use the extra money you were spending on the previous account and apply it to the next credit card you have with the lowest balance. Then keep making payments on that account until it’s paid off, and so forth. By doing it this way, you’ll feel a sense of accomplishment that you’re actually getting somewhere, which will give you more motivation to keep on track.

The benefits of paying off your credit card debts…

The results of your efforts will show up as an increase in your overall credit scores. As your scores go up, you’ll have more clout with your creditors. Call them again and ask for those interest rate reductions on the accounts you have remaining. Folks with the highest scores, get the most benefits…so use that to your advantage! Don’t be afraid to call every other month or so and ask for a rate reduction. What’s the worst that can happen? They say no???? No big deal….you’re not in any worse position than you were before you called. If their answer bothers you, you can boycott them after your account is paid off…..that’ll show ‘em!

Don’t close your accounts after they’re paid off…

Remember, it’s not wise to close accounts that have zero balances, unless you can’t trust yourself to leave the card alone or at one point you got “credit happy” and have way too many open accounts. (You know like… Old Navy, Kohls, Mervyns, Sears, Macys, Target…those cards you got because you got an extra 15% off?)

If you do have too many, and know you really should get rid of some of them, close the most recently opened account first, and the second most recently opened account next…and so forth.

Your credit scores like a long credit history and positive, open, active accounts contribute to that history. Just charge $20 on the card every 3 months or so to keep it active and reporting to the credit bureaus. Then PAY IT OFF when the statement comes in. Do this, and you’ll be on your way to an 850 FICO credit score in no time!

For more information on Increasing Your Credit Score:

http://RepairCreditTrauma.com

Best Time Of Year For Credit Repair

Credit Trauma — Wed, 19 Nov 2008 15:36:35 -0600

Best Time Of Year For Credit Repair

Were you aware that the best time of the year to submit disputes to the three major Credit Bureaus is during the holiday season?

Typically staffing at the credit bureaus along with the creditors themselves, who are responsible for verifying disputed information, are a bit short-handed during this time of year due to holidays and vacations.

Under the federal Fair Credit Reporting Act, a credit repository has 5 days from submission of an on-line dispute or from the receipt of a written request, to contact the creditor in question about investigating your complaint(s). The credit reporting agencies should reply back within 30-45 days from the time you submitted your complaint. The repository must send a written report to you with its findings, (and a copy of the revised report if there was any change) within 5 business days after the completion of the investigation.

Because there is a time frame that legally must be adhered to for both the credit bureaus and the lenders/creditors who must verify any items you are disputing, November and December are the optimal times to work on repairing your credit and getting negative items removed.

Use this time of the year to your advantage to fix your credit, in case the credit bureaus and creditors can't thoroughly investigate within the specified time allotted.

Remember....Anything that cannot be verified, must be removed from your credit report altogether.

For more information, visit:

http://RepairCreditTrauma.com

Credit Card turned Collection Account?

Credit Trauma — Wed, 19 Nov 2008 15:35:17 -0600

Credit card companies are also experiencing major losses in our current economic environment. In light of this, they are also tightening up their guidelines and becoming pickier on who they send “Pre-Approved Offers of Credit”.

They are also watching your accounts like a hawk. Not only accounts you have with them, but accounts you have with other credit card companies as well.

Your credit is being watched by all your credit card issuers more frequently than ever before. If you happen to become past due on any credit card you hold, then beware….you may be in danger of having your credit limit decreased or even frozen.

How does this affect your credit?

<D Decreasing your credit limit can cause your balance-to-limit ratio to go up.

In order to achieve the highest credit scores you can possibly have, you don’t want your balance-to-limit ratio to exceed 30% (50% maximum) on any individual account, nor on the total amount of your revolving accounts combined. If a creditor decreases your credit limits on one or more accounts, this can have an immediate negative impact on your overall credit scores.

<!- Credit card issuers are also lowering credit limits to an amount below what you currently owe.

If they do this, it can possibly put you into an immediate financial bind, because the next statement you get from that creditor is going to ask for the difference between your current balance on the account, and the new reduced credit limit. This amount they’re requiring you to pay can amount to thousands of dollars, and if you’re one of the ones affected, more than likely you’re not going to be able to come up with an extra few thousand dollars to pay by the next due date.

