Monthly Archives: January 2016

34Your credit history is also a fundamental determinant of your overall score. Therefore, you should repair it appropriately. Your credit history is divided into categories basing on the data used to calculate your credit score. These categories can guide you to correct your credit history comprehensively enabling your credit repair process to be successful.

Check Your Credit Report Keenly
Begin your repairing process by thoroughly checking your credit report. This checking is meant to identify any errors that affect the score significantly. Ensure that there are no incorrectly listed late payments and all the amounts owed for every one of your open accounts is correct. In case you identify any errors, you should immediately raise a dispute with the credit bureau.

Set up Payment Reminders
Timely payments of your debts contribute significantly to your credit score. Some financing institutions send an email and text message reminders enabling you to make your payments on time. Though you can enroll in automatic payments debited from your bank account to avoid late payments, it does not show a sense of good money management skills on your behalf.

Reduce Amounts of Debts Owed
Achieving this feat is easier said than done. Nonetheless, reducing your debts gives you a sense of fulfillment more than it helps in your credit repair process. First, stop using your credit cards and check all your accounts to determine how much you owe and how much interest rate each of your accounts charges you. Come up with a plan that allocates more money to the accounts charging higher interest rates and maintain lesser payments on the other accounts.

Payment History Tips
In the past, there was no legitimate way to track down the consumers' credit activities. Nonetheless, the Fair Isaac Corporation designed a credit scoring system that is known as the FICO score. Since the three primary credit agencies have distinct information on each consumer, the FICO score calculated by these agencies are not equal. Payment history contributes up to 35% to your FICO score calculation. Though they have this significantly high percentage of effect to improving your score, past instances of missed and late payments are not fixed easily.

You can start your credit repair by making sure that your delinquent payments are made on time. If you had late payments, you should avoid any late payments in future to impact your score positively. The timely payments with time will neutralize the late payments since your good payment patterns will show that you have significantly improved your credit management strategies. Always remember that even if you pay off a collection account, it remains on your credit report for seven years. Whenever you encounter a financial crisis, contact your creditors and legitimate credit counselor to restructure your payments to suit your lower income comfortably.

Amounts Owed
The amounts of debts you owe contribute 30% of your total credit score calculation. This category can be cleaned more easily than payment history though it will require you to have strict financial discipline. Since high outstanding debt can take a toll on your credit score, you should keep all your credit cards and revolving credit balances low. Moreover, you should pay your revolving credit instead of moving it around.

You should never close your unused credit cards to raise your score quickly since having them same debt will be fewer open accounts may significantly your score. Also, you should not open new credit cards that you do not intend to use just to increase your available credit. Though it may seem like a brilliant idea, the strategy may backfire and lower your credit scores considerably.

Length of Credit History
Financial experts advise that if you have been managing your credit for just a short time, you should not open new accounts too rapidly. If you open new accounts, they lower your average account age and it significantly lowers your credit score considering that you do not have a lot of other credit information. Moreover, having a rapid account buildup makes you appear risky especially when you are a new credit user.

New Credit
Always do your rate shopping in a restricted period since FICO scores differentiate between a search for a single loan and that of many new credit lines. To enhance your credit repair process in the long term, you can open new accounts in a responsible manner and pay them off on time. It is also advisable to order your credit report right from the credit reporting agency or from a consumer credit reports providing organizations that are authorized. Obtaining your report through any other way may affect your score.

In conclusion, you should fix errors in your credit score history to kick-start your credit repair process. Then, follow all the guidelines that will enable you to create and maintain consistent, good credit history. Nonetheless, to rebuild and raise your credit score, you will need patience and discipline.

d6THE FIRST THING TO DO

The first thing to do is to get a free copy of your credit report. By law you're allowed annually one free copy of your credit report from the three major credit agencies: Experian, Equifax and TransUnion. It's important to get all three reports from all three agencies to compare and contrast any discrepancies such as late payments, charge offs or delinquencies.

SET ASIDE SOME TIME TO REVIEW

Now that you've gathered all the information from the credit agencies, set aside some time to figure out where you went wrong with your credit and prepare to fix it. If there are any items on your credit report that are wrong or don't look familiar, file a dispute in writing. Even errors such as misspelling of your name, social security number or address could mean your personal information is mixed up with someone else. The credit agencies are obligated to remove any errors in personal information, which will help increase your score. The most highly used credit score scale used by the largest banks and lenders is the FICO score and generally a score of 720 and above is considered good.

