Used responsibly, credit cards can help consumers build a credit history. (Photo Credit: CC BY/Andres Rueda/Flickr)

Many consumers looking to establish a credit history are denied credit because they don’t have enough credit to begin with. Even if a person has an excellent FICO score, it’s still possible to be denied something as weighty as a mortgage because the credit report reads more like a leaflet than a book.

Avoid being financially super-responsible with credit

People who are super-responsible can never enjoy their own parties, and the same is true for consumers who are financially super-responsible with their credit. Paying off student loans right out of the gate, avoiding excessive use of credit and generally living debt-free will save money in the long term, but some creditors do not view the credit-phobic kindly. Even for those who use credit but are choosy, an excessive number of credit inquiries can also have a negative impact on the credit score.

Having little credit history and being a serial credit card applicant can impact credit negatively, says Rod Griffin, public education director for the credit bureau Experian. Showing an ability to manage a reasonable number of open, active credit sources over time is paramount in illustrating credit-worthiness to creditors, including mortgage lenders.

Pay off loans, but keep some credit active

Griffin claims that contrary to what some so-called credit experts say, it doesn’t hurt to pay off loans early. Positive marks on the FICO report remain visible for approximately 10 years, whereas negative aspects generally only hang around for seven years. Paying off loans with excessive zeal can lead a consumer into the “No, thank you” zone with some potential creditors, however. If there aren’t at least three open, active accounts on the credit report that have been around for 24 months of more, it’s possible some creditors will pass on a credit application.

Use credit cards, but sparingly

It’s a myth that college students who are just beginning to build credit should take on multiple credit cards. Used responsibly and in moderation, having one credit card or two is a fine path toward building credit.

But the weather may be changing, says Griffin. Credit bureau insiders see the new Credit Card Act established under the Obama administration as a possible hindrance to young people’s ability to build a credit history. By restricting credit card company access to college students, some experts see more limited opportunities for building credit history.

Avoid the cash-only lifestyle if you want good credit

While you won’t rack up revolving debt by living a cash-only lifestyle, you also won’t build your credit. Maintain active credit accounts where you pay more than the minimum each month, and look to such products as installment loans and no credit check loans when emergency funding is necessary. While such products do not traditionally report to the credit bureaus – and hence do not provide an opportunity to record positive marks on a credit report – they will enable you to avoid building up excessive revolving debt on credit cards.

Sources

MSN Money
U.S. News and World Report

Understanding the Credit Card Act

Don't assume a debt collector is throwing you a life preserver. Demand they verify your debt first. (Photo Credit: CC BY-ND/Gibson Regester/Flickr)

If you’re drowning in debt and need major credit repair, don’t automatically assume that debt collectors have your best interests at heart. Their job is to get paid, and the truth is that sometimes, unscrupulous techniques are used that can be illegal. Before agreeing to a payment plan or even filing for bankruptcy, demand that the collector verify your debt in writing.

Debt validation: A bankruptcy scenario

Bankrate.com provides a useful example of a scenario in which someone should demand that a debt collector validate a debt. A couple has a home with a mortgage that is in both their names. One person is in collections with $30,000 in credit card debt solely in her name. She is considering filing for Chapter 13 bankruptcy, but the couple is concerned about losing the house in the deal.

While there are some potential complications that would require the consultation of a bankruptcy attorney (or two, if a second opinion is desired), Bankrate points out that filing for either Chapter 13 or Chapter 7 bankruptcy will generally not put a home at risk.

How to get aggressive with unscrupulous debt collectors

Get everything in writing when dealing with debt collectors. Don’t reveal bank account information when they push to set up automatic payments. Demand that the debt collector provide a fax number or address to which you can submit a request for debt validation. Simultaneously, dispute the debt in question.

By demanding debt verification, you’re demanding that the debt collector prove that you owe the money, that the collector has the legal right to collect and that the original company that held the account is clearly identified. By disputing the debt, you’re one step ahead in case the debt is erroneous or the collector does not have the information. Few things are as fruitless as giving money to a collection company that may not even own your account.

Know your legal rights

Under the Fair Debt Collection Practices Act, a consumer has the right to force a debt collector to validate a debt. Attorney Tom Martin of Price Law Group says that if debt collectors fail to comply, they cannot legally continue to harass a consumer for payment. If the collector continues, the consumer may even be entitled to monetary damages. But that’s not all:

“If a debt collector receives a dispute from a consumer, and the debt collector has been reporting the consumer’s account to the credit bureaus, the collector must also start reporting the account as disputed,” Martin reminds.

As a final note, the “get it in writing” directive must also apply to the consumer. If any debt payments are made, receipts and statements should be kept as proof in the event of a lawsuit.

Sources

Bankrate
Fair Debt Collection Practices Act
Lawyers.com: bankruptcy attorneys
U.S. Courts

What happens when you’re drowning in debt?

Are old charge-offs still giving you the blues? (Photo Credit: CC BY/Caitlin Doe/Flickr)

Maintaining good credit can be challenging, particularly after a life-altering event like job loss. Understand that if a creditor throws in the towel and charges off one of your debts, that doesn’t mean that you’re in the clear. It’s quite possible that you will still be liable for that bad debt – even after it disappears from your credit report.

Charge-offs: The light side

Imagine this scenario involving a charge-off on your credit report. While the credit item may say it’s going to drop off your credit report at a certain time, that debt may still have legs because the rules for collecting a debt and the rules for reporting a debt aren’t the same, reports Bankrate. The Fair Debt Collection Practices Act (FDCPA) provides the guidelines for debt collection, while the Fair Credit Reporting Act (FCRA) holds jurisdiction over how a charge-off is reported.

On the plus side, the FCRA mandates that a charge-off must be removed from your credit report after 7 years. That includes whatever debt collection agency owned the debt. Check your credit report about a month after the charge-off is supposed to occur. If the bad debt is still there, dispute it with the three credit reporting agencies: Equifax, Experian and TransUnion.

Student loans, tax liens and Chapter 7 bankruptcies cannot be charged off.

Charge-offs: The dark side

Thanks to the FCRA, bad debt will disappear from your credit report. Unfortunately, the FDCPA makes it possible for debt collectors to pursue your debt almost in perpetuity. As there is a lucrative secondary market that purchases bad debt, there is still cause for concern on the part of the consumer who needs debt repair. Each collection agency will likely try to collect at least once before selling your charge-off.

Can a consumer escape from that bad credit card debt amassed during a span of unemployment? Because there is typically a statute of limitations, the answer is yes. The amount of time in which a debt is subject to collection via the court system varies by state, although it is usually 4 to 6 years for credit cards and 6 to 10 years for installment loans, payday loans or auto loans. Contact your state’s attorney general for more specific information.