What happens if you can’t pay the difference?

If you cannot pay the “Amount Due” to the creditor after a certain period of time (usually about 90 days), then your account will be transferred to the Collections Department. Some creditors have internal collection departments, while others outsource these accounts to 3^rd party Collection Agencies. Either way, the collector’s primary task is to convince you to “pay-up”.

Once a debt has been labeled a “collection account” on your credit, you’re going to see an immediate credit score drop. Collection accounts are about as bad as it gets, short of bankruptcy, as far as your credit scores are concerned.

How do collection agencies work?

Collection agencies work with lenders and creditors in a couple different ways. In all cases, collection agencies purchase these bad debts for much less than the amount owed, usually for pennies on the dollar. The first way is for the agency to buy the bad debt so they own it outright. Another option is for the creditor or lender to consign the account to the collection agency. With this option, the creditor or lender agrees to pay the agency a percentage of whatever amount their collectors are able to recover. Percentages do vary, but some collection agencies can make as much as 50% in some cases.

Once the collection agency takes over the account, they give bonuses to their agents if they are able to collect most or all of the outstanding debt. In essence, the collectors make more in their pockets by making you pay more of the debt. This can lead to brutal and unethical collection practices at times.

How Collection Accounts should be handled:

<!- 1. First and foremost, don’t ignore the collection account or the debt collector. The problem can only get worse if you do, which may lead to wage garnishments, or even the company filing suit against you which could result in a judgment. Communicate with the collector and be honest about what you can pay and when you can pay it.

<!- 2. It’s always in your best interest to pay a collection account as soon as you possibly can, so you don’t incur interest that is going to accrue on the account as long as you have an outstanding balance. This does not mean that you have to pay the entire balance. You need to keep in mind that these companies have purchased your bad debt for pennies on the dollar, so you should try to negotiate and settle the debt for as little as possible. You can start the negotiation process by asking them if they’ll settle for 20% of the amount they’re asking you to pay, then go up from there. Do not include any interest that is being tacked on as part of your negotiation process. The interest they’re trying to charge you is just the icing on their cake.

<!- 3. You should be aware that when you are “settling for less than you owe” on a debt with a collector, they are looking to receive the amount you negotiated with them immediately, so make sure you have the money to do so. Once you do come to an agreement, make sure you GET IT IN WRITING before you make the payment.

<!- 4. At times, you may hear an unethical collector tell you whatever you want to hear if they think it will help them get you to pay the debt. If they offer to remove the collection from your credit report in exchange for payment, make sure you require them to put this offer in writing first. Collection accounts are never automatically removed just because they are paid, so don’t fall for that trick unless you see it in print on the collection agencies letterhead referencing that exact account.

<!- 5. Debt collectors are paid bonuses on how much they can collect in a calendar month. Keep this in mind during your negotiation process. Sometimes calling at the end of the month can be helpful and negotiations may be more to your advantage if that particular debt collector is trying to meet a goal.

In Summary:

Life does have its challenges and can throw you a curve ball from time to time, usually when you least expect it. In some cases like this, it may be impossible to avoid a collection account. You need to know that you do have many rights and there are many important things you need to be aware of.

For more information,

Visit: http://CollectionActCreditTrauma.com

Spending On Credit - Getting Back To Basics

Credit Trauma — Wed, 19 Nov 2008 15:30:47 -0600

I don't think there is one person right now that isn't affected in some way by the current economic downturn we're experiencing.

In some ways, I'm thinking that maybe what is happening right now is a good thing in some respects. Credit limits are being cut, and people can no longer "consolidate" their debt into home equity loans, because most of us don't have any equity available. Don't get me wrong.....these are not "good" things, but I do believe that all of us are having to re-think our spending habits, and THAT IS a good thing.

Do You Really Need Everything You Charge On Credit?

For too long, we have been on the "gotta have it now" program, which has thrown a majority of people into more debt than they can ever afford to pay back. I reflected back myself on things I've bought that I never even used or really needed. Did I really need to spend my money on that? No, not really.....I just "had to have it" for some reason or another that I can't even remember now.

We Need To Cut Back...

