Common Misconceptions About Credit

One skipped payment results in one delinquency

If you skip one payment on your home loan it can result in a series of billing currencies being reported to the credit bureau. The reason is that the lender always credits payments against the earliest unpaid obligation. This is according to the accounting rules used for amortized mortgages.
For example if you miss a payment in February and then make a payment in March then that payment will go towards the missed payment of February so you will still owe the lender money for the month of March. If the late payment in February was reported to the credit bureau then a late payment for the month of March we reported now. To the time that you make a double payment in any particular month a late payment will continue to be reported which result in several things going to the courts being created on your credit file.
Mortgage contracts where you are allowed to skip a payment every now and then are common in the United Kingdom but have only started appearing in the United States now and even then not very widely available. Unless your contract states otherwise if you skimp a payment but continue to make regular payments thereafter you remain delinquent and accumulate late fee on your mortgage until the skip payment is made a good by making a double payment.

Paying Off a Delinquent Account Improves the Credit Score

Another misconception that many people have is if they pay off their delinquent accounts their credit score will improve. This is not necessarily true. A credit score looks at the stability and reliability of a person to make and timely payment on the money that he borrows. Having a delinquent account will continue to reduce your credit score even though you pay them off to the time that your payment history can demonstrate that you are now making regular payments on all your credit accounts and are being more responsible with your credit. The delinquent account just does not disappear from the credit report when you have paid it off. A late payment will continue to show on your credit report even when you have paid it.

This includes tax liens, bankruptcies, foreclosures and federal court judgments. They will only be removed from your credit report after the stipulated duration is over. But until then they will remain on your record even if they had been discharged or released. However the impact of these entries on your credit report will have a lesser impact on your credit score as time goes by.

Consolidating Balances Improves Credit Score

One more misconception that people have about their credit score is that if they consolidate the balances on their credit cards into a smaller number of credit cards it will help increase their credit score. While it is true that the fico credit score might look more favorably upon a person who has 5 credit cards rather than 20, there is also the credit utilization factor to look at. The credit scoring models does not view high balances on a credit card very favorably. If you’re consolidating your debt from multiple credit cards to a few credit cards then it is possible that you might max of those few credit cards. Coming close to the credit limit on your credit card is an indication of financial distress. So consolidating your debt into a smaller number of credit cards which results in them getting close to the maximum limit result in your credit score decreasing other than increasing.

Authorized Credit Card Users Can be At Risk As Well

Authorized users on a credit card are usually not responsible for making the payments on the credit card. However, if the primary cardholder happens to default and does not pay off his debt certain lenders may deport the authorized user as being late on the card to the credit bureaus as well. They do it in the hopes of the authorized user making a payment on the card in order to avoid his credit score getting blemished. However, this is against the law and you are in no way obliged to make payment on a credit card when you are just an authorized user. In order to fix this you can write a letter to the credit reporting agency informing them that you are only an authorized user and to verify this information with the lender as per your rights according to the fair credit reporting act.
Edit and Income Can Be Separated in a Loan Application
Some people are under the misconception that when they apply for a loan as a couple they can use a credit score of one spouse whereas the income of another. This is not how it works. When lenders our qualifying a couple for an home loan they will look at the combined income as well as the combined with the treating of both the people. If the mortgage on his being applied for by one person than the credit score as well as the income of that one borrower will be reviewed and considered by the lender.

10 Places to File Complaints Against Creditors

When your rights are violated by a business in the credit industry – whether it’s bank, credit bureau, collection agency, or credit repair company – there are several legal entities you can complain to.

Federal Trade Commission

Send complaints about any business breaking a credit law to the Federal Trade Commission. This includes creditors, debt collectors, credit repair organizations, and credit bureaus.

Your State’s Attorney General

Better Business Bureau

You can send complaints about all type of banks to the Better Business Bureau.

Office of the Comptroller of the Currency

Send complaints about banks with “National” in the name to the Office of the Comptroller of the Currency.

National Credit Union Administration

The National Credit Union Administration regulates federal credit unions.

Your State’s Credit Union Charter

If your credit union isn’t federally chartered, use this website to get the contact information for your state’s credit union charter.