Know your debt collection rights

If a charged off debt is past your state’s statute of limitations for collection, it cannot be legally pursued and you can ask not to be contacted against regarding that debt. If a debt collector continues to chase, you may have the option to levy a counter-suit.

Legal action will require time, money and the advice of a lawyer, however. The best way to get out from under a debt collector that is pursuing your debt in a legal fashion is to either pay what you owe in full or come to a settlement.

Sources

Bankrate.com
Equifax dispute form
Experian dispute form
TransUnion dispute form

How to deal with collections

A bad credit score or unfixed credit score errors can rob a person of thousands of dollars over a lifetime. Image: CC everydayminimalist.com

Consumers who don’t know their credit score or don’t think a credit score is important are robbing themselves. A credit score factors into everything from getting a job to getting a good deal on a house or a car. The simple process of checking a credit report can lead to action that results in thousands of dollars in savings over time.

A bad credit score costs money

Just about everyone a person does business with, from landlords to mortgage brokers to wireless carriers, uses credit report information to decide how much credit will be extended and how low, or how high, the interest rate will be. The difference between a good credit score and a bad one can add up to $5,000 in interest payments on a $20,000 auto loan. Maxing out credit cards or not paying bills on time could add 25 percent to the cost of that vehicle. The time and effort it takes to optimize a credit score can save an individual hundreds of thousands of dollars over a lifetime.

Correct credit report errors

For most responsible people, ensuring accuracy is the key to a good credit score and credit reports should be checked frequently. Credit scores are available online through FICO and the three credit-reporting agencies: Experian, Equifax and TransUnion. The government site annualcreditreport.com offers one free credit report per year, but it does not include the credit score. The different credit reporting agencies interpret information in different ways, so the best approach is to check all three resources. Information on credit reports can often be erroneous. Federal law requires that credit reporting agencies must correct inaccuracies free of charge. However, the agencies are known for making the process of correcting credit report errors difficult. Sometimes the money spent hiring a law firm that specializes in correcting erroneous credit report information is worth the time saved.

A good credit score saves money

One of the best examples of how a bad credit score costs money is current mortgage interest rates. Mortgage interest rates are lower than they have been for decades, but not for everybody. Borrowers with weak credit scores will pay several percentage points more on a fixed rate loan. According to FICO, a borrower with an excellent credit score might get a 5.9 percent interest rate on a $200,000 30-year fixed rate mortgage and pay $259,074 in interest over the life of the loan. A borrower with a bad credit score, if he or she can get a loan, may qualify for an 8.5 percent interest rate and end up paying $355,200 in interest. The bad credit score will have cost more than $127,000.

Sources

MarketWatch

FinanceTalks

BankRate.com

This is a sample of one of the IRS scam e-mails that have been spotted. (Photo Credit: CC BY-ND/Chris/Confessions of a Consultant)

Each tax season, unscrupulous individuals come out of the cyber-woodwork to prey on unsuspecting taxpayers. Unfortunately, 2011 tax time is no different. According to the Shelbyville Times-Gazette, a new IRS e-mail scam is circulating that can infect your computer with malware and viruses and even place your sensitive financial data in the hands of identity thieves.

The IRS does not sent personal tax e-mails

Dan Boone, an IRS media relations representative, told the Times-Gazette that the IRS never sends e-mails about specific tax returns.

“If you get an e-mail that looks like comes from the IRS and it looks like it has something to do with your personal taxes or business taxes, it’s a scam,” said Boone.

While there is not one specific IRS scam e-mail in circulation, there is a common theme. Identity thieves are phishing for social security numbers, bank account numbers or other personal information that will make it much easier to get their hands on your money or lines of credit in your name. Typically, the fraud e-mail dangles a refund due to the consumer but says the consumer must provide banking information on a special refund form in order to facilitate a “transfer” of funds.

“There is no refund form. Your tax return is your refund form,” said Boone.

How to handle an IRS phishing scam

If you receive an e-mail claiming to be from IRS.gov that asks for your personal information, do not click on any links in the e-mail or download/open any attachments, advises Boone. This can open up your computer to malware and viruses that can potentially steal sensitive data from your computer’s hard drive or record your keystrokes. Whether or not a link in an information-seeking IRS scam e-mail redirects a taxpayer to a website that looks like IRS.gov, the fact is that the IRS does not send taxpayers e-mails that require personal data.

The IRS encourages taxpayers to report fraud of any kind. Forward suspicious e-mails to phishing(at)irs.gov. Please note that a return receipt from the IRS will not be issued. For more information, consult IRS form IR-2006-49.

Sources

IRS.gov: Suspicious e-mails and identity theft

Shelbyville Times-Gazette

Beware e-mails that appear to be from the IRS

Experian is adding renters history to its formula for credit scores, which is good news for many people. Image from Wikimedia Commons.

Credit score bureau Experian is now including renter history in its formula for adding up credit scores. Previously, only negative marks on a renter’s history, like evictions from non-payment, were added. Now positive marks will be added.

Pay the rent on time and do some credit repair

Credit bureaus typically do not factor renter’s history when calculating credit scores, except when things go horribly wrong. Paying rent on time doesn’t get noticed by credit agencies even if “the rent is too damn high” as Jimmy McMillan astutely observed. However, eviction for financial reasons is reported. The credit bureau Experian is going to start adding rental activity to its score formula, according to CNN. That will include rent payments, whereas only mortgage payments were previously included in calculating a credit score. Now a person only needs to pay rent on time to do a little credit repair.

Participation unfortunately limited

Rental history being reported to credit bureaus would be fantastic for many people, as it would mean a positive history is established before trying to get a loan for a home or a car. However, participation is going to be limited for some time. Experian’s RentBureau unit is only getting reports from 45 rental property management companies and info on  eight million renters so far. Unfortunately, college students from Arizona to Alabama and beyond might not be improving their scores by being responsible. Those interested to know should contact their landlords to find out if they report to Experian or request a credit report from Experian.

New rules for credit scores

Credit bureaus have new rules to abide by because of the Dodd Frank Act and the Fair Credit Reporting Act, which alter the rules for credit disclosure, according to the Wall Street Journal. A person applying for an installment loan has the right to know what their credit score is. However, the laws don’t mandate that loan lenders disclose which credit bureau’s score was used. However, one free annual credit report from Experian, Equifax and TransUnion can be requested through AnnualCreditReport.com.