We are all so rushed in this life. There is never enough time to get everything done that we want to do. Our life has taken on "outsourcing" to complete the tasks we either don't want to do, or don't feel we have the time to do, or just don't know how to do. Outsourcing takes money and the majority of us just don't have the disposable income we once "thought" we had to pay for these services. We're having to cut back now. The housekeeper and gardener services are being cancelled. We're not buying things we don't really need. We're not going out to eat as much, nor are we going out for our entertainment as frequently as we used to.

I think we all need to get back to basics and learn how to do some things on our own, and for ourselves. We need to re-think our spending habits, focus on reducing our debt, and learn how to "save" money instead of "spending" it. We need to invest in ourselves, our own security, and our own future. We need to set an example for our own government by not spending beyond our means. We need to have emergency funds saved for ourselves, so we can bail ourselves out of our own mess. We need to be accountable for how we got into this position, change our habits and take personal responsibility.

Getting Back To Basics:

Going out to dinner has become a privilege now, not an expectation. You know what? Recently, I've actually learned how to cook some pretty darn good meals! Not only that, but we're spending more quality time together as a family, because we all get involved in the process. My kids have even come up with a couple of concoctions that pass as "edible"! You know what the best part is? It's not the homemade dinners that I remember, but the quality time I'm spending with my family actually making them. That's priceless.

Instead of spending money going to the movies, we're dusting off the board games that have been shoved to the back of the closet for too many years. The laughter, jokes, and quality time we're now spending together is bringing us closer together as a family. More priceless memories.

I love taking long walks with my teenage daughter now....talking about her favorite topic....boys. It brings us closer together and the more she talks and I listen, the more she tells me and the closer we get. Trying to relate to a teenager is no easy task for most parents, myself included. I think I've found the key to that dilemma in just listening to her. I find out all sorts of things about her views on life, her dreams and her plans for the future. I try to tell her every chance I get, how proud of her I am and her face just lights up. There is nothing better in the world than the sight of a smile and happiness on your child’s face. Now she bugs me to go walking with her....it's become a part of our daily ritual, and one I look forward to every day.

When was the last time you just curled up on the couch in front of the fireplace with a good book or with your spouse and just sat and talked about the good times? I'll bet you'll remember things about times you spent with loved ones or others; not the things you bought. In the grand scheme of things....nothing you bought, brings you more happiness than the things you actually experience with the ones you love.

Take Some Responsibility To Get Out Of Your Current Situation:

Now is the time to take responsibility for our own credit. Credit affects every area of your life, from home loan rates, to insurance premiums, employment, whether or not a landlord will rent to you, and whether you will even qualify for a credit card, along with what rate you will pay. You need to realize the importance of the roll credit plays in your entire life. How much is your "bad credit" really costing you in the grand scheme of things? Maybe you should take the time to read and learn for yourself. If you don't know what you're doing or how it works, then find out! Don't let credit repair companies scam you out of thousands of dollars because you don't know what you're doing.....FIND OUT! It's not rocket science or brain surgery....really it's not. You could probably learn the basics and enough to make a complete turn-around in your life, if you just took a couple hours to read up on the subject.

We need to learn what affects our credit and what changes we need to make so we have the highest scores we can possibly have. This will afford us "choices" in our lives and not rely on some government bailout program that's going to end up costing all of us even more than we owe now.

Now is that time. Credit Trauma will give you all the education you need to become knowledgeable and self sufficient in this area. Just check out our "About" section and find out which scenario best fits your situation. You no longer can afford to bury your head in the sand, and you can no longer afford to pay someone hundreds or even thousands of dollars for services and tips that you can use and implement yourself. There are hundreds of resources out there available to you for free....you just have to find them and that's what we're here to help you with.

It's time to get back to basics.....that means taking responsibility and doing more things for ourselves. You know what? It feels good. There is a sense of accomplishment and pride in doing something yourself. I think we all need to get ourselves back on track.....learn how to do the simple things.....and remember back to a time when that's all you needed to be happy.

Visit: http://www.RepairCreditTrauma.com

Tighter Credit Reporting Required For The Three Major Credit Bureaus

Credit Trauma — Wed, 19 Nov 2008 15:27:49 -0600

Credit standards have tightened to the point that you now have to have, at the very minimum, a 680 credit score to obtain financing for a mortgage or home equity loan. If you don’t have that kind of score or better, then you’re going to be denied credit, as millions of Americans have found out first hand in recent months.