Office of Thrift Supervision

The Office of Thrift Supervision oversees federal savings and loans (S&L) or federally chartered savings banks (F.S.B.).

Federal Reserve Board

The Federal Reserve Board (FRB) regulates state banks.

FDIC

The FDIC handles compaints about state banks that are not regulated by the Federal Reserve Board.

Consumer Action

Consumer action is a national advocacy group that focuses on finance, credit, and telecommunications.

Three Steps to Reach Your Credit/Debt Goals

Without a systematic approach to accomplishing your credit or debt goals you will not have much success.Whether you are trying to pay off your existing credit card debt or trying to improve your credit history is in order to qualify for a home loan or an automobile loan,  it is important to follow a systematic process and should discipline.

Here is a breakdown of the process that you should follow in order to make sure that you are able to achieve the targets that you set yourself.
Set a specific course — set a specific goals such as you want to increase your credit score from 600 to 680 in the next seven months. Being ambiguous like Justin yourself that you want to increase your credit score will not have much success as you will not know where you are supposed to reach. Setting a goal is always about having a destination.
Break your goal into steps — in need to figure out the steps that you need to take in order to achieve your goal. It’s like panning out a trip where you have several smaller stations along the way. Think of it as a map where Hugh breakdown a journey into smaller stops.
Besides the timeframe — give yourself a deadline under which you are supposed to achieve your goal. Leaving it just hanging without a deadline will not inculcate a sense of urgency.
Write down — it is a commonly accepted fact that writing something down emphasises it. Do not keep your plan just in your mind. Put it down is a you can frequently refer to it and look at it this way you will also be able to know what progress you’re making.
Take inspiration — you can either tell someone close to you what you’re trying to achieve so that you have someone who can hold your account will for what you set out to do. This person can also inspire you to achieve your goals. Take time out to celebrate when you achieve your goal or when you complete a certain step towards the completion of your goal to keep you inspired.

How to Buy or Rent Another House after Foreclosure

More and more people and services check your credit report of a consumer. Landlords are allowed to check your credit report of a potential tenant after they have taken credit information. If you have a foreclosure couldn’t on your credit card then getting new rented accommodation may be difficult if your landlord is doing a credit check on you. This foreclosure has become a reality for many consumers in the United States of America owing to the credit crisis and the economic meltdown. Here are some tips to secure rented accommodation even though you might have foreclosed your home.

Find Accommodation with the No Credit Check

Credit Checks Are Usually Commonplace at Large Apartment Complexes Which Are Typically Owned by Large Corporations. You Are Likely to Face Strict Approval Rules Which Would Include a Credit Check. If You Have a Foreclosure on Your Credit Report the Odds Are That Your Application for Rented Accommodation Would Be Denied at Such a Complex.

You should instead look for smaller apartment buildings, you place, townhouses and other places which are typically owned by a single landlord. A single landlord is less likely to do a credit check. You can find such accommodations advertised in local newspaper, craigslist or reference through family and friends.

Pay a Higher Deposit

If a landlord is hesitant to offer you the rented accommodation you can offer to pay a higher security deposit. Paying a higher security deposit conveys your ability to handle the rent of the house and also covers the lender for any loss that in a rise in the future due to non-payment. Once you have managed to get your rented accommodation make sure that you pay the monthly rent on time. Putting in a high deposit does not exclude you from making payments on your rent and utilities every month unless your rental agreement says otherwise.

Rent Quickly

It may take some time before the foreclosure gets updated on your credit report. If you move quickly you may be able to get a rented accommodation before your credit report has been updated with the information on your foreclosure.

Getting Someone to Cosign

You may be able to get approved for rented accommodation if you can get someone to cosign as your guarantor. Typically this has to be person with a good credit rating so that the landlord may use him as security and a person responsible for making the payment against your rent in the scenario of non-payment.

Try to Keep up Your Credit Rating

Even though you have had a foreclosure on your credit report you must not compounded the situation by falling back on your other payments as well. People with foreclosure often have 90 days late on their credit than people who have not done foreclosure. While foreclosure is damaging of the credit rating late payments compound the situation in the eyes of a landlord. With no other negative information on your credit report apart from the foreclosure you may be able to convince the landlord that’s the default on the mortgage was an isolated incident.