Sources

CNN

Wall Street Journal

Call 888-5-OPTOUT to cut the pre-approved junk mail offers. Otherwise, someone can reach in and steal your identity. (Photo Credit: CC BY-ND/Tony Webster/Flickr)

Pre-approved credit offers no doubt litter your mailbox, particularly if you’ve recently had a bankruptcy discharged. The lure of “buy now, pay later” has ensnared many American consumers, but it doesn’t have to be that way. By calling 888-5-OPTOUT (1-888-567-8688), U.S. consumers can opt out of pre-approved credit card offers with the three major credit bureaus: Equifax, TransUnion and Experian. This is beneficial not only for consumers looking to rebuild their credit without the need for emergency loans, but for those who would prefer to give perpetrators of identity theft less ammunition.

888-5-OPTOUT sweeps the credit card offers away

Call 888-5-OPTOUT if you’re sick of all the direct marketing lists that seem to hound you daily. No more credit card offers and no more advertisements for credit products via postal mail will show up. Call from your home phone line and be prepared to give your Social Security number. If the prospect of revealing those digits worries you, put your mind at ease – the service is recommended by the Federal Trade Commission.

If you prefer, send a letter

Similar to the 888-5-OPTOUT telephone option, consumers can opt-out of pre-approved credit offers and related advertising via mail. Here’s a sample opt-out letter. Make sure that your request is sent to all three credit bureaus:

Options
Equifax, Inc.
P.O. Box 740123
Atlanta, GA 30374-0123

Experian
901 West Bond
Lincoln, NE 68521
Attn: Consumer Services Department

TransUnion
Name Removal Option
P.O. Box 505
Woodlyn, PA 19094

Past confusion over 888-5-OPTOUT

Several years ago, there was a widespread e-mail message that extolled the virtues of 888-5-OPTOUT, but it did so with erroneous information. Specifically, the message claimed that a consumer would have to opt out if they didn’t want the credit bureaus from releasing their sensitive data to “anyone who requests it.” According to Privacy Rights Clearinghouse, this muddles elements of two federal laws, the Financial Services Modernization Act and the Fair Credit Reporting Act. Essentially, the confusion comes down to whether 888-5-OPTOUT was actually connected to the former of the above laws, which it wasn’t. Thus, the controversy was somewhat minor.

The take-away here is that 888-5-OPTOUT is a useful tool for consumers. Avoid the credit card trap, avoid identity theft and perhaps you’ll be in a position where you won’t need bad credit loans.

Sources:

CBS Moneywatch

Federal Trade Commission

Privacy Rights Clearinghouse

Opt out of junk mail

Knowing your credit score is the most basic fundamental of credit repair. But it’s even more important to know what affects  your credit score. And even more important than that is knowing what you can do to improve your credit score.

Your credit score is free

Thanks to financial reform, doing something about your credit score is easier than ever. Free credit report services are advertised all over the Internet. Until now, those free credit reports didn’t include your credit score. You had to pay extra for that. But part of the recently passed financial reform bill ensures that you can get a free credit report that includes your credit score once per year.

Why is your credit score so low?

When it comes to credit repair, most people don’t know how they affect their credit score. For instance, Wallet Pop reports that many people assume if they pay their bills on time, their credit score is good. The truth is, even if you always pay on time, when your credit cards are maxed out, your score is lower than it should be. When credit bureaus see borrowing to the limit, they see risky behavior. To improve your credit score, tackling excess credit card debt is your first priority.

Credit repair: pay off credit cards first

To raise your credit score, pay off credit card debt first. There are two basic types of debt. Installment debt is secured by collateral, like a car loan. Revolving debt is your credit card balances. For some people, credit card debt revolves forever, which is not good for the credit score. Since credit card balances are unsecured, credit report companies like FICO say they’re more risky than installment loans. So paying off your credit cards will do more to raise your credit score than paying off your car.

Pay off collection agencies last

Unfortunately, if you’ve been taken to collections, your credit score is already hurt. Paying the collection agency won’t change the numbers. Bankrate.com reports that by the time your debt goes to collection, your creditor has already written you off. Although paying the collection agency will end the harassment, the payment won’t erase the delinquency from your credit report. Bear in mind that a surprise call from the collection agency can result from missed payments on everything from utility bills to library fines. The key to protecting your credit score is to avoid collection in the first place.

No thanks to charge cards

To keep your credit score from dropping, keep refusing that charge card every department store tries to sell you. This is because opening and closing credit accounts can lower your credit score. Wallet Pop said FICO credit bureau research has found that opening any type of credit account is automatically seen as more credit risk. If you do get that charge card and pay it off in full, your credit score will rebound in a few months, but it won’t rise above the level it was before you bought that new outfit.

Don’t cancel your credit cards

Sometimes when it comes to credit repair, it looks like the deck is stacked against you. Especially when canceling credit cards can lower your credit score. When you cancel a card, the line of credit it carries goes away. With less credit available, your credit score goes down. Instead of canceling, just zero the credit card out and throw it in your dresser drawer. New credit card rules prohibit credit card companies from canceling cards you don’t use–which used to hurt your credit score–so you don’t  have to worry about that anymore.

Use installment loans wisely

Taking out an installment loan for credit repair is risky, but it can work to pay off credit card debt with personal discipline. If you have a bunch of maxed out credit cards, the new installment loan won’t negatively impact your credit score as much as those debts. For this strategy to lower your credit score, you have to make yourself pay off the credit card debt with the installment loan, and throw the credit cards in the drawer until the installment loan is paid off.

Get professional credit repair help

Speak to a professional today and take proactive steps to repair your credit. For a FREE credit consultation, call 1-877-563-2076.

Establish Credit

This starts by simply borrowing money — could be with a car loan, credit card or any number of different types of loans. What really establishes your good credit, though, is the way in which you pay back the money that was borrowed, how you handle the money and your consistency in payments. Creditors are basically looking to see if they can trust you with money. Loan amounts and credit limits start out low, but as you show that you can be responsible, you will build your credit, allowing you to borrow more so that you can buy a car, a house or any other major life purchase.

Protect Credit

With all the talk of identity theft, how can you protect your credit from a thief? It is very important that you are mindful of where your debit/credit cards and account numbers are. Only keep the cards you plan on using with you while you are out shopping. Don’t give out personal or account information to parties which you aren’t currently doing business with.

You can also protect your credit by paying close attention to all your billing statements, making sure all charges are legit and for the right amounts. It is your responsibility to report any mistakes on your bill in a timely fashion, usually 30-60 days, and if you don’t notice and report it, the debt is assumed yours and you will be stuck paying for it. Overall, in protecting your credit, vigilance is the cornerstone to keeping your good credit.

