Your Credit History

We have already revealed how your credit history makes up your credit score and thus is usually the main indicator in determining your credit worthiness. So this would tend to lead to the conclusion that all of your credit history in particular the last 7 to 10 years would be what is of concern. While this is true for the most part, what is even more important is your last year or two with regards to your credit history.

The reason is simple, lets say that 5 years and beyond you had some really bad financial mishap and you where not paying back credit cards and other things to negatively affect your credit. Then the last 2 years you have not only cleaned up your bills/ late payments etc. To add to this argument lets say you also got a good job. You can see that a creditor would probably see that your situation has changed considerably from years back and thus you would probably gain more favor. Even if you have had something considered really negative such as a bankruptcy, this too can often be overlooked it your situation now has greatly improved. Now you probably will not be given the best rates available, but it could make a few points difference in interest or even make the difference of obtaining credit or not period.

This also common sense approach also is true for any bad credit points you have on your report now. Do not give up hope if your credit just looks too bad. If you can fix things up the next year or so it could look very good on your credit history. There have been situations where someone has had to declare bankruptcy but after this point, they have really worked on cleaning up their credit. After a year and half, they where able to obtain a small loan for a car. They where diligent in making the payments which in turn helped their credit report. They then where capable of putting their car up as security towards more credit for other things in life. So don’t give up if you currently are challenged with regards to credit. Start good credit habits and you can help turn things around in less time than you may have realized.

This same principal can be allied to outstanding debts. Debts you have obtained from years ago may not affect your credit report quit as bad as recent ones. Although it is ultimately your responsibility for paying back the money you owe, paying off the more recently obtained debts is often advised due to this reason. But don’t be fooled, old debts can still haunt you and if you where for example looking to purchase a house, I doubt any bank would issue you any substantial credit if you have old debts that have gone into collection still within the seven year window.


While bankruptcy may seem to be an attractive option if you are up over your head in debts, it isn’t necessarily the way you should go if you can avoid it. By declaring bankruptcy it will very negatively affect your credit for many years to come. Also be aware that bankruptcy does not clear you against all debts. Some of these that are not cleared away are child or spousal support along with fines. Also be aware that depending on your situation debts from taxes or credit card fraud may not be discharged and student loans are often not as well. You also usually have to pay a fee to file for bankruptcy. This can range in the $300 area.

Some other options you may want to consider is to reach a deal with your creditors. By letting them know your strapped for cash they may allow for more time to pay them off. This is true especially if you let them know you will probably have to file for bankruptcy otherwise. This is only an idea for unsecured debt, not secured such as a house. You may also want to contact a Credit Counseling organization to explain your situation to. Because everyone’s situation varies, in some cases it could actually be your best option.

Is there hope for someone’s credit after bankruptcy? Yes there is but the process can be slow. Often people have claimed bankruptcy and have obtained a house 2 – 3 years later with a loan. This is especially true if you can put a decent amount down and have a good enough job to make the payments. People can also usually obtain some kind of credit card as well. The rates you make will be higher than other people but there are cards out there that will be available to you. The main thing is that if you have filed for bankruptcy and want to obtain credit in the future, is to start rebuilding your credit. I would recommend reviewing your credit report and make any necessary objections to it if needed (credit repair), live within a budget and slowly start trying to rebuild your credit.

Debt Consolidation / Loans

There is debt consolidation and there is a debt consolidation loan. They are similar but also a little different. The terms may be used somewhat interchangeably. But basically debt consolidation is the bringing together all of your debts (the ones that qualify anyways) and putting them into one bill to pay off in what is usually monthly installments. The benefits are that you are way less likely to forget that particular payment since it is only one to remember. Also, combining them makes budgeting easier and you can reduce interest rates in some of the higher interest bills with certain programs.

A debt consolidation loan is essentially a bank or financial institution lending your money in order to then go and pay off all of your bills yourself but then you owing just the bank money in what basically becomes a bank loan. If you are able to provide the financial institution collateral you will obtain a secured loan and thus receive a better rate of interest due to the risk associated with it now is very low since in the worst case, the financial institution can re-possess your collateral and put it up for auction in order to repay what you owe it. An unsecured loan is one where there essentially is no collateral and as such, your interest rates will most definitely be higher due to perceived risk of default.

A form of collateral that many people choose to use is if they own a house. It is an excellent form of security that banks/ financial institutions love. A bank will have no problem lending out $20,000 for example on a house worth $200,000. It is always a win – win situation for them. They will earn interest on the money they loan out to you and if you default and do not pay it back then they get to keep your house. If this kind of loan interests you, go and talk to your bank or where you have your mortgage or where you deal with. Also I should point out that obviously the bank will not put itself into a situation where it could lose money (well not usually and lets not get started on the sub-prime disaster of a few years ago) If your home is valued at $200,000 on the market but you owe $180,000 still on your mortgage, don’t assume the bank will lend you the remaining $20,000. Remember they will only loan what they feel is a safe amount against its value after what you still owe on it.