Do Not Lie

If you’re not asked about your credit history or foreclosure there is no need to mention it. However to not misrepresent the credit situation. If the landlord asks you specifically about foreclosure and you have gone through with it then you should tell the landlord the truth. Try and focus in telling the landlord how you intend to meet the payment for the rent and making him understand the circumstances behind the foreclosure which won’t prevent your being late on your rent payment every month.

Things To Do For A Better Credit in 2012

Review your credit report

If you have never done so in the past, it is time to order a free copy of your credit report. Review the information on it so that you can clean it up. Dispute the wrong information and address the negative items that are hurting your credit score.

Review your credit score

It is more important to check your credit score before applying for credit. Order a copy of your credit score to see where you stand with the lenders.

Pay your balances in full

Start paying off the balances on your credit card more aggressively till they are completely paid off. After that make it a point to charge only what you can afford to pay off completely at the end of each month. Avoid the expensive interest rates and finance fee.

Opt out carefully

Increase in the interest rates on your credit card may feel unfair and make you feel like cancelling the credit card. Do not do so till you have paid off the balance. Do not close credit cards that might hurt your credit score. If you have to opt out, do so after making sure that you have other credit data being reported to the credit bureaus and other credit cards that you can use.

Build an emergency fund

Start saving up for an emergency fund that will sustain your living expenses for 6 to 12 months if your current income happens to dwindle. This will reduce your reliance on credit and debt in times of financial direness.

Pay your bills on time

Pay all your bills on time so that you avoid the expensive late fee and hurting your credit score.

Only take the loans you need

Only take the loans you need. Avoid taking loans for expenses that you can avoid. Buy only what you can afford with your current income.

Budget

Make a budget for your household expenses. Make a budget if you want to pay off your debt. Make a budget so that you can plan for your expenses every month in advance. Make a budget so that you are more in control of how and where you spend and avoid the unnecessary expenses. This will help you save more and use the money where it’s needed.

How to Lower Your Debt to Income Ratio

Your debt to income ratio is an indication of how much debt you have. The ratio is measured by comparing how much you aren’t not what you earn goes towards paying off your debt. Debt to income ratio is also known as DTI. Lowering your DTI could be important for your credit rating as for as helping you qualify for an important credit such as a mortgage loan etc. in the future. Mortgage lenders look at the DTI of a person in order to determine whether the person is qualified to take on further loan. Your existing debt to income ratio tells a lender whether you’ll be able to pay off additional debt with your current income and at what risk of default.

In order to lower your DTI you need to either pay off your existing debts completely or increase your income. DTI gets to be a problem if you are only making minimum payments on your credit cards and yet have a high ratio. Paying your balances in full and having other active loans such as a mortgage loan and an automobile on result in a high DTI which is not so bad since you are taking payments on your loan is actively.

In order to lower your DTI you can pay off your existing credit card bills completely. You must understand is that when you take on an aggressive outlook to ring an outstanding debt your DTI might increase temporarily. This is because you’ll probably devote more of your income towards paying off your debt. However once the debt has been completely paid off the DTI is liable to drop dramatically. If you manage to pay for only a debt then your ratio will drop to 0% because none of your income will go towards debt payments any more.

Preparing Yourself to Become Debt Free

Habits You Need Change To Prepare Yourself for a Debt Free Life.

If you are making efforts to pay off all your debts then you may also need to work on changing some of your old habits that resulted in you incurring a lot of debt. If you do not change some intrinsic and basic habits then you might find yourself in the same situation as before once again. Being in debt is bad enough but finding yourself in the same situation after having recovered from it is worse. Here are some of the habits that you might want to consider changing and evolving if you do not want to have a debt relapse.

Don’t Ignore Your Debts

People get into a bad to worse situation with uncontrollable debt because they do not pay enough attention to it. Once they are in a bad situation they try to escape it by ignoring it. Face up to your debts as soon as possible and take action.