MONITOR YOUR CREDIT REPORT

One important factor to raising your credit score is to make sure you pay your bills on time. While this may not seem important, 35% of your FICO score is determined by your history of payments made - whether you were late or current with your obligations. During this time of repairing your credit, you should prohibit yourself from applying for any additional credit, which may lower your score. If you have any other credit cards you don't use as frequently, use them to make small purchases every few months to help grow your score and pay the bill off in full. If there are any outstanding balances from other cards stop using these cards until you pay them off even if it's the minimum amount.

SEEK A CREDIT REPAIR COMPANY

If you don't want to repair your credit on your own, you can go through a company that specializes taking care of that task for you. Many companies advertise that they're the best and can help you clean up your credit within a short period of time. It's very important to do your research on various credit repair companies to avoid getting scammed. Ask friends or family about a reputable credit repair company they may have used. Be prepared to pay associated fees with such a company.

REBUILD CREDIT

If you're afraid to delve into the credit game after getting your credit score on the right path, obtaining some type of credit is key to rebuilding and keeping your good score intact. Look into getting a secured credit card, which is fairly easy to apply for. The good thing about a secured card is you put down a security deposit and whatever purchase is made will directly debit from the card. Managing the account properly and having this card reported to the three credit agencies will help maintain a good credit rating.

Once you get the secured card, don't go on a spending spree and reach your card's limit. You may have the idea in your head that swiping the card as much as possible will improve your credit score but it may look as if you're about to max out to the credit agencies. You will want to use about 10-25% of available credit from the card to have a favorable score.

e5CREDIT AND CREDIT REPAIR AS TODAY'S HIERARCHY

Credit is borrowed money used to purchase goods and services when you need them thereby ensuring some needs are met. Credit repair ensures your chances for accessing credit are increased by lenders. From the theory, Maslow identified five levels at which the needs must be satisfied.

At the bottom of the pyramid are physiological needs which constitute the most basic amenities for human survival. These needs are food, shelter, clothing, water and physical needs. Provision of housing may be through renting or buying. Landlords check the credit history of potential tenants thus credit repair is essential in ensuring the need for shelter is met. When buying a house through mortgage, a low credit score may mean increased interest rates by lending institutions reducing your chances of accessing the mortgage.

The second level of needs is the safety needs. Individuals are driven by the need to gain job and financial security, health security, family security and environmental protection. Financial security is gained through high credit scores due to better management of debt. When short listing candidates for job opportunities, employers check the credit rating of the future employee thus a higher credit score will increase your chances of job security. One can access better health amenities through credit and insurance.

The third level of needs is the social needs, need for companionship, friendship and belonging to a group. While not always the case, people tend to associate with success. Poor credit ratings may be viewed as a failure. One may find themselves shunned when the consequences of bad debts start being felt such as recalling of mortgages by lending institutions. In such cases, credit repair is essential to restore broken relationships for the individual to have a sense of belonging.

The fourth level of needs is the esteem needs. Closely hinged on social needs, they include pride, prestige, recognition from others, status and self recognition. Credit increases an individual's status in the society through achievements one may make using the availed resources. An example would be purchase of luxury items such as a yacht. Building a business empire using loans is another example that can only happen if one has a good credit rating. They give one status and good standing in the society.

The last level in the hierarchy of needs is self actualization. This is the need to be the best one can be by developing to their fullest capabilities and achieving worthwhile goals. Once all other needs are met, an individual is said to be self actualized. Career wise, family life, social standing and all other goals have been met. The individual may continue self improving on areas they feel need to be polished up.

w2Having a credit card (or cards) may not necessarily mean you have bad debts, I'm sure in this day and age, most adults carry one - everywhere. However when used without planning or management, having just one card can mean a huge financial issue in the long run.

So here are the top 5 TIPS on how you can utilize a Credit Card to your maximum benefit so that it works for you.

