Repairing Bad Credit to Purchase or Refinance A Home

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Consumer Credit Counseling Service - Interview with an expert
Educating consumers about debt is one of the missions of the Consumer Credit Counseling Service. Recently, EconSouth talked with Boas about her organization and about the state of consumer debt today.

EconSouth: How did you get into the credit counseling business?

Suzanne Boas: I spent 16 years at the retailer Macy's South as vice president of credit and consumer affairs. Tha... Read credit counseling article



Bad Credit Home Loan To Get You Out Of Debt
A "bad credit home loan" can help you climb your way out of debt and get you started back on the road to upstanding, good credit. There are many lenders who are willing to make bad credit home loans to you - a loan based on your equity in your home even if your credit has slipped or isn't as perfect as it could be. By taking out a bad credit home mortgage or home equity loan, you can consolidate a... Read article



Repairing Bad Credit to Purchase or Refinance A Home
Your credit report and credit score makes huge differences in your life, and in your finances. If you have a great credit score, your home, car, insurance, and more will cost you thousands less because you are deemed "credit worthy." If you have poor credit, you can be denied a home loan, refinance, and even auto insurance. Yet, most people have absolutely no idea what is necessary to improve their own credit score to accomplish their goals. If you follow these tips, you are sure to see your score improve.

1) Avoid Fee Credit Repair Services

Everyone has seen the credit repair signs on the side of the road and the advertisers online promising to fix your credit - for a fee. Although there may be reputable credit repair specialists somewhere, I have never met one, and I have dealt with many "credit repair specialists." If you choose to enter into a contract with a "credit repair specialist" you will likely hear from them only once per month - when their service fee is due.

However, there is quality help available. Find a Realtor or Mortgage Broker who specializes in credit repair. The beauty of this arrangement is that your Realtor or Mortgage Broker will not earn their commission until you obtain the credit score necessary to purchase a home or obtain the refinancing terms you want. You will pay for results, not promises.

2) There's No "Magic Bullet"

These same "credit repair specialists" will try to sell you on their own "magic bullet." They will claim to have found a loophole in credit law that either: 1) Allows them to successfully dispute your collections and have them erased - or- 2) Dispute the manner in which the collections were filed in order to have them erased.

Creditors typically are in the position to loan money because they are very organized, have long memories, and are up to date on credit law. It is possible to dispute credit charges, and it is possible to have legitimate collections removed from your credit report. However, this has one BIG problem: The collections will reappear on your report within a few months.

Your "credit repair specialist" may dispute your charge, at which time the creditor has 30 days to respond. If the creditor does not respond within 30 days, the collection is removed. However, as soon as the creditor's reporting cycle again lands on your file, it WILL be reported, and it WILL reappear on your report. This is why you may find someone who claims to have had a good experience with a "credit repair specialist." If you speak with the same customer 2-3 months later, they won't have the same praise.

3) Borrow Money

This may seem counter-intuitive, but it's absolutely essential. If you have bad credit, you will have to re-establish good credit in order for your score to go up. The only way to establish good credit is to borrow money. Borrowing does not necessarily mean putting yourself into debt. Do you need to purchase something from Best Buy? Put it on your Best Buy card. Do you buy gas on a regular basis? Apply for a new gas card and use it. Groceries? Use a credit card. The key is to maintain the same level of spending but to increase your use of credit.

4) Pay It Back On Time

Now that you're borrowing money on a consistent basis, you have to pay it back in a timely fashion. If you don't pay your bills on time, your score will go down - and fast. Timely, in this case, means no more than 30 days late. That's the good news - just because your credit card company charges you a late fee doesn't mean that they've reported you late to the bureaus. Make it a habit of paying ALL your bills on the same day of the month - that way you only have to go down the list once and you'll ensure that you avoid any late fees, and any 30 day lates.

5) Decrease Your Revolving Credit Balances

If you already have credit card debt, you need to take a hard look at how it's distributed. Ideally, every card will be below 35% of its limit, but it will also help you quite a bit to keep them under 50%. You can accomplish this a number of ways. If you have money in the bank, pay the cards down - there's not a savings account in the world that will pay out the interest your creditors charge you. If you don't have the money to pay the balances down, ask your creditors to increase your limit - oftentimes, they will. Finally, if you have one card maxed out and another with a low balance, transfer some of the balance from the maxed out card onto the low balance card - or open a new account and transfer part of the balance there.

6) Open a New Revolving Line of Credit - Or Two

If you don't have any revolving credit (credit cards) then it's time to open two accounts. If you have credit cards in collection, then you will probably have to get secured cards. A secured credit card will require that you deposit money with them in order for you to receive a credit card. This will feel like a debit card, but it's not. If you deposit $300 with your bank to receive a $300 line of credit, you actually have two separate accounts. When you charge a balance to your line of credit, you will have to pay it back - the funds will not be deducted from the initial $300 you deposited. After you've opened your two lines of credit, use one for groceries and another for gas. Gas and groceries are two expenses that almost everyone has, and that almost no one will increase their spending on just because they are able to.

7) Buy a House

If you don't already own a home, you are probably working on your credit in order to purchase your home. However, be very aware that your credit should skyrocket after you've made 4-5 mortgage payments on your new home. This means that you shouldn't worry too much about your interest rate - you should worry more about getting the approval on your home. Avoid a pre-payment penalty on your loan, and plan on refinancing your higher interest loan for a much better monthly payment about 1 year after your purchase.

Credit scoring can seem very confusing and very intimidating. Unfortunately, there are a lot of uneducated professionals who claim to understand the scoring models but don't. Find someone who specializes in credit repair and who has a vested interest in the success of your repair program. Follow these tips, give it some time, and watch your scores increase!

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Easy Credit Options For Business Start-Ups

If you have a business idea in mind and require funds to transform the idea into a reality, there are plenty of options available in the market. Careful study of the options is however, essential, as any hasty decision could land you into a financial mess. Therefore, gaze your requirement well and compare the available options to check which one would best suit your necessity. Given below are some popular credit options and various pros and cons related to them.

Credit Cards: Credit cards are the most popular credit option available in the market. You can use them for almost all the purposes from paying your grocer's bill to booking tickets in an airline. When a credit card company issues you a credit card, it sets a specific credit limit for you after verifying your income details and various other factors. You can go on borrowing until your limit extinguishes.

You must however shop for a card that has low interest rates and additional features such as reward points or cash back facilities.

Home Equity Loans: These loans are among the favorites of the tax payees, as they are cheap, easily available, and offer tax deductions on the interest component.

In such an option, you can avail of a loan against your house (on ownership). It is a very good option because of the prevailing low interest rates. People, however, take such loans for granted and repay them leisurely, which offset the advantages that you would reap if you repaid fast.

Retirement Funds: You should use these loans only when all other options are closed. Interest on such loans is not tax-deductible. If you fail to repay such a loan within the stipulated time (mostly five years), you are charged with heavy penalties and taxes. Moreover, if your resign from your duties at office, the employer holds the right to call such a loan full, this can cause financial distress.

Life Insurance: You can borrow against your life insurance, if you have a whole policy. Here, you have the option of not repaying. However, it is wise to repay, otherwise, the loan amount is deducted from the benefits payable by the insurer to your beneficiaries.

Credit Unions: It is wise to borrow from credit unions, as they offer very low interest rates and fees. If do not belong to such a union, check with your employer, if you can join one.

Whichever option you choose, make sure that you negotiate with your lender well to get the best deal. In case, you are considering borrowing from friends or relatives, obtain all the terms and conditions in writing to avoid hiccups later on.




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Repairing Bad Credit to Purchase or Refinance A Home
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