Debt Reduction Advice | Debt Reduction Advice

Tips to clear your debt

Getting out of debt is strenuous; it causes countless sleepless nights, stress, loss of appetite, depression, and is generally a bad feeling! Debt can be short term, lasting a couple of months, to long term, lasting several years. Debt is not impossible to overcome, even though it may be difficult. Here are some options to help you clear your debt: (more…)

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Steps to get out of debt

Getting out of debt can be summarized into a 3-step process. For this method, I suggest using a spreadsheet program like Microsoft Excel. If you do not know how to use Microsoft Excel that well, you can simply use an old fashioned pen, paper and calculator or an abacus (…just kidding… use a calculator). (more…)

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How Credit Scores are Determined

How Credit Scores are Determined

Perhaps the most important determinant when applying for any form of credit is your credit score. This number is essentially the statistical probability that you will pay back your loan and not default. The problem with these scores is that the intrinsics of their calculations are shrouded in mystery. Although you can obtain your score for a reasonable fee ($15.95 from Equifax.com), it’s important that you know how your credit score became the level that it is today – be that good, bad, or neutral – so that you can continuously work to improve your score, and never damage it by accident.

As a disclaimer, the exact formulas that each independent credit score company uses are considered to be trade secrets, so they aren’t disclosed to the public. What we do know is the weighting that was given to the original FICO score. From here, we are going to go through each category and explain a little of how that weighting affects you.

Punctuality (35%)

As is logically expected, the bulk of a score used to determine the probability of default is the punctuality of payment. The more punctual you are at making your payments (even minimum ones), the higher your score will be. Due to the high percentage, a late payment could substantially damage your score, and many late payments are certain to make you very non-creditworthy. The moral of this story is to make your payments on time.

Amount of Debt (30%)

The amount of debt that you owe, relative to the credit limits you have been given, affects this score. Using a large portion of your limits on one or more cards can damage your score. The logic behind this is that if you’re using a high portion of the limits that have been already given to you, adding new credit is more likely to make you default because you will likely use a substantial amount of it as well. So, keep the balance as low as possible relative to your limits. One trick is to try to use multiple cards to keep this ratio as low as possible.

Length of Credit History (15%)

This one’s very straightforward. Statistically, the length you’ve had a credit history means that the models are more likely to be accurate, so they’ve baked in some “accuracy” points here.

Types of Credit Used (10%)

It is not known how this is calculated. I would suspect that safer loans (such as, perhaps, revolving credit) don’t boost this portion much, but that successfully paying off larger, higher percentage loans – such as a mortgage or business loan – might help your score a bit.
Recent Credit Search (10%)

Lenders, employers, or companies recently obtaining your credit score damages your FICO number temporarily. You want to use aggregate services, such as mortgage brokers or web sites that compare rates, as much as possible and try to minimize the number of times you apply for credit. This is an easy way to boost your score.

Final Thoughts

In conclusion, take the time to examine some of the points above as they will give you solid tips into improving your score. Simple things like making your payments on time, or minimizing the number of credit applications you make will go a long way to making your credit score better than you ever thought it could be!

Source: http://en.wikipedia.org/wiki/Credit_score_(United_States)

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Re-negotiate Your Mortgage

It’s no secret that the current global economic crisis has put tremendous amounts of pressure on the average American homeowner. Across all major news sites and programs are stories of Americans being foreclosed upon and struggling to make their credit card payments. If you’re in a situation in which your bank is threatening foreclosure, or even foresee a time in which you might be faced with this problem, it’s important to know that there are some positive options for you. One of these options is to renegotiate your mortgage and is arguably the best option for homeowners facing foreclosure as it will make a dramatic impact on your long-term financial sustainability. As documented on various web sites and journals, this is certainly no easy task, but with enough persistence and evidence of financial hardship, renegotiating your mortgage is by far the most logical choice. So exactly how do you lower your monthly mortgage payments?
Perhaps the first aspect of this idea that should be analyzed is the criteria that need to be inherent for banks to even consider lowering your mortgage payment. This is not something you can do because “the economy is sour so the banks will be scared” or “maybe I can just save a couple of hundred a month and invest it”, rather banks will only listen to you if there is evidence of immediate financial hardship and you have literally no way to pay your bills. Thus, make sure for any meetings to bring ample evidence of your inability to pay the mortgage, such as pay stubs, bank statements, and so forth.
Secondly, renegotiating your monthly mortgage payment is relatively easy once you get the right groups on your side, and find the right people on the bank’s side. Customer service representatives for the bank will often not be able to help you as they have very little authority to change payments – you need to be focused on finding the decision makers, like supervisors and persons involved in mitigating losses. It also helps to get the assistance of a group like NACA (Neighborhood Assistance Corporation of America) on your side. They have a home save program that they state is the “most effective… in assisting at-risk homeowners restructure their mortgages to make it affordable over the long-term”. In fact, they are advertising “America’s Best Mortgage” which is a fixed 30 year 4.75% payment schedule. To put it mildly, this not-for-profit agency is excellent to have on your side as they can negotiate cheap mortgages and have helped thousands save their home.
To summarize, if you are facing the threat of foreclosure, there are a couple of good options that will let you stay in your home and restructure your mortgage into payments that are more affordable. Talk to your bank directly and show the higher level supervisors your pay stubs and monthly expenses – demonstrate clearly that you can no longer afford to make your payments. With the gluttony of houses on the market, the last thing they want is another house to have to try to sell. If that doesn’t work, enlist the services of NACA as they may be able to either save your home or at least give you some legal tips on convincing your bank to lower your payments.

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Using Debt Consolidation to Rebuild Credit Scores

Honestly one of the best ways or techniques an individual can do is have a company that assists you with debt consolidation set up a plan and help you. By doing this the debt consolidation not only makes the payments on expenses but can also literally rebuild your credit score in the process.

As you pay the debt consolidation the creditors see this and therefore in many situations will extend credit once again. This usually occurs after about six months. Debt consolidation can also help students with tuitions and loans if they are becoming a financial burden, having one payment with lower interest fees is much better when you are trying to get an education at the same time.

Some individuals think that by debt consolidation you are free of your obligations to credit companies and this isn’t true. It just means that your payments are all placed together and in most cases lower so they can be paid in a timely manner.
Amazingly, after some people have gone through debt consolidation and rebuilt his or her credit they will start to receive special offers for credit cards and so forth in the mail. Simply due to the fact that his or her credit score went up through the assistance of debt consolidation.

Another point to consider is when an individual goes through a financial institution of some type to help receive debt consolidation these places also have fees. Although it is extremely worth it when it comes to your overall credit score and lower payments each month.

Some people even find that after a few months of paying he or she has the ability to pay the debts off. This is also an option and many companies that see this will also apply that to your credit score ratings as well. Debt consolidation is for anyone struggling financially with unpaid bills and credit card amounts. It assists the individual by using what they can afford each month to pay the debts off.

For more information about debt consolidation and how you can learn more there are several web sites via the Internet. Some of these web sites give details about interest rates as well as other issues associated with debt consolidation. If there are questions you have in many circumstances the email address of the web site is there for you to use.

In addition, there are debt consolidation places locally in the area where you live as well.

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Getting Out of Credit Debt

Getting out of credit debt is actually easy today. There are several debt consolidation companies that will essentially offer their assistance. The first thing however that you have to do is decide what bills you owe and what debts you have and get them all together.

Then through a process of looking for a credit debt consolidation agency or company you go through an application to see if you qualify to receive their help.

There are many companies that are all over in different cities and towns. There are several of these credit debt consolidation companies that are via the Internet as well and all you have to do is a simple search and you will result a number of results.

Credit and debt consolidation are almost alike, however there are some differences. Credit consolidation is repairing or rebuilding your credit. Debt consolidation is combining your debt whereas not to destroy your credit.

Many people think they are two of the same however they are not. So, with this point considered talk to the credit debt Consolidation Company or agency and find out all this information ahead of time. Sometimes you won’t even know until you have actually filled out the forms to see if you qualify for their assistance. This becomes a waste of your time.

Furthermore, if one company turns you down there are several others you can ultimately choose from. The best thing to keep into consideration is how much help you are going to need or assistance they will have to provide. And then go by these criteria, as some credit consolidation and debt consolidation companies can only handle a certain amount for their potential clients.

If you use a company via the Internet chances are they will ask you to fax certain paperwork, or mail it depending on the web site. Another thing will be proof of identification and this is primarily for their confidential purposes only. It also protects you as well.

Once you are approved then the credit debt consolidation company can start assisting you to get back on the right track. Sometimes it doesn’t take long at all and other situations can take much longer. Once again, this depends on the company, how quickly you get them the information, and how much debt you have that is going to potentially destroy or at least damage your credit in some way.

If it is at all possible finding a company that is within your city or town is to you benefit because this essentially moves the process along a little faster, however if you do decide to use an online company via the Internet they will work as quickly as possible once you have qualified and they receive the information they need from you.

In addition, if its possible use copies, never originals when sending paperwork through the mail for a company via the Internet. If you are going through a local company in your city or town this is totally different, but using the Internet and offering information often leads to a lot of conflict and confusion for everyone involved if the originals are not sent back to you.

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