A financial institution will also want to insure to the best of their abilities to account for possible real estate market down swings and any other issues to insure that in the worst case scenario they would be able to sell it quickly. Banks do not want to be caught up in the real estate market or any other selling of collateral. They simply want their money back asap if someone cannot make payments. This does not mean that they will simply repossess whatever security you have put up a day after you where to miss a payment. They would go through a system of most likely several missed payments and contact you several times etc. To be sure always read and discuss any of this information with your financial institution.

Getting Out of Debt

If someone is in debt to the point where it has become a burden, they already know they would like to get out of debt, you don’t have to convince them. In particular, I am referring to credit card debt not so much a mortgage. When debt begins to erode away at your financial health it becomes a disease, where it consumes more than it was ever intended to do. It is not good for your overall health either, debt can contribute to worry, stress etc. Some people even have trouble sleeping when they are being consumed with it and can’t seem to find a way out. What they may not know however what they should actually do in order to do so. But there are ways and methods to help reduce it and live within your means.

The reason why a mortgage is not as much as a stress as credit cards is because with a mortgage, one is typically investing their payments. Someday they will hopefully have paid off their house and then they will have something that is worth a lot. Credit card payments however are not the same, perhaps you have spent money on clothes, eating out, electronics etc, things typically not associated with an investment. Often after a short while many of these consumer products purchased are only worth dimes on the dollar in what someone could actually sell them for. A house however tends to keep its value and actually goes up. I say this is generally the rule because we all know that it is not always the case. Credit card debt however is really the dagger you need to look out for.

The reason credit card debt can be so damaging is because of the interest charged on overdue payments. If you pay off your credit card bills each month, than you don’t have to worry about any kind of interest charges. Where the trouble begins is making partial payments or worst of all, the minimum payment. Lets for example the interest rate is 15% (this amount can vary and also be warned that cash advances usually carry a higher rate). With this 15% lets assume you owe $8000 and you make only $200 a month payment on that amount. Assuming you do not accumulate any further debt, it will take over 4 years and you will have paid over $3000 in just interest charges. Bump that rate upto 18% interest and you will take over 5 years to pay it off and have paid over $4000 in just interest. Also studies have shown that people typically will spend more if they are using credit cards over cash or a cash equivalent. It probably has something to do with paying for it later and not actually seeing the money. But knowing this can help you to spend less if you are needing to do this.

If you are spending out of control and are stuck in a whirlpool of debt, you may want to see a financial counselor. They can help you implement a budget that you should be able to stick to as well, they could provide some debt consolidation or debt settlement options to further assist you. The services that exist out there range in fees and what they deliver. There are also non profit businesses to help you but non profit still may have fees associated with them. They are just not actually making a profit from it.

Your Credit Score

Credit Scoring is kind of like a report card. It is a mathematical formula based on how you have paid your bills, what you are still owing on your bills and other financial information all related to your credit. Most every bit of information that is created when you use credit either creates a negative or positive point. Some will actually end up being neutral towards your actual score. Your score is derived from your credit history and converted into a number. This is done so that creditors can process your risk quickly and fairly accurately. Your score has become the basis on what most credits will consult before lending. The reason is simple, if each creditor actually had to read through your credit history, they would have to come up with their own assessment.

This would be very time consuming as they may deal with several different people each day. Instead with a simple number that credit bureaus create for you, your credit worthiness can be assessed almost immediately. However, this doesn’t mean that a credit will only consider your credit score. They may consult your credit history for what they may deem as more important for their business. If your credit score is not where you want it, companies like are there to help raise it and get you back on your feet.

While your credit score is very important, it doesn’t necessarily tell the entire story for a potential creditor. They may wish to find out more specific information relating to your actual financial practices. Some examples would be perhaps you are in a smaller town. Word of mouth, whether reliable or not, may play a bigger role in someone’s trust. Some creditors may also grant you more favor if you now have a good job and decide that is a more important factor than whether you paid off a few bills late a year or two ago. Other determining points of interest could be someone’s age or overall wealth and other factors. However it is illegal to discriminate on someone’s ethical race, sex, religion etc, unfortunately I am sure occasionally it happens. For this reason if you think you are being treated unfairly due to one of these factors, you may want to go see a different creditor.

If you are denied credit, your creditor is legally obliged to release the information as to why you where not granted credit if you want to know. They do not however have to release how exactly they determine their own scoring technique. The reason they have to at least let you know the reason why you where denied is because there is an act called the Equal Credit Opportunity Act (ECOA) stating they must. This actually favors both the lender and the consumer because it lets you know what you can improve in order to then in the future reapply and be accepted. It helps the lender because then they can lend out money/credit and thus earn interest on it.