Improve Credit

This is often where most people get lost. It’s easy to get in over your head. With our cultural “want it now” mindset, it is all too easy to get behind and feel as if you are drowning in the sea of debt. There is hope; you can restore, regain and get back on track with your credit. It must start by taking responsibility for your debt. You can’t just ignore it. Contact your lenders and try to work out a new payment schedule. Often they will work with you in creating a payment plan that you can afford.

Immediately stop purchasing with credit. If you can’t pay back what you currently owe, don’t add to it. If you have substantial debt, it would be a good idea to contact a credit counselor. You can start with the National Foundation for Consumer Credit – call (800) 388-2227. It will help you find a counselor in your area. Be cautious of debt consolidation companies that offer you a quick fix to all your problems. Remember that it took you time to build your credit in the first place, and that it will again take time to rebuild your great credit.

What is bad credit and how does it affect our lives

With the recession looming clear in all our lives, problems related to bad credit have been more evident of late. Dreams of buying a home or any property for that matter seems close to impossible with banks going super strict on approval for loans. Bad credit is a sure shot way of determining your name on the list of unapproved loan applicants. Even on the rare occasion of your loan being approved, you will be asked to pay a higher rate of interest, thanks to your debt. Landlords renting out their apartments also look into your credit history before they choose you as a tenant. So what can keep you away from becoming homeless? Credit history repair is the only solution to this problem but comes with its set of hassles. As tiring as it can be, credit repair is possible, and here’s how.

What is the solution to the above problems faced?

By logic, if you are facing problems due to bad credit, the sensible thing would be to try and clean up your credit report and gather good credit. Easier said than done, this process often leads to more trouble than solving the issue of bad credit. The best way to go about it would be to take it one step at a time as given below:

What to do:

• First things, first. Get hold of that credit report as the first step towards your goal of good credit. Know exactly where you stand and evaluate what you can do to repair the damage. A credit report can be obtained for free, as per the recent rule implied by the federal government. There are a few credit repair agencies that claim to provide you with a free credit report, but tread with caution here as some agencies take you for a ride. They promise you a free credit report, but only after you sign up for months of their service.

• Once you have a credit report in hand, evaluate it with care to eliminate any errors that may have been included. Calculate how much you owe. Keep all relevant documents with you so that you can cross check. Next step is to calculate your monthly income and monthly expenditure. Check on how much of this amount goes towards paying off your debts. Make a conscious effort to clear your debts while also making sure that you earn enough.

• Reducing your overall debt is essential in building good credit, and to increase credit score. At the same time, take note not to reduce it to zero, as it indicates no activity and will affect your credit report. Please note that it is advisable to use your credit card within 80% of the allowed limit. Using your credit card more than 100% of the limit can cost you around 100 points. In the same way, availing a new credit card or more within a short span of time can also be a bad mark on your credit history.

• Payments made on time can help in credit history repair. A late payment penalty is detrimental to good credit. Paying off all your debts will not suffice in giving you a better credit score or report. You might have to notify the payment collectors that your debt has been paid off and that they should remove any negative mark on your credit report.

What to look out for:

• A major concern in your struggle with obtaining a clean credit report will be to decide if you require professional help of credit repair agencies or if you can solve your credit issues on your own. The do-it-yourself plan will require a considerable amount of time spent on doing your base work on understanding the situation. Do your homework well with the help of books, the internet or by asking around for good remedies based on what experienced people have to say. On the other hand, if you are considering professional help, it is necessary to watch out for the good ones and the bad ones. Distinguishing the genuine agencies from the frauds is essential and there are steps to do the same. The Better Business Bureau is one such place that can help you decide on which agency to opt for. Ask ample amount of questions and make sure you get the answers.

• Be prepared to invest your time on this procedure of credit history repair as it can get tedious. Credit repair does not happen overnight and although is possible, will take its own time to fall into place. Any agency that promises a miracle with credit repair within a few days is sure to be a scam, as tried and tested cases of credit repair has proved that it is a time consuming process to say the least.

• Once you set out on the path of credit repair, do not give up. As we mentioned earlier, bad credit is easy to ignore but can prove disastrous the longer it is pushed away. Work towards meeting your goal of good credit and stay alert for any indications that will not allow you to increase credit score, like a negative remark by a payment collector whose debt is already paid or an unaccounted debt on your credit report.

The vital need to repair credit

All in all, as mammoth a task it seems to be, credit repair is absolutely necessary in today’s times. Keeping yourself equipped with all necessary documents and credit report is a wise thing to do while on the mission of availing good credit. Keep your goals clear and work on it step by step till bad credit is a thing of the past in your life. Say hello to good credit and watch all those unfinished dreams come true!

Get professional credit repair help

Speak to a professional today and take proactive steps to repair your credit. For a FREE credit consultation, call 1-877-563-2076.

Credit cards in the US

Almost everyone in the US uses credit cards as a way to pay for debt. Dependency on credit has grown immensely throughout the economy, as lenders in the past were more than willing to extend funds to borrowers. Unfortunately, the recession put a damper on that freedom, when credit card companies were sent reeling by their former over-enthusiastic lending. They began using tactics like cutting people’s limits, even if they had more than that limit charged. This automatically put them in a higher interest rate bracket, and many times unjustly cost them over-limit fees. Credit card companies also began charging higher interest rates without notice to consumers, based on their “adjustable rate” clause in the contract. It was unscrupulous acts like this that pressed the Obama administration to face the credit crisis head on, making legislators step in and find ways of regulating credit card company activity.

Understanding credit cards

To understand what impact credit card companies’ actions have on credit, it’s important to understand how credit is scored. A consumer’s credit score is made up of five different components:

1. 35% is based on history of payments
2. 30% is based on debt percentage, or credit being used versus credit available
3. 15% is based on the length of time credit has been open
4. 10% is based on new credit taken out
5. 10% is based on a mixture of the overall credit a consumer has

Knowing this, the most important thing a consumer can do is pay their bills on time. This is the largest contributor to credit scoring. It’s also important to have a good mixture of all of these elements to maximize a credit score.

Also, length of credit is very important. It’s much more beneficial to have a good payment history with one credit card company than to open new cards that have no history. Consumers should always keep good-standing credit cards open to benefit the most from them.

Debt consolidation companies

Many experts advise against using debt consolidation companies because they do what consumers can do for themselves, for free. A debt consolidation company will charge large fees to negotiate. Experts say that if a consumer wants outside help they should contact the NFCC, the National Foundation for Credit Counsel. They charge a small fee, but it is much less than a debt consolidation firm. The NFCC will communicate with lenders on a consumer’s behalf to work out an affordable plan. They also will work with the consumer to create a workable budget that allows the client to pay down debt as soon as possible.