Stop Taking on for the Debt

People don’t know when to stop. Just one habit like stopping to use your credit card can be difficult. Sometime a person may take more debt to get out of the previous one. But any compulsive habit that allows you to take more and more debt use your credit card can possibly even though you have an outstanding balance on the needs to be curbed.

The more you keep spending without taking care of your outstanding debt the longer it will take for you to become debt free and your debt will simply continue to go more and more out of control all the time.

Make a Budget

The importance of making a financial budget for your expenses and spending cannot be underestimated. It is a plan that helps you find your way towards using your income in the best possible way. Using a budget you will find that you do not squander your money on useless expenditures. Making a budget is the first step towards managing your money. A budget will help you make the best use of your income, find any leaks in your spending and help you put together a plan to get out of debt. The sooner you make a budget and have your finances planned out the sooner you will be in a more confident and secure position as far as your finances are concerned.

Living within Your Means

One of the foremost reasons why consumers in America find themselves with an uncontrollable debt today is because they have relied on credit to live beyond their means. They have been living beyond seven come using credit to supplement what they earn. If you wish to pay off your debt you will have to bring your spending while within your income. You’ll have to bring get well under your income so that you have money left over that you can use to pay off your existing debt.

Don’t Walk the Fine Line between a Want and Need

There is a fine line of distinguishing between what you want and what you need. Sometimes you may want something so bad that you may tell yourself that you need it. But this is only a matter of adjusting your attitude. If you have gone beyond your living expenses and find yourself in a position of surmounting debt, then it is time to stop walking the fine line between what you need and what you feel you want. Distinguish between these two different expenditures and you will find yourself in a much better place to save money. For example you need food, shelter, clothing, transportation. However, you probably want things like steak, designer labels, and a luxury car and so on. It’s very high time he took the core on which of the things are need-based and which ones are based on what you desire.

How To Make A Personal Budget Work

Learn how to troubleshoot your budget.

There is no point of having a budget to manage your finances or managing your debt if that budget is not working. Before you give up on the concept of a budget to help you with debt repayment you need to try and figure out why is it that a budget is not working for you.

A budget is an extremely strong financial to help you tackle debt. Here are some common reasons why a budget may not be working and how you can easily fix it.

Working with a Budget Requires Patience

Maybe you haven’t enough time for a budget is to have the required effect. Any landing that you have made in any changes that you are thinking about in your financial activity may take some time before you ensure result. The situation of debt does not happen immediately and improvements should not be expected overnight as well. If you keep a record of your debt and how you are proceeding to pay off the balance is you will be able to see the difference your budget is having better. This is

You’re Spending More Than Your Income

If you continue to spend beyond their means and the problem is not your budget it’s about your spending habits. One of the main things that a budget is supposed to accomplish is helping you to live within your means. Shape your budget to achieve exactly that and then allow it to do so.

You haven’t planned For Every Expense

If you have skipped out certain expenses in your budget then your actual financial performance of the month will go out of sync with what you a plan for. Go over your budget or more time to see that you have planned for all consumer expenses.

You Are Not Sticking to It

Before you become a master at budgeting your expenses and budgeting comes naturally to you, you have to follow the plan strictly. Do not make a budget and think that you can take it lightly in.

A Budget Should Be Adjustable

A budget should be flexible and not like a binding contract. Your budget may need to be adjusted from time to time special in the beginning when you have not really minus to figure out all your expenses. Certain events and changes in your life can also require budgets change.

You Have Not Been Accurate with Your Budget

If you have been inaccurate whether the figures that are provided in your budget such as your reported income, expenses than the budget will fail when you implement it. Sometimes people exclude certain expenses from a budget because they do not want to admit to themselves some spurious and reckless spending as a result of an impulsive spending nature.

TheMaking a budget is not about getting the latest version of the latest financial tool. What a budget needs most is clear thinking and honesty in making. Apart from that you really need is a piece of paper and pencil. Keep your budget simple list your expenses and your income. Don’t forget to add all expenses, include expenses that are not only on a month Lee basis but also ones that are on an annual basis such as house tax, taxes etc. Try to keep a record of which payments are semi-annual expenses or quarterly expenses or monthly expenses. Try to provide for these expenses in your budget so you can put away money for them at the earliest.