The term credit score has become synonymous with FICO score. FICO stands for Fair Isaac Corporation. Your FICO score will range between the numbers 300 and 850. The higher your number is, the better your credit score is. While it is subjective, if you have a score of around the 650 mark and above, you have a pretty good credit score and will have relative favor in obtaining credit. Each credit bureau will have a FICO score for you but they will not necessarily be the same due to issues discussed on the home page of this website. Each bureaus may refer to their score as the following:

Trans Union: EMPIRICA® Score
Experian: Experian/Fair Isaac Risk Model
Equifax – BEACON┬« Score

How is your credit score calculated?

Payment History makes up 35% of it. This includes issues such as how well you paid off your previous debt/credit. Did you pay them late? Any overdue payments? Any bankruptcies? Wage garnishments?

Length of your Credit History accounts for 15%. How may years have you been obtaining credit for? If you are new your level of trust will be lower than someone who has several years of a good credit history.

How much new credit have you obtained 10%. How many new credit accounts have you opened recently? Have you made many inquiries? Opening several new accounts will be seen as a negative where as if you have already several open and are paying them back well it will not necessarily be.

How much you owe accounts for 30%. How much are you in debt to your current creditors? By keeping the amount you owe on your credit cards in the lower third of your maximum looks much better than if you are close to being maxed out on them.

The types of credit you have obtained already accounts for the last 10%.

Again, while ones credit score is not the entire story to ones credit, it represents an easy number for creditors to refer to. Generally (these numbers are plus or take) these numbers below can be a fairly decent representation of how creditors will see you.

A credit score of:

> 720 is an Excellent Score
660- 719: Very Good
620- 659: Fairly Good
< 600 is usually considered bad credit. About 75% of people have numbers between the 600-800 range.

Tips on Debt Settlement

While settling any outstanding debt is a good place to start when trying to improve your credit this in and of itself will not necessarily do what you think it may. If you have a debt outstanding and you are likely unable to pay it off due to low financial resources, you can attempt to deal with our creditors. There is actually big business with debt settlement. There are companies willing to go up to bat for you with attorneys or just qualified people who can help settle on a lesser amount than what you would otherwise need to pay. Whether you decide to deal with your creditors yourself of hire a professional service is up to you but if you do it yourself you need to take into consideration this important point.

Settling your debt will not naturally improve your credit rating. This is because just because you have come to a deal with your creditors doesn’t mean that they will not give you a negative point on your credit report. After all, you just caused the to lose money on you. What could be achieved however is that in your dealings with your credits you make part of your terms that a negative point is not placed on your report.

Debt settlement is a practice mostly used when someone cannot pay back what they own on any unsecured debt. For example, if you went to a department store, signed up for their credit card and purchased something and then when you received your bill a month later realized you could not pay for it, well you cannot squeeze water from a stone. Or in this case pay back something if you don’t actually have the money. What can be done in these situations is to reason with the creditor that you can only pay back whatever percentage.

In this case let say 50%. The reason is simple in that if the creditor realizes you may go bankrupt then there is no way they will get any money back so making amends on certain amount is better than nothing. The practice of debt settlement is a bit of an art because you are really just trying to reach a deal. If you are good at dealing than you will reach a better deal than someone who is not. One also better understand the various laws and acts surrounding this before they try to deal because you don’t want to end up getting trapped.

If you want some debt settlement tips, here are a few:

– Don’t take their first offer, be persistent and patient with them, if you really cannot afford something you really have to push this across to them.

– The older the account is usually allows for more bargaining room. The newer ones are more difficult.

– First contact your creditor with a letter in the mail. Allow them then to phone you in response to your letter.

– Never get too eager or thrilled to be settling your debt, in doing so they will know you will settle at a greater amount.

– Do not provide other financial information they may ask you about, stick to the topic.

– Try to get them down to close to 50% then give them a day where you can think it over before you call them back. It is then during this call the next day where you insist your credit report is not touched. A settled payment on your credit report looks really bad.

Get them to provide a written letter that your account is reported as paid as agreed so that you have proof that nothing negative was added.

Budget realistically and repair debt

Credit Card Secrets and Your Credit

There are a few secrets when it comes to Credit Cards. Now while some issues are secrets for some and common knowledge for others, I should at least first cover some of the basics. I hope it is only a secret to very few people that credit cards charge a terribly high interest rate on any overdue payments as well as any cash advances. These high interest charges are the worst most have ever seen. Because of this, you should always do your best to pay off any credit cards as soon as possible or you will end up owing considerably more than you ever thought you could. The minimum payment or even paying just over this amount will end up stinging you badly in the longer term. This being said, be aware of it and don’t overlook it. However there are a few less common tricks that can be done in order to obtain more credit while not necessarily advised.

One method is what I like to call the blitz method. This is done by going to every bank and credit institution where you can apply for a Visa or Mastercard. Then