Debt questions to ask

One important issue to face is what actions led a consumer to having credit card problems. Did overcharging send the credit amount skyrocketing? Did fees due to late payments do the damage? Are credit cards too widespread? These are all questions that need to be addressed for consumers to create healthy relationships with credit. On the other hand, the credit card problems may be due to extenuating circumstances such as unmanageable medical costs. If this is the case, bankruptcy may be a more viable option for the individual. Regardless of what the solution is, it’s important to get to the root of the credit card problem and take care of it. The future after the recession is still unknown and consumers have to work hard to make sure they will be financially sound.

The state of lending today

Prior to the recession any score of 700 or higher would have no problem finding a lender. Now, rate adjustments begin at 740, with every 20-point drop adding another adjustment. The result of the shift in credit scores is that people with decent scores need to pay more for loans or make quick changes in their credit habits to increase their scores. Some drops in credit scores may even be hidden to consumers. For example, Todd Huettner, president of Huettner Capital, said, “One of my clients always had a credit score of 740. When she went to refinance, she found out her score was at 719. The reason was she put a new washer and dryer on a store credit card. Many store cards are actually revolving credit, which means your limit is essentially your starting balance. So that purchase maxed out her card and caused a 20-point score drop.”

How things changed in the world of credit

Last year the nation’s two largest mortgage lenders, Fannie Mae and Freddie Mac, struggled in the market. Due to the lending crash, both companies changed their definition of “risk.” Any borrower with a credit score below 720 fell under this new definition and is affected by its change. Sean Cragg, VP of sales for Gold Star Mortgage Financial Group, said, “These fees have nothing to do with the mortgage company or its various products and cannot be negotiated away.” All providers of mortgage, auto and personal loans must comply with the new rules. Only financial institutions holding their own portfolios can dictate and follow their own guidelines.

Is there hope for the future?

So the question is: Is there hope for the future in lending? David Chung, managing director of CreditXPert, Inc., said, “There are many factors, including proposed legislation and regulation that continue to change the mortgage lending landscape. In the near term, it is more likely that this benchmark will continue to rise than fall.”

To individual borrowers that means more difficulties in finding funding. Chung added, “Often, lenders will quote rates that include the adjustments, without calling attention to them, in order to avoid a negative reaction from their customer.” What is stable, however, are the general requirements for finding funding. In today’s world of credit, here are the requirements:

• Great credit
• Stable income, with a minimum of two years of steady employment
• Reserves after closing
• Down-payment
• Low debt-to-income ratio
• Good loan-to-value percentage

Being proactive with credit

For any consumer looking for mortgage, auto or personal loans, it is more important than ever to work on credit scores. Chung said, “Virtually everyone can raise their scores by at least 10 to 20 points, sometimes significantly more in 30 days.” It may take some persistence and care, but in the end the savings will be worth it.

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The contents of your credit report can make or break your next loan application and your ability to borrow money. A good FICO score is the key to success. However, if your credit has taken a beating in recent times, you will have to do a little dusting off. The good news is there is still hope and you can easily impress a scrutinizing loan officer by implementing a few simple strategies discussed in this article.

How lenders grade your credit worthiness

There are various factors that lenders look at when it comes to underwriting a loan. To keep track of all these factors in today’s credit-driven environment, lenders use FICO scores to put everyone on a standardized scale. Doing this is useful in making quick decisions about a borrower’s:

- loan balances

- ability to pay

- payment habits

- history of seeking credit

To repair your credit, follow the steps below and your FICO score will improve accordingly.

Step 1: Make a plan

Planning to apply for a loan in advance of actually putting in your application can affect your outcome tremendously. If you have a poor credit score, a window of 3-6 months will give you plenty of time to make important changes. What is most unfortunate is how little attention people devote to planning.

A poor (or, less than stellar) credit rating can not only affect your approval status, but it can also affect the amount of interest you will pay. As such, planning before applying not only improves your chances for getting approved, but it also saves you money in the long run by lowering your borrowing costs.

Step 2: Decrease your loan balances

In simple terms, if you are using all of your credit (or worse, exceeding it), you are not likely going to be approved to add yet even more credit to your portfolio of debt.

As a general guideline, you should not exceed 75% of the credit limit on each account. Notice how I’ve said the credit limit for each account rather than all of your accounts combined. If you have a credit card with a $1,000 limit, pretend that the limit is actually only $750 and commit to sticking to this personally-imposed reduced limit. Apply the same formula to all of your other cards and their respective limits. This practice can impact your score dramatically, which will ultimately help you borrow money successfully. Use the next 3 – 6 months to bring down your limits to ideal levels.

Step 3: Know about your ability to pay

Aside from usage, there is another factor that relates to loan balances that can affect you. If you have too many accounts open and not enough income to service those accounts, lenders might classify you as a risk that they’re not willing to take.

Unfortunately, if this is the case, there’s little you can do. You could pay down your balances, which would be good for your FICO score anyway, but it won’t eliminate all the excess credit you have (which will still affect your debt ratios).

If you are tempted to close down some of your accounts that you don’t use, think again. Closing down various accounts is not always a good idea because that can affect you credit negatively. The only advice I have here is to refrain from opening up useless accounts in the first place (like department stores or specialty cards that you really don’t need in the long run) and simply lower your balances. Working to improve other factors will help your score overall.

Step 4: Improve your payment habits

If you have had many late payments in the past, your score is bound to be bruised as a result. However, if you start to improve your payment history from this day forward, your improved activity will be reported and you will start to notice boosts in your FICO score. Vow to make all of your payments on time – from this day forward!

Step 5: Do not seek credit

If you plan to apply for a loan in the next 3 – 6 months, do not seek any credit whatsoever between now and the time that you apply. Each time you seek credit, you get what is known as a ‘hit’ on your report. Hits lower your FICO score slightly. While they don’t make huge impacts, having plenty of them (and, being subsequently rejected) is not a good situation for prospective lenders to discover when they pull your report.

Put the above strategies into play and you will start to see dramatic improvements in your FICO score. To borrow money, lenders just want to make sure you are a good credit risk. They actually want to lend out as much money as they can. That is how they profit, after all. However, before profits, lenders have another priority and that is to protect their capital. If you do all your homework, and launch a plan in advance and put the strategies discussed in this article into play, you will come out ahead.

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Speak to a professional today and take proactive steps to repair your credit. For a FREE credit consultation, call 1-877-563-2076.

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When it comes to borrowing money, Americans are getting a good lesson in the new rules. Pre-recession credit was thought of as a tool available to almost everyone. People used their credit for a wide variety of things, seeing its convenience as a major advantage to their monthly bill payment plan. For this reason, there was estimated $3.5 billion in open credit for US consumers in 2006. Then the market began to decline.