Use your budget to build an emergency fund so that you can rely on this month during times of emergency financial needs such as unemployment or medical emergency situations.

Why a Budget Is a Good Debt Management Tool

Usually when someone speaks of living within a budget one gets the impression that living like that involves constraining you suffer the points that all your needs and wants are strangulated. People think they will have two go over innumerable numbers and figures in order to calculate the living expenses and have to go without any and all luxuries. Making a budget is not about surviving in candlelight and eating mashed potatoes. A budget is simply a plan. And like any other well-made plans a good budget plan promises success. You should put away all negative thoughts that you have about budgeting in your mind and fight for yourself if you haven’t done so already.

A budget makes life easier because it helps you plan in advance for expenses. If you are second-guessing your expenditure every month wondering if you will be able to afford general expenses while paying your bills at the same time you can take the guesswork out of the picture by making a budget. A budget will allow you to list all your expenses and pit them against your total income. You will put yourself in a position where you can evaluate how short you are falling off your monthly financial requirements. This will allow you to make adjustments before disaster strikes. You’ll be able to make contingency plan before you are faced with a situation of getting late or delinquent on your bills.

A budget is a great tool for managing your debt. How else can you manage to reduce your debt if you are not going to have a closer look at your expenses and your income? Putting away more of your income towards reducing your debt needs that you may need to cut down on your expenses or increase your income. Either of these things will not be possible without making a budget. Making a budget helps you take an inside look at your expenses because many times you may have expenses that you don’t even realize. It will make you see how you can save hundreds of dollars every month this by cutting down on a cup of coffee. People make instinctive purchases without even realizing it. Simple objects in life that one could have very easily gone without buying add up to hundreds of dollars every month. Putting expense in perspective and seeing how much you actually need to come up to become debt free is the first step towards becoming debt free.

Going about reducing your debt without a budget is like wandering about the countryside without a roadmap. It may take you a long time to find the right direction while you find yourself to be lost most of the time.

Making a budget brings your total amount of debt also in perspective. You will be able to calculate how much money you need to become debt free and how you can come up with it. You will be able to figure out house you can make the most of your current income and come up with a maximum amount of money to be devoted towards paying off your debts.

How to Stay Self-Motivated to Pay off Your Debt

Getting out of debt can be a time-consuming process. It can take patience and determination. As with anything else that takes time and requires commitment and grit paying off your debt is also something that you may need to certain motivation for from time to time. If the burden of debt is huge and it’s becoming a lengthy process you need to keep encouraging yourself are reminding yourself of the progress that you’re making. When the balance of debt is high your initial efforts may not seem to be making much of the difference. In the first couple months your burden of debt may loom just as much you as before.

A good practice to keep your self-motivated is to keep a record of your payments and the reducing balance in your debt. As we mentioned before the first few steps in making a plan to get out of debt involves calculating your total debt and your total income. As you begin to make payments on your debt, start writing it down somewhere. Write down the amounts that you are paying as well as the balances as they go down. This way you will know and have an opportunity to see that you payments are having a desired effect. Put up your reducing balances on a piece of paper that stick on a soft board in your room or on the refrigerator where you can see it frequently and be proud of the fact that you are making an effort to becoming debt free. Set a deadline for yourself in which you want to pay off all your credit cards. A deadline is a motivation for many. Knowing that something had to get done in a fixed amount of time can make you divert all resources that you can towards achieving it.

It is important to stay focused towards your goal. If you have decided to make a certain amount of money towards your credit cards then make these payments every month. Do not reduce the money in a month because you have decided you want new luggage. Do not reduce the payments because you have managed to pay off one of your credit cards. Shift the payment from that credit card to the next one that you need to pay off.

Another great way to stay motivated is to use the lowest balance method of paying off your credit cards. This method involves paying off the credit card with the least amount of balance first while making the minimum payment on the rest of the credit cards. Because you’re starting with the credit card with the minimum balance and working your way up to the next consecutive high balance you will pay off your credit cards faster. While this system will cost you a little more and take longer than the’ being card with the highest interest’ system, it can help you stay motivated as you pay off your first few credit cards quicker.