1. Don't Trust Self - Organize Direct Debits Arrangement

Once you get that "APPROVED" notification, make sure you get around setting up an account where you can easily have the Closing Balance direct debited from this account at the end of every month (or billing month). This account can simply be an everyday/ most basic account (preferably one that don't cost a monthly fee) where you can budget your Credit Card spend to. This way, you will never miss any payment due dates, and will never set yourself in that trap of irrevocable-cycle of credit card interest repayments.

For example, when you first sign up for a credit card, most of the bank offers an "X day Interest Free Period (e.g. 55 days)". This means you get to spend up to your limit (e.g. $1,000) for up to that 55th day. On the 56th day, you are expected to make the closing balance for that particular period. If you don't, you get charged the Purchase Interest Rate, which can range between 14% - 25% per annum. Now, this is charged and accumulated on day 56th onwards up until you can pay that down to $0 owing balance!

So - imagine this chaos for a minute; On that card, you have $999 owing balance. You are trying to repay $100 each week. But you have ongoing monthly contract linked to this credit card each month for your phone, internet, gas; yet that apparently-not-so-amazing piece of plastic is accumulating you 20% interest on the balance every day... Are you confused yet? Well that's how they get ya! Before you know it you are just stuck, simply stuck in this game of never ending money drainer.

The only logical way to salvage that icky situation is pretty much destroying the card, literally. So make sure you set up that Direct Debit. Pronto! Because you just can't trust self.

Guess what, it will probably force you to make sure you are aware of your money, so you don't go on spending on that credit card as unless you can afford to make the repayments.

2. Keep Your Limits Low

Just because you can get a credit card with a higher limit, doesn't mean that you should take it. Sometimes you can get carried away knowing how much you have in the balance and walking in that same trap again. Don't lead yourself into that bad habit.

Basically the way it works is, once the bank notice how good you have been with your money management - you know, with all that direct debit set up so you pay everything on time, on budget - they tend to send a "Good news!" notification - to congratulate you for the offer to be able to 'upgrade' to a higher limit.

Note to self, this is not really a 'reward', it's simply a nudge to say "Well done on being a responsible adult. We trust that you can manage your money so here's more money for you to spend, but remember you STILL gotta pay us back!" Get it?

3. Review Shopping Habits

Now - the fun part! Think about your shopping habits, do you go to specific grocery stores, shopping centre, cinemas or even specific fuel stations? Check if they have any Points Rewards Affiliates with the credit card company or vice versa. For example, most Credit Card Companies (Banks) have affiliate programs with Airlines - and if you use that card in certain fuel stations/ grocery stores - the points are doubled!! So if you're anything like us jet setters, or love a free or even half-priced holiday; make sure you abide to that rewards program!

It really is a no brainer - you need to spend on those groceries every week anyway - might as well earn some travel points on them!

4. Don't spend it on Doodads

There should be a separate account for this.

If you aren't familiar with Robert Kiyosaki and his famous game, the Cashflow Game, then you probably don't know the term 'doodad'. Doodads in this instance means, gizmos/ gadgets that are nice to have but you don't necessarily need.

Don't get me wrong, of course you can have your 'nice' things - like your dream home theatre, or that plush armchair you've been eyeing since your cat invaded your favourite chair. But! If you manage this right, you should have a "reward/ gift" savings account set up for you, partner and/or cat, so you don't have to dip into credit card debts.

Just don't get into bad debts if you don't have to.

5. Create, Maintain, Destroy

Who doesn't love having a Credit Card? I have 2, I think my dad has about ten (10) times that, purely because he loves points hoarding. Oh plus where he lives (Indonesia), you get discounted meals (50% off each time) if you use specific credit card in that restaurant. #winning

But like I said before, once you stepped into that 'never ending money drainer' game (even if it is an accidental move) - you gotta let that go.

If you can't maintain it - for some reason you are not able to make repayments on those Interest Repayments then you have to stop using the card. Ring up all the providers to cancel any bills linked to it and destroy the card, whilst you try and pay it off to zero.

Once you have paid it all off, you may reapply for another card down the track. Just so you can start from a clean slate! Yay hooray!!

NOTE: We created an awesome budgeting course to master your finances, plan your bills and expenses - easy to use and brilliant (if we can say so ourselves) - definitely one that you can call your doctrine.