It was a wake up call of sorts when the recession first began. Martha Coleman, consumer in Pittsburgh, Tennessee said, “I had always thought of credit cards as safeguards against financial disaster. If I didn’t have the cash up front, I charged it. I always mentally knew if the money wasn’t available I had a credit cushion to save me.” Coleman soon learned that “credit cushion” was gone when her credit card company slashed her limit at the height of recession. She added, “It could not have come at a worse time because I got laid off. I was counting on having extra credit to tide me over and suddenly it was gone.”

How the recession changed credit

The recession greatly changed how consumers manage credit. When it comes to purchasing big-ticket items, almost everyone needs to have credit. Homes, cars, appliances and electronics are all normally financed. The biggest problem however is when people use their credit cards to pay for small expenses too. Gale Frampton, analyst for Crohn’s and Dackman, said, “Everyday expenses normally only drive up your balance and do little to actually help you. If you are buying a $30 item, why stretch the payment out over a few months? If money is that tight, then don’t buy it at all.”

It’s a hard lesson consumers learned via the recession and how credit lenders responded. To mitigate damages credit card companies slashed limits and increased interest rates to unmanageable amounts. The problem was that an abundance of sub prime borrowers forced credit card companies to turn to their good-paying customers, to find as much profit as they could. Many people who were borrowing money wisely felt that they were being penalized undeservingly. Frampton added, “Bad borrowers bowed out of the game early, leaving good borrowers holding the bag. Credit lenders realized that if they weren’t hard on their good customers, they wouldn’t make any money back.”

How to manage credit now

When it comes to post-recessionary credit, there are new rules to follow. One the most effective ways to manage credit is to pay down balances. Craig Watts, spokesman for FICO, said, “The overall effect of paying down credit balances is based on an individual basis…but depending on a consumer’s overall credit profile, he or she could push their score to the 700 range just by paying it down.” The reason for this is because 30% of a credit score is based on “credit utilization.” That term is used to gauge the amount of credit being used versus the total amount of credit available. For example, if a consumer has $5,000 in debt and an open credit line of $10,000, then their credit utilization is 50%. That percentage is what creates about one-third of a credit score and the lower the credit utilization ratio, the higher the overall credit score.

Another tip for consumers is to always make payments on time. The chronically late payer is doing nothing but hurting his or her score. For example, Watts also pointed out that paying all bills on time for just one month could potentially “boost a credit score by as much as 20 points.” Overall the two biggest tips when it comes to managing credit are to pay down balances and pay on time.

Figuring out credit for positive results

Borrowing money does not have to be detrimental to a credit score. Credit cards are meant to help consumers, but the new face of credit lending forces them to be wiser about management. Credit card lenders are strict these days, but if a consumer knows how to maneuver their accounts they can still walk away with a positive outcome.

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The loan industry is one of the largest financial marketplaces in the world today. Spending largely drives the economy and many consumers need loans to do their fair share of the spending. An unfortunate by-product of the loan industry is that many consumers and borrowers fail to repay their loans. Through unforeseen circumstances, such as job loss, or catastrophic medical bills, consumers are often left in debt and in amounts they cannot afford to repay. Credit scores suffer and securing a loan in the future now becomes more difficult. These types of situations create a separate niche within the loan industry known as bad credit loans. Having bad credit does not preclude you from getting a loan.

The new type of loan

More and more people in today’s economy are suffering from bad credit scores. Lenders have identified this niche and adjusted their requirements for making loans to accommodate this ever-growing market. Everyone is forced to adjust in an economy like the one we are experiencing. Lenders are no different.

As long as there are lenders, they will need borrowers. Borrowers need lenders and so adjustments are made by both entities.

What are lenders looking for?

There are essentially two things that lenders want to know about a prospective borrower in regards to making a bad credit loan. There are many other factors and considerations that lenders use, but the bottom line is this: Does the borrower have the means to repay the loan and does the borrower have intentions to do so? We are told credit scores are important and to some measure they are. However, the aforementioned factors are the most important.

Explain your credit report

For example, if you lost your job and were unable to make your monthly obligations on time, obviously your credit score suffered. However, if your complete credit history shows that you did pay your monthly financial obligations in the past, creditors will likely overlook your bad history with a simple explanation letter. Mostly everyone who takes out a loan has intentions of paying it back. Circumstances beyond your control may have prevented you from doing so. No one understands this better than lenders. You once paid your bills on time, and lenders only want to know that you plan to do so in the future.

Don’t get discouraged, you’re almost there

Regardless of how your credit score was damaged, if you are in a position where you are back on your feet financially, are able to pay your bills on time and have a history of doing so, you may be able to get a bad credit loan. All too often, consumers with bad credit tell themselves that they are not good enough, that there is no way they can get a loan. Nothing could be farther from the truth. It will take some effort, it may take some documentation, and it may take some shopping around to different lenders. Persistence is the key in securing a bad credit loan.

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Now that the holidays are over, many Americans are mired in debt. Sure it was easy to pull out credit cards for expenses, but now is when the credit card bills are coming in. Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, said, “It will only get worse as the bills continue to arrive…putting it off will only result in ruined credit and more stress.”

One of the most important tips the National Foundation for Credit Counseling gives to all its clients is to set a goal date when holiday debt will be paid off. Cunningham stated, “Setting a goal date like March 31, for example, can give you a clear picture of what you have to do to pay down debt.”

Credit cards and the future

When you are trying to get out of debt, it is important to stop purchasing on credit. Though small charges seem to be more easily handled with plastic, they add up quickly. Cunningham also instructs her clients that stretching out debt payments as a result of a holiday spending spree, only negates savings. Once the holidays are over, leave the credit card at home. If you can’t afford to pay for an item with cash then leave it at the store. Lynn Mayabb, financial planner at BKD Wealth Advisors said, “It is much harder to pay for something if you have to pull cash out of your wallet.” Research shows that people who pay with cash end up spending about 20% less than those who use credit. Using cash can cut back substantially on frivolity.

Budgeting post-holiday season is crucial

Finding a workable budget is also important to getting out from under Christmas debt. Experts warn that budgeting isn’t always fun. In fact, it can be a difficult task to honestly assess what comes in versus what goes out on a monthly basis. In the end though, it’s the only way to get an accurate picture of where your money is going and what changes need to be made.

The best way to get started with a budget is to start tracking every expense for one month. Cunningham said, “It can be as intricate as buying a software program to help you track expenses, using a spreadsheet or getting a notebook for 99 cents.” It’s also important to note everything from a big-ticket item’s purchase to a cup of coffee. You want as accurate a picture of your fiscal month as possible. That way you can make the necessary changes to realistically reach your financial goals.

Check out the paperwork

Finally, it’s important to take time to look at paperwork that may reveal money drains. Reviewing your tax withholding on your W-4 form can show you whether or not you are deducting more than you should every month. Reading credit card statements can show you if there are additional charges you were not aware of. Cunningham said, “You’d be surprised at how many people are unaware of a $9.99 charge to their credit cards that came with a free-trial. Sure it may not sound like a lot, but over the course of a year, that adds up to almost $120.”

No debt is good debt

Debt is something that can easily grow out of control during the holiday season. It’s an expensive time for many Americans and a lot of stress comes along with it. Addressing debt early on is key to overcoming it. It may take a few months, but paying it down will save money in the end. When your credit card statement shows a balance of zero, you will be thankful you conquered it.

The recent government bailout of the nation’s banks, begun under former president George W. Bush and continued under current president Barack Obama, has produced considerable outrage among many Americans, particularly those facing mounting job losses, declining home prices and income, rising variable-rate mortgages and a host of other economic and financial pressures. The $700 billion plus rescue was necessary, government and bank leaders say, to save the nation’s banking and investment system from imminent collapse and to help restore failing banks to financial liquidity and ability to offer credit to America’s businesses and consumers, both large and small.

But the disclosures of large salary bonuses conferred upon bank executives, lavish spending on entertainment and the continued tightening of credit became lightning rods for the public’s anger. When this combined with persistent complaints from consumers about credit card and banking account abuse by banks, Congress finally moved in 2009 to address at least some of the industry’s more aggressive practices.

The Credit Act of 2009 Promises Relief to Consumers

The Credit Card Accountability Responsibility and Disclosure Act, or CARD, enacted by Congress in May 2009, is being called a major step forward in reining in some of the banking industry’s excessive practices. While there are undoubtedly some specific curbs that consumers can be thankful for, there are also clear limitations to what the new law is empowered to regulate. Plus, the time gaps in implementing the various measures are allowing banks to find alternate ways to charge fees and raise interest rates, actions which have raised the ire of consumers in recent years.

What the Credit Act Will Regulate

The first phase of CARD took effect back in August 2009. Since August, card issuers must announce any interest-rate increase 45 days before it takes effect, and the notice must be in writing. Cardholders have the right to refuse the increase by closing the account and are also allowed to pay off the balance within five years under the old terms. Some banks are allowing their customers to keep an account open but no new purchases may be made on the card until the balance is paid. Another change since August requires card issuers to deliver account statements at least 21 days before the due date, up from 14 days.

A second phase takes effect in February 2010. Banks will then be prohibited from raising interest rates on current balances unless a customer is at least 60 days behind on a payment. This restriction will apply as well to the widely detested practice of raising interest rates on one balance simply because the bank learned a customer was behind on another account with a different card issuer. In addition, a customer whose rate is increased for being 60 days late must be allowed to earn back the earlier rate with successive on-time payments for six months. But these protections have several exceptions: banks can still charge increases on introductory rates, temporary hardship rates and established variable rates.

Highlights of other rules to take effect in 2010 include: for balances with different rates as a result of special transfer offers, payments above the minimum payment must be allocated to the balance carrying the highest rate; banks can only charge an over-the-limit fee for a purchase if the customer authorizes the bank to allow purchases that push him or her over their credit limit; and cardholders cannot be charged for payments made over the telephone, online or by other means unless the customer requests expedited service.

Will the Act Make a Genuine Difference?

CARD thwarts several egregious practices imposed upon consumers by many banks. What shines particularly are the limitations to how rates can be increased and the manner in which excessive payments are distributed to different balances on the same account. Of course, constricting over-the-limit fees and extending notice periods are helpful as well. But what can banks still do to generate revenue and not be overruled by CARD? As Bill Hardkopf, chief executive officer of LowCards.com, a Web site that tracks the industry, says: “There are so many things that issuers can do that the Card Act doesn’t touch.”

What issuers have been doing leading up to CARD’s full implementation is to arbitrarily raise interest rates, including on fixed-rate agreements, slash credit limits and, in some cases, close accounts, all in the name of “a challenging economy.” What they will be allowed to do after implementation is to close accounts, switch fixed-rate agreements to variable-rate ones and start charging annual fees on some cards, including new cards. For these actions, the Act offers no protection.

Where the Consumer Now Stands

Congress has acted to provide some real benefits and protections to credit-card users and it is to be praised for that. At the same time, it didn’t act on other, onerous bank practices. For instance, there is nothing in the Act that prohibits banks from charging exorbitant interest rates that have been as high as 30 percent and more, levels traditionally associated with usury. In addition, they can charge these rates retroactively after the 60-day period of being late. These actions have been taken by banks usually in response to customers missing a payment and being deemed in default of their account. Banks have shown some flexibility for one-time late customers, particularly if they have consistent payment histories. But they almost invariably impose a late charge for missing one payment. Thankfully, the Act now limits the late charge to a maximum of $39 per occurrence and at least offers the payer 60 days to mend his or her late status before major changes occur.

If and when a card user’s bank imposes severe changes on the account, the user should communicate with the bank and ask for modification of those changes. Specifically, the consumer should ask to have the credit limit raised again if drastically lowered, ask that rate increases be lowered if drastically raised and ask that a variable-rate status be returned to a fixed-rate agreement. If a large number of consumers undertook such action, the banks could be pressured if they started to see their customers leaving them for other banks offering better credit-card terms. Also, remember that being properly informed about one’s financial rights protected by law limits the opportunities to be taken advantage of. Consumers can learn more about CARD at: www.whitehouse.gov/the_press_office/Fact-Sheet-Reforms-to-Protect-American-Credit-Card-Holders .

Finally, consumers can always, and should, write or call their Congressperson asking him or her to work to expand the consumer protections in the Credit Card Accountability Responsibility and Disclosure Act of 2009.

In years past there was a certain stigma that went with having a bad credit report. Lenders were often at an advantage, being able to pick and choose borrowers with the best credit scores, and simply avoiding bad credit risk borrowers. The world economy has changed. The number of people seeking loans with bad credit or challenged credit has grown exponentially in the past two or three years. Lenders have adapted to this change and now provide loans for people with bad credit.

Watch out for the stipulations

Loans with bad credit are now being made available to borrowers, with a few stipulations. It will be necessary however, for borrowers to document why their credit scores are lower than they had been in the past. If you indeed have had good credit in the past, it is quite possible that securing a loan with bad credit is only a few explanation documents away.

Good credit scores make your life comfortable

For example, if your credit and payment history suggests that at one point in time you made all your payments in a timely fashion, lenders are more apt to extend credit to you again. Lenders realize that circumstances and personal finance matters are sometimes beyond the control of the borrower. Lenders also realize that if you have made payments in the past, it is likely you will again pending changes in your financial situation.

Explain your situation

Providing a perspective to the credit lender with an explanation letter as to why payments were not made on time will generally suffice to reassure the lender that you will make payments in the future. This is not always the case, however, many lenders work in this manner.

Bad credit loans dissected

Lenders for bad credit determine whether or not they will make a loan to a bad credit borrower by assessing risk. Generally, the higher the risk for the lender the higher APR the borrower can expect to be charged. While a higher interest rate isn’t always desired, it is part of the consequence of a lower credit score. Borrowers should keep in mind that even if the only loan available is one with a higher APR, that loan can always be refinanced at a later date. Once you have reestablished your credit history and more importantly your payment history, it is much easier to secure a loan at a lower APR.

Economy driven loans

The most important thing for a borrower to remember when trying to secure loans with bad credit is that lenders profit only when they make loans. The economy has created an entirely new pool of borrowers from which lenders choose. Bad credit borrowers are more numerous today than ever. Lenders will always find a way to accommodate the needs of their customers. The truth is their customer base is not only larger, but many have challenging credit.

The way of the lenders

Do not get discouraged should you be turned down on your first application. There is a remedy and lender out there for just about any circumstance or situation. You may have to jump through a few more hoops, in other words, provide documentation, but there may be loans available for those with challenged credit.

Consumers who had to rely on personal loans to make ends meet throughout 2009 are making strict financial resolutions for 2010. Nancy Sycamore of Plainfield, Washington said, “We thought three month’s worth of savings would last us…that was the suggested savings amount by numerous experts. When we went down to a one-income house, our savings quickly diminished.” Saving more money is a high priority among Americans now that 2010 is here. The recession taught many consumers a few lessons when it comes to credit. First of all, credit isn’t the savior it was thought to be. Credit card companies were quick to shut their doors to even good clients, when the recession was at its most difficult. Secondly, good old-fashioned cash proved to be the most reliable form of funding in a tricky market.

Finding ways to save in 2010

Everyone knows that savings is a high priority, but what are some ways to save? The best thing about saving these days is that it can be done automatically. For example, directly depositing funds from a paycheck into an interest-bearing savings account can make saving effortless. June Schroeder, financial planner with Liberty Financial Group, said, “Any bonuses or raises should be carefully managed. A good rule of thumb is to put at least half of any extra money directly into savings.” Also, any rebate checks or coupon discounts should go to savings as well.

Ways to bulk up savings

There are a few ways to bulk up savings. For anyone who wants to commit to their New Year’s resolution of having bigger cash reserves, here are a few helpful hints:

• Research financial plans. It is never a good idea to become lax with where money is going, but for someone wanting to increase their savings, it’s crucial. Consumers should study their 401k and credit card accounts. They should know exactly how much their debt is costing and have a viable plan when it comes to minimizing it. They also should research insurance policies for any lapses in coverage and revamp the contract if necessary. Any personal loans should be studied to find out if credit rates can be renegotiated and if the loan is truly necessary. Many consumers do research on existing credit accounts and realize that they can get along relatively easily without them.
• Be aware of new credit card rules. In February of 2010, the second phase of the Credit Card Act begins. By law, the days payments are due have to occur the same time each month. This is great news for the millions of borrowers who struggle with paying their bills on time. The number one thing a consumer can do to better their credit is pay on time, every time. Bringing up credit scores can open the door for lower interest rates and that can save money.
• Research monthly budgets. It’s always a good idea to periodically study a budget. Financial Planner Mary Middleton said, “Things change. The markets change. A budget that worked a year ago may not be most efficient now.” A good rule of thumb is to look at the biggest expense areas in a budget and find ways to minimize them. For example, if a mortgage payment is the biggest bill, a consumer can try refinancing for a lower rate or if credit card payments are too high, consolidation may be an option.

Saving money

In today’s post-recessionary market it is more important than ever to save money. Older generations were right when they said: “Cash is king.” Millions of Americans are mired in debt from credit cards, personal loans, mortgage loans and automobile loans. With some careful planning and immediate action, the goal of saving money for 2010 can be achieved.

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What Suze Orman Says About Payday Loans

On her website, Suze Orman’s thoughts about payday loans are clearly expressed. Understanding that most people find this option a lifesaver when they are in dire straits, as part of her Get Out of Debt Special web section, Suze Orman admits that there are times when payday loans make good sense. However, she also stresses the importance of repaying payday loans and, especially, paying down loans with high interest rates. She even encourages those who are able to utilize funds from a 401k account to do pay loans down, when necessary.

Debt Should Always Be Handled Responsibly

While payday loans can be a timely help when a person needs it most, there are a few things that should be analyzed when a person finds themselves considering this option. To begin with, how is one’s current income being spent? Experts like Suze Orman and others all agree that most people are in debt as a result of poor spending habits, relying too heavily on credit and as a result of mismanaging their income. Payday loans exist in order to help a person get out of debt. However, one’s debt can be increased and their credit damaged if payday loans are not responsibly handled. Before taking the lifeline offered by a loan until payday, one needs to closely scrutinize why their income is not adequately covering their expenses. And, where necessary, make adjustments so that regular income is sufficient.

More of Suze Orman’s Advice on Payday Loans

Suze Orman’s advice on payday loans also includes comparing the option of taking a cash advance on a credit card in lieu of a payday loan when possible. Orman’s recommendation is based on scenarios where the interest rate on payday loans being offered may be higher than what a person can comfortably repay. In terms of repayment, a person in debt should always choose the option that is the most comfortable for them. However, for those who cannot access a cash advancement on a credit card, payday loans might be the best option in order to meet one’s financial obligations.

Financial Freedom is Within Reach

Besides offering words of wisdom on payday loans, Suze Orman’s strategies for getting out of debt should be studied closely, as should the advice of other financial experts. Far too many individuals live stressful lives that are consumed with debt-related worries. However, information and educational resources that support better financial management abound in today’s marketplace. Those who find themselves relying more and more on the assistance of payday loans should educate themselves on debt reduction, personal finance and credit repair, when necessary.

Cash Advances Relieve Debt, Not Responsibility

Payday loans are understandably a very helpful alternative for those in serious need for fast, hassle-free financial relief. Many cash advance companies lend money without requiring a personal credit check. In many cases, all that is needed is proof of employment via recent pay stubs in order to obtain a personal loan. As Suze Orman’s books and appearances always highlight, however, being educated on handling one’s own finances is crucial. Payday loans offer relief, but only when they are obtained and repaid as responsibly as all other debts.