Basically, we’re all counting on the fact that the three major credit reporting agencies are reporting accurate information, in order to ensure you have the highest credit score you can obtain based on your situation.

Debts discharged in Chapter 7 bankruptcies affected…

Apparently, this is not always the case though. If you have filed a Chapter 7 bankruptcy which has been discharged, the debts that were included in the bankruptcy could still possibly be showing on your credit report as “unpaid” or “overdue”. This is going to affect your credit score in a negative way, which could then affect whether or not you’re going to be approved for a loan.

Help with this issue however, could be on the way. As the result of an injunction issued by Judge David O. Carter of the U.S. District Court of the Central District of California, against credit reporting giants, Experian Information Solutions, TransUnion and Equifax Information Services, new rules for the credit reporting industry have recently become operational.

New procedures the credit bureaus must follow:

The country's three major repositories of consumer credit information must now follow detailed procedures for the retroactive correction and updating of borrowers' and consumers' credit file information concerning debt discharged in Chapter 7 bankruptcy proceedings as well as new procedures to ensure that debts subject to future discharge orders will be similarly treated.

Michael W. Sobol, an attorney at the national law firm Lieff Cabraser Heimann & Bernstein LLP, which represented the plaintiffs in the litigation, called the new procedures a "paradigm shift in credit reporting industry" that will immediately benefit millions of homeowners and borrowers. "No longer can credit reporting agencies merely parrot back this information as provided by creditors but must now reconcile creditors' information against available public records to assure maximum possible accuracy," he added.

In the class action lawsuit, the plaintiffs alleged that Experian, TransUnion and Equifax violated the Fair Credit Reporting Act by failing to follow reasonable procedures in the reporting of debts discharged in Chapter 7 bankruptcy proceedings. Plaintiffs allege that defendants continued to report debts as unpaid or overdue even though they had been discharged in bankruptcy and defendants were aware of the existence a Chapter 7 discharge order.

When does this take effect?

The new procedures for the credit reporting industry were established under to an injunction approved by Judge Carter in August 2008 in the case of White vs. Experian Information Solutions. The court set Oct. 1 as the date the new procedures became in effect.

"Consumer credit is tightening across the nation due to the crisis in the financial industry," added Mr. Sobol. "It is more important now than ever that consumers' creditworthiness be assessed upon the most accurate information available."

The class action lawsuit remains ongoing with the plaintiffs seeking monetary damages for the defendants' alleged misconduct.

It looks as though we’re going to finally see some self-accountability with the credit reporting agencies.

(Information courtesy of James Comtois – Broker Universe)

Visit: http://BankruptcyCreditTrauma.com

How To “Buy Time” When Late On Your Mortgage Payment

Credit Trauma — Wed, 19 Nov 2008 15:25:28 -0600

How To “Buy Time” When Late On Your Mortgage Payment

Were you aware that as soon as you’ve missed three (3) consecutive mortgage payments in a row, that most lenders will NOT let you pay less than the full amount (all three payments at once) at that point?

If you’re struggling right now to just keep up with your mortgage payments until you can work out something with your lender, or the government’s bailout program steps in to help you, then did you know that you can continue to run 30 or 60 days behind indefinitely? Most lenders will continue to let you make one payment every month, as long as you are NO MORE than 60 days behind on your mortgage. This isn’t going to help your credit score any, but it does buy you some time.

What happens if I miss that 3^rd payment?

Once you miss that 3^rd mortgage payment and are a full 90 days delinquent, your lender will no longer accept less than 3 full months of payments to bring you current. They are also required to file an NOD (Notice of Default) against your property, and this marks the beginning of the foreclosure process. From here, the phrase “foreclosure process started” is going to appear on your credit report (and will remain there for 7 years even if you bring the loan current) and your loan is going to start to incur additional, pretty hefty charges because of the process itself.

Unless your lender can work out an arrangement with you before your home “goes to sale”, and you lose it forever, which takes a minimum of 90 days, then buying time by making at least one mortgage payment before you are 3 months down is the best way to go, if you can possibly do it.

What if I’m already 90 days late?

If you’ve already missed 3 months of mortgage payments and your lender has already filed an NOD against your property, the first thing to do is contact that lender and see if they’ll be willing to renegotiate your loan terms, so you do not lose your home. Mortgage lenders are NOT in the business of owning real estate, and right now, the last thing they want is to own another house. They own too many already! If you don’t get satisfaction at the first level that you speak to, ask for their supervisor and keep moving up the “food chain” so to speak, until you actually talk with someone who can answer your questions with the authority to do so. In business, I’ve found that “Those who scream the loudest, get the best service.”

Don’t spend the money!

A lot of folks will have some of their mortgage payment, but possibly not all of it. One of the biggest mistakes you can make if you are in this situation, is to spend that money on something else. Just because the lender will not accept less than 3 payments to bring your account current, does not mean that you will not need to come in with “some money” if you can negotiate a loan modification with your lender. A lender is going to be more willing to work with you, if you’re willing to do your part and bring some cash to the table during the negotiation process. Even if this turns out not to be the case, you’re going to need somewhere else to live and now that your credit is shot, you’re going to look a lot better to a prospective landlord if you have enough cash to come in with first and last months’ rent, along with a security deposit, so be smart about what you do with that extra money.

Visit: http://MortgageCreditTrauma.com

What Is A PayDay Loan?

Credit Trauma — Wed, 19 Nov 2008 15:22:34 -0600

A payday loan is basically a paycheck advance, also referred to as a payday advance and it is one of the biggest financial mistakes you can make.

Ever borrowed from a “loan shark”?

The purpose of this type of loan is to cover a borrower’s expenses for a short term, until their next paycheck comes in. I like to refer to these types of loans as “mafia loans” or “loan sharks” because of the amount of interest that is charged.

Most loans range from $100 to $500 and the balance is due and payable in two weeks. Interest rates can range anywhere from 400%, and even as high as 900% APR.

How does it work?

These types of lending stores usually have small locations in strip malls within the city. A borrower can walk in and is required to furnish one or more pay-stubs, along with their most recent bank statement, to prove they have a steady source of income. In order to secure the loan, the borrower is required to write a post-dated check to the lender for the total amount of the loan, including the fees that are being charged. The finances charges are usually 15% to 30% of the amount being borrowed for the two week period.

Re-payment for the loan is expected to be in-person. If the borrower fails to show up, then the lender will deposit the check directly, or process an electronic withdrawal directly from the borrower’s bank account. If there is not enough money in the account to cover the check, not only does the bank charge a non-sufficient funds fee, but the loan store is going to charge additional fees or an increased interest rate because of the failure to pay.

Why this is so stupid…

This type of company is basically charging you an arm and a leg for the use of their money for only two weeks! You work hard for your money. Why would you want to give back such a big chunk? It’s basically just throwing money out the window.

Learn how to budget your money and make it last until the next time you get paid. Better yet, take that $30 or $80 finance charge you were going to pay and put it in savings. That way, next time you’re in need of cash before you get paid, you can withdrawal it from your savings instead! Now that’s a novel idea!

Visit: http://RepairCreditTrauma.com

How To Establish A Good Credit History

Credit Trauma — Wed, 19 Nov 2008 15:14:04 -0600

A good credit history is established by keeping your commitments to repay credit cards or loans as agreed, making your payments on time and in the amounts required.

Neglecting to do so make it difficult and costly for you to borrow money for the things you need for yourself and your family. This can affect essential areas in your life such as renting an apartment or buying a home, getting insurance, an education or even medical care.

Plan for emergencies!

Things in life occur that are not under our control, such as losing a job, or getting into a car accident, which can impact your ability to repay your bills. This is why it’s critical to set up a savings account and contribute to it on a regular basis. This will ensure you have emergency funds available to honor your credit agreements in spite of any unforeseen challenges.

Unfortunately, creditors don’t care what your situation is. If you’re late on a payment, they’re going to report it as late, and that late payment will remain on your credit report for 7 years. It will also have an impact on your credit score for the first two years. That’s pretty harsh for just one 30 day late payment, but that’s how it works.

What if you don’t have credit?

If you have not yet established credit, or you do not use credit, it’s in your best interest to apply for one or two cards. It takes about 2 years to really establish a credit history with enough information in it for a lender to make a risk-based decision for large purchases. You do not have to keep a balance on your credit cards if you’re adverse to credit. Just charge a small amount every other month or so and pay off the balance. This will ensure the account remains open and active with the creditor, and updates will be transmitted to the credit bureaus accordingly, which will give you the credit history you need, along with a good credit score.

If you are trying to re-establish your credit, and you cannot qualify for a traditional credit card, then one option that is guaranteed for you is to obtain a “secured card”. With this type of card, you deposit typically $300 to $500 in an account with the creditor and that amount becomes your credit limit. Because you are using your own money, there is no risk to the creditor.

A couple things to make sure of when applying for a secure card:

Make sure the company you’re applying with reports to at least one of the three major credit reporting agencies. If they do not, then move on, because if they do not report, you are losing a major benefit.

Shop around for the lowest annual fee. All secured cards charge an annual fee, and some can be pretty hefty. Make sure to read the fine print first!

Most secured card companies will allow you to get an “unsecured card” after about a year of making your payments on time. Be sure to check on this, because you don’t want to have a secured card any longer than you have to. It’s too costly.

If you belong to a credit union, ask them if they offer secured cards. About half of the nation’s credit unions offer secured cards to their members and they may offer lower interest rates and waive annual fees.

Use the secured credit cards carefully; paying off the debt each month. You do not get this type of card to carry a balance on it. Remember, you’re using your own money as collateral. You don’t need to pay the creditor interest on top of that.

Points to remember…

In summary, to establish a good credit history, remember to keep your overall debt at a reasonable level that is relative to your income. Generally speaking, your expenses should not exceed 20% of your net (after taxes) take home pay, excluding your housing payment.

Visit: http://RepairCreditTrauma.com

Do You Still Get A Credit Score If You Pay-Off Your Balances IN FULL Every Month?

Credit Trauma — Wed, 19 Nov 2008 15:10:45 -0600

Do You Still Get A Credit Score If You Pay-Off Your Balances IN FULL Every Month?

There is conflicting information going around about this particular subject and most of it is un-true.

Yes, even if you pay-off your credit card balances in full every month, this practice will still contribute to generating a credit score for you. Some folks are under the wrong impression that they need to keep a balance on their account(s) in order to generate a score. This is completely false.

If you make charges on a credit card that you pay-off in full every single month, then in actuality, your credit report will NEVER show a zero balance. Why? Because the creditor updates your account with the credit bureau’s at the same time that your statement cuts off. So, every time your statement cuts off, you have a remaining balance, which is why it will never show zero and will always contribute to your credit score.

Now you may think that because you pay-off your account(s) in full each month, that you’ll always have a high score right? (This is assuming that all the other credit you have is paid-as-agreed.) This isn’t always the case and let me explain why.

Even if you pay off your balance in full, your credit score can actually drop...

Let’s say you have a high credit limit of $500 on the one particular credit card that you use and pay-off every month. This past month, you charged $400 on that card. That means you’ve used 80% ($400 divided by $500 = 80%) of that card’s available credit limit.

This affects your balance-to-limit ratio which, for the best credit scoring results, should be kept at, or under 30%, but no more than 50% maximum. If you go over these amounts, it’s going to drop your credit score during that period.

Not to fear…your score will go right back up again the following month as long as you keep your balance at 30% or under, so this will only affect you for a short period of time, but it’s definitely something you’ll want to keep in mind for the future!

Visit: http://RepairCreditTrauma.com

Beware….Not All Credit Scores Are The Same!

Credit Trauma — Wed, 19 Nov 2008 15:08:00 -0600

When did credit scores come into being?

Around 1990 or so, the very first credit scoring system, which was created by Fair Isaac Corporation, began increasing in popularity with lenders. During the mid-90’s, Fannie Mae and Freddie Mac began using these FICO scores exclusively, which created the standard use of credit scoring today.

It’s only been fairly recently, since about 2001, that credit scores have been made available to the general public. The credit bureau’s capitalized on this, as they all began charging consumers for their FICO score. Due to the fact that they had to pay Fair Isaac Corporation royalties on every sale made, the bureau’s themselves decided to create scoring systems of their own. Ultimately this gave them a bigger piece of the pie and a chance to create more services to become even more profitable.

Beware of ads for “free credit reports”!

This is the reason that you see ads and commercials everywhere these days promoting “free credit scores”. These free scores are NOT FICO scores and the scores you receive may differ greatly from the actual FICO scores that are used for mortgage lending purposes.

There are many different scoring models being used today in many different industries. If you do not know exactly which scoring model you’re getting a score from, then it really doesn’t mean anything. Some scoring models have ranges up to 950, whereas FICO scoring model only goes to 850. If you choose to get your score from some unknown company, you might think you have a better credit score than you actually do.

These companies that are offering free credit scores usually make you sign up for some type of credit monitoring service that charges you monthly. Unless you’ve been a victim of identity theft, there really is no reason to need a credit monitoring service. You can check your credit report once a year at no cost to you, for all three bureaus thru www.AnnualCreditReport.com.

You know the old adage….

”If something sounds too good to be true, it usually is.”

What Happens To Your Credit Score If You Lose Your HELOC?

Credit Trauma — Wed, 19 Nov 2008 15:04:55 -0600

Has your bank frozen your Home Equity Line Of Credit?

More and more banks are re-calculating the estimated value of your home because of the declining property values hitting our entire country. Let’s face it…..they’re scared.

If they determine that the current value of your home has dropped severely enough, one of the ways they can reduce their possible risk it to freeze your existing credit line, (if you have any portion that is un-used anyway) so you no longer have access to those funds.

Guess what…this just hit your credit score!!!

This can even affect people with excellent credit because now, that “high credit limit” has just been reduced, which can negatively affect your “balance-to-limit” ratio. Because this particular category carries 30% of your total credit score weight, the loss of that credit limit on your existing line of credit can cause your credit scores to drop; and in some cases, this drop may be huge.

On top of the hit to your credit scores, now you no longer have use of those “emergency funds” if you ever need them. This can create a financial hardship on you, in itself. Of course if you’re already maxed out on your HELOC, there is nothing the bank can do and your scores are already reflecting the fact that your line is maxed out.

Unfortunately there is no way to know if your bank is going to pull the rug out from under your existing credit line, if they haven’t done so already. You’ll find out when you get a letter in the mail from your lender and by then, the deal has been done and your line has already been frozen.

What can I do if I still have funds available?

If you do have money available on your existing line of credit and you know you’re going to need that money in the future, the only choice you have to be certain that the funds are still going to be available, is to draw out the remaining balance and place it in the highest interest bearing account that you can find. If you know you’re not going to use it for a year or so, consider a CD (Certificate of Deposit). Shop around at your local banks or go on-line. Rates for CD’s can vary greatly from institution to institution and a lot of them have specials going on all the time. If you don’t want to lock it up for a long term, then shop around for a high paying money market account

The only drawback to this temporary solution is you will have to pay interest on the entire balance every month. Because Lines of Credit are all tied to Prime Rate, we’ll all just keep our fingers crossed that the Fed will leave it alone so we can juggle our finances a bit longer during this crisis!

Visit: http://MortgageCreditTrauma.com

How Do I Claim A Short-Sale Or Short-Refi On My Taxes?

Credit Trauma — Wed, 19 Nov 2008 15:01:09 -0600

How Do I Claim A Short-Sale Or Short-Refi On My Taxes?

The tax code has been temporarily amended because of the mortgage crisis that has hit our entire country.

This break comes in the form of "The Mortgage Forgiveness Debt Relief Act of 2007", whereby in certain circumstances, a homeowner does not have to pay federal income tax on debt forgiven on a loan secured by a qualified principal residence via a short sale, foreclosure, deed in lieu, loan workout or short refinance. ( A short refinance is defined as "where the loan amount was reduced and forgiven in order for the homeowner to keep the property".)

This is great news for many a homeowner, because in prior years, any remaining balance was considered income for which you would owe taxes.

Under this new law, there is no federal income tax due on debt forgiven on a loan that is secured by the seller's principal residence, provided that the loan was made to acquire, construct, or substantially improve the principal residence. Also, a short-refinance of that type of loan also qualifies for the exemption.

However, if you just pulled money out of your house to pay for a vacation and got debt relief on that loan, you would be subject to income tax.

The exemption applies to any portion of loan debt forgiven beginning January 1, 2007 through December 31, 2009.

Therefore, it doesn't matter when the loan was made; what matters is when a portion of the debt is forgiven.

IRS Income Taxes on debt relief due to foreclosure, is NOT automatic though…

You have to file IRS Form 982 "Reduction of Tax Attributes Due to Discharge of Indebtedness," and the form has to be attached to the federal tax return.

Many people entitled to this tax break aren't filing the form and they need to in order to get the credit.

Visit: http://MortgageCreditTrauma.com

Does It Help Your Credit Scores To Close An Account?

Credit Trauma — Wed, 19 Nov 2008 14:56:40 -0600

Does It Help Your Credit Scores To Close An Account?

Were you aware that positive credit history stays on your credit report forever?

Did you know that when you close an account, becomes inactive after 6 months (meaning it no longer contributes to your credit score) and the entire account, history and all, gets automatically deleted after 10 years?

So contrary to popular belief, as long as an account is positive, meaning there are no late payments associated with it, then you DON'T want to close the account.

Now, if you don't use it once every 3 months or so, the account will become inactive and will no longer be a contributing factor to your credit scores, which is the whole purpose of not closing it in the first place. So, charge $20 bucks on it every so often and pay it off when the statement comes in. This will ensure that the creditor will not close it or stop reporting the activity to the credit bureaus, and it will continue to add to your positive credit history and reflect positively in your credit scores too!

Thirty-five percent (35%) of your credit score revolves around your payment history and your scores get very happy when they have a long-term account that is always paid on time!

On the other hand, if you are a charge-o-holic, maybe the best thing for you is to actually close the account if you don't trust yourself enough to leave it the heck alone. If this sounds like you, go ahead and close it until you get everything paid off. Get your finances and spending habits under control first, and if closing an account takes away the temptation to charge, then by all means, get rid of it.

As I always tell my kids, "you can always start over tomorrow".

Visit: http://www.RepairCreditTrauma.com

No More Benefit For "Authorized User" On Credit Reports....

Credit Trauma — Wed, 19 Nov 2008 14:42:37 -0600

No More Benefit For "Authorized User" On Credit Reports....

When someone finds a loophole in the IRS rules, you're going to see a bunch of folks exploiting it until the IRS figures it out and takes the loophole away from you. Ahh.....it was nice while it lasted huh? The same thing has happened with "authorized users" in regards to increasing your credit score by "piggy-backing" off of another's positive account rating.

The following is the definition of an Authorized User: "Person permitted by a credit cardholder to charge goods and services on the cardholder's account, but who is not responsible for repayment of the debt. The account displays on the credit reports of the cardholder as well as the authorized user."

Originally, the purpose of an "authorized user" was to allow a family member or close relative to be added onto your account and that person was allowed to make charges against that account. This was especially helpful for young adults trying to establish credit for the first time. A parent would add their teenager onto an existing account of theirs and typically, this would be the first type of charge account a young person would have. With the parent's guidance, they could teach their teenager the advantages and disadvantages of using credit, along with teaching them the responsibility that comes along with it. If they managed this type of account well, then it would reflect as such, in establishing a credit history and a good credit score to go along with it. This practice enables a person to qualify for things that they wouldn't, under normal circumstances, qualify for, which constitutes a form of fraud.

Of course, scammers found this loophole in the credit scoring system and decided to abuse it for monetary gain. In the past few years, these scammers would solicit people who needed to establish or re-establish credit and they would be offered the opportunity to piggy-back off of someone else's positive account, (that they didn't know) for a fee. Once they were set up as an authorized user on this account, that person's account and the credit history that went along with it, would automatically reflect on the authorized user's credit report and would therefore generate a good credit score for them.

Unfortunately, because of this abuse, Authorized User accounts are no longer a contributing factor in credit scoring, so they will no longer benefit the authorized user in that respect. These types of accounts are still available thru creditors, and they will still reflect on the owner's credit report and the authorized user's credit report, which will show the account's history, but the greatest benefit of the account reflecting in the credit scores is now history.

Visit: http://RepairCreditTrauma.com