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.

Image from Wikimedia Commons.

Remember, remember the 5th of November

OK, a lot of us saw V for Vendetta, but people were commemorating Guy Fawkes’ Night  (November 5th) a long time before the movie came out, and certainly before the graphic novel (that the more sophisticated and discerning among us have read) that the movie was based on came out.  On a side tangent, if you haven’t read the book, just go out and spend some instant cash on it.  (It’s better than the film, and it makes it clear why Alan Moore HATES Hollywood.)

Time for a History Lesson.

“Remember, remember the 5th of November,

The Gunpowder Treason and Plot.

I know of no reason why the Gunpowder Treason should ever be forgot.”

The Gunpowder Treason and Plot was a (nearly successful) plot to blow up the Houses of Parliament in London, England, and thereby killing King James I.  (The Houses of Parliament thing is a dead giveaway, isn’t it?)  The next phase was to kidnap the king’s children, hold them for ransom, and start a rebellion.  Why were they so agitated? Well, the Gunpowder Plotters were all Catholics.

Incidents like these are why the Constitution has that Establishment Clause and why the Separation is necessary, BTW.

The Reader’s Digest version:  Henry the 8th (I am, I am) separated the English Crown from the Catholic Church, because the Pope was tired of his marital shenanigans.  (Beheading your ex-wife is wrong, though understandable!)  He created the Church of England, with the Monarch as the Head of the Church.  Afterward, Catholics were discriminated against (putting it mildly), until a group of wealthy Catholics decided they’d had enough, and if the King wasn’t going to listen to reason and be fair about things, they were going to do something about it, and get someone on the throne more friendly to their plight.  (This was also one more excuse for the British to abuse the Irish, although English Catholics didn’t have a problem with that.)

In 1604, a group of conspirators got together (I’m leaving the names out – this is the quick version) to come up with a plan to remove the government, and then to execute it.  They decided to burrow under Parliament, plant explosives over a long period of time (the gunpowder barrels were planted over more than 6 months) and get alibis together.  The person in charge of executing the plot was Guy Fawkes, aka Guido Fawkes, a veteran soldier.  He was about to set the whole thing off on November the 5th, 1605, when an anonymous letter tipped off the guards.  He was caught, tortured, and as they were beginning to hang, draw and quarter him, he jumped off the gallows and committed suicide.

The Aftermath

Afterward, English Catholics faced even further discrimination.  (Irish Catholics got it worse, and then came lord Cromwell. He’s getting a small “l” for a reason.) Guy Fawkes Night is celebrated in England and other territories, by lighting fireworks and/or bonfires, and burning effigies of Guy Fawkes to commemorate the Deliverance of the English King. It took 2 centuries after the events for the crown to repair credit with British and Irish Catholics, and end discrimination.  (3 more centuries to free Ireland.)  Now, don’t go setting off fireworks if it’s illegal – but take pause to remember, remember the 5th of November.

Credit counseling and a debt management plan can lead to greater peace of mind for consumers in a bind, but proper education is needed first. (Photo: picasaweb.google.com)

When a consumer enters into credit counseling, a common element of any program is what’s called the debt management plan (or DMP). In a DMP, the consumer agrees to make a set monthly payment to their credit counseling agency. Those funds are in turn used by the credit counseling agency to repay the debtor’s bills, loans and other debts according to a schedule made with the creditors. The presence of the credit counseling agency in the transaction may persuade the creditors to be amenable to lowering interest rates or waiving fees, not to mention staunching the flow of credit collection calls the consumer had been receiving. Provided that something more than free counseling but less than bankruptcy filing is needed, a DMP can be a useful tool in protecting a consumer’s financial interests and helping them to move forward and repair credit.

Benefitting the Consumer

A 2008 study entitled “Completing Debt Management Plans in Credit Counseling: An Application of the Theory of Planned Behavior” by Jing Jian Xiao of the University of Rhode Island and Jiayun Wu of the University of Arizona tenders that the most ideal arrangement for a DMP would be one in which consumers were fully informed of their options and chose the most appropriate course of financial action. At the same time, creditors and credit counseling services alike would deal with the consumer in an ethical, professional manner.

While circumstances surrounding a consumer’s financial troubles rarely fall into place like clockwork, numerous recent studies have shown that consumers who participate in DMPs show ” a significantly lower incidence of bankruptcy over the two years following counseling” (Staten & Barron from 2006). Overall, consumer financial well-being has been observed to improve.

Xiao and Wu Study the Link between Attitude and Behavior

In other words, they apply the theory of planned behavior. Consumers’ attitudes toward credit counseling (and the DMP in particular) are important, as the theory hypothesizes that these attitudes will accurately predict future credit behavior. Xiao and Wu study survey and plan completion information from DMP-enrolled consumers in order to go where studies in the field have never been before. While previous studies have attempted to shed some light on the desires and behaviors of consumers who participate in credit counseling, they relied almost solely upon survey data. Xiao and Wu’s use of the theory of planned behavior to identify factors associated with completing the debt management plan is entirely new in the field, according to the study authors.

Positive Attitude, Intention and Results

The authors begin with the survey data from clients of a national credit counseling agency, and then they apply the theory of planned behavior and other methods from literature on the concept of consumer satisfaction. Their goal is to find the link between a consumer’s intent and their actual behavior when completing their DMP. Their discovery is that observed behaviors consistent with the theory of planned behavior had positive effect on consumer’s intentions, post-credit counseling.

Their Findings Have Implications for Credit Counseling Services

DMPs are understandably a significant monetary resource for credit counseling agencies. Predicting how likely consumers are to complete their DMP would hence be useful to the financial stability of such companies. Positive attitude toward completing a DMP plays a very important rule in a consumer’s future intent. It’s much more significant to ask someone “What do you think about completing the debt management plan?” versus “What do you think about the debt management plan?” Thus, the way in which credit counseling agencies approach the matter with their clients can definitely steer them toward more likely completion, which in turn could foster positive attitudes that reflect in how such credit counseling agencies are perceived by consumers.

Help Clients Feel They’re in Control of Debt Management

By providing clients with the necessary information to make informed decisions and periodically updating their progress, credit counseling services can help empower consumers. If said consumers feel as if they’re in greater control of their debt via a well-executed DMP, their instance of intent to complete the DMP is found by the authors to be higher. Greater client satisfaction is central to credit counseling success, which would indicate that if the agencies consistently treated clients with respect, there would tend to be positive result. Meeting consumer need and even exceeding expectations – a good recipe for any business transaction – leads to a greater likelihood of DMP completion. This is beneficial to all parties involved, from the client to the credit counseling agency to creditors.

What Can Educators Take From Xiao and Wu’s Study?

Determining a credit counseling client’s behavioral intention comes down to two factors, say the authors: “Attitude toward the behavior and perceived behavioral control.” When developing programs to promote positive behavior development, educators should consider directing subject attention to attitude toward the desired behavior as well as the method used to promote behavior (in this case, the DMP). Clear benefits and consequences of DMP completion should thus be made available to credit counseling clients. If such information is made available as a part of a financial education curriculum, the authors feel that consumers could possibly have a more favorable attitude toward DMPs should they ever have the need. Possible psychological barriers could be lessened.

Knowledge: the Key to Positive Attitude and Intent

Xiao and Wu findings suggest that if a consumer in credit counseling finds a DMP that best suits their needs, satisfaction levels can be significantly high. Education as to what the programs entail is most important. In order for consumers to have the optimal attitudes toward DMP usage, they also need to be aware of other options available within the credit counseling industry. Knowledge leads to well-informed choices and greater satisfaction, per the authors’ findings. It should be noted that another important part of a consumer’s financial education should include how to avoid marketing scams, as some segments of society view credit counseling and debt management plans with negative or exploitative. There are many reputable credit counseling agencies that would benefit from heightened consumer awareness.

Seek 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.

Complete video course on how to correct bad credit.

You will learn:

• how to identify mistakes,
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• how to contact the major credit agencies,
• what the scores mean,
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• and how to “beat the system”.

You can be on your way to a much better credit score within 4-6 weeks.