Credit Repair

17 Jun, 2009

Debt Settlement

Posted by: Steve In: Debt Management

Although it’s not really brand-new, this method for getting out of debt is not well known to many people. It’s becoming increasingly popular, however,
for financially strapped consumers who can’t get out of debt on their own, but can’t-or don’t want to-file bankruptcy to arrange for the services of a debt settlement company.

Here’s what it involves:

You stop making your payments to your unsecured creditors. Instead you start making a regular monthly payment to a separate savings account. (These payments are typically lower than the minimum payments you probably have been making.) After your debts go unpaid for several months, they will typically be charged off by your lenders. That means the  lenders write them off their books as bad debts, but they can still try to collect on them.

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14 Jun, 2009

First step – organizing my debt

Posted by: Steve In: My Journey

The first step on this debt management is to organize my debt. This entails listing out all of my debts.

Barclays(Juniper credit card) – $4521
Providian 1(chase) – $9046
Providian 2 Business(chase) – $4640
Paypal GE Money Bank – $1182
Merrick (Hooters card) – $9000
Household Bank – $3500
GM Flex Card(hsbc) $1783
Capital One – $1200
Wells Fargo Financial – $2849
Staples – $1000

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01 Jun, 2009

Sick of Debt

Posted by: Steve In: Debt Management

Everyone in debt knows that debt can make you feel sick. You plan around it; you think about it; you worry about it. Many of us can trace our level of stress right back to our level of debt. A study at Ohio State University found that people who reported higher levels of stress in regard to their debt showed higher levels of physical impairment and reported worse health than their counterparts with lower levels of debt. The study also found that the level of credit card debt compared to income also played a role, with those with higher percentages of debt to income reporting a higher level of physical impairment. Read the rest of this entry »

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This one sounds logical, especially when a mortgage broker tells you that lenders are suspicious of people who have lots of unused credit available to them. What’s to keep you, after all, from rushing out and charging up a storm?

Of course, if you think about it, what’s kept you from racking up big balances before now? If you’ve been pretty responsible with credit in the past, you’re likely to continue to be pretty responsible in the future. That’s the basic principle behind credit scoring: It rewards behaviors that show moderate, responsible use of credit over time, because those habits are likely to continue.
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Some of the phony credit repair places blitz credit bureaus with disputes about anything and everything. In the past, this might have been temporarily effective if the credit bureaus removed the disputed items while they investigated. These days, though, the bad stuff typically stays on your file during the investigation, so you don’t even get a temporary boost. Even when you do, most or all of the negative items simply come right back as soon as the original creditor confirms that they’re correct. What might not come back are the accounts that are helping your score. The creditors might not bother to respond to the bureaus’ requests for confirmation, and you could end up making matters worse.
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Bankruptcy does deal a devastating blow to your score, but that doesn’t mean you can’t get credit afterward.

How quickly you’ll reestablish credit and how much you’ll pay for it will depend largely on your behavior after you file for bankruptcy. If you start handling credit responsibly-paying your bills on time, not running up big balances, and not applying for a bunch of credit at once-your score will begin to recover.
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Sometimes this is phrased as “credit counseling is as bad as bankruptcy” or “credit counseling is as bad as Chapter 13 bankruptcy.” None of these statements is true.

A bankruptcy filing is the single worst thing you can do to your credit score. By contrast, the current FICO formula completely ignores any reference to credit counseling that might be on your credit report. Credit counseling is treated as a neutral factor, neither helping nor harming your score. Read the rest of this entry »

27 May, 2009

Lower your debt utilization ratio

Posted by: Steve In: How to Repair Credit

One of the fastest ways to boost a score is to lower your debt utilization ratio-the difference between the amount of revolving credit that’s available to you and the amount that you’re using.

One simple way to improve your ratio is to redistribute your debt. If you have a big balance on one card, for example, you could transfer at least some of the debt to other cards. It’s typically better for your scores to have small balances on a number of cards than a big balance on a single card.
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The theory behind this myth is that lenders will see a closed account on your credit report and, if not informed otherwise, will assume that a disgusted creditor cut you off because you screwed up somehow.

Of course, as you know by now, many lenders never see your actual report. They’re just looking at your credit score, which couldn’t care less who closed a credit card. Fair Isaac figures that if a lender shuts down your account, it’s either for inactivity or because you defaulted. If you defaulted, that will be amply documented in the account’s history.

If it makes you feel better to contact the bureaus and ensure that accounts you closed are listed as “closed by consumer,” by all means do so. But it won’t make any difference to your credit score.

You don’t need to carry a balance on your credit cards and pay interest to have a good score. As you’ve read several times already, your credit reports-and thus the FICO formula-make no distinction between balances you carry month to month and balances that you payoff. Smart consumers don’t carry credit card balances for any reason, and certainly not to improve their scores. Read the rest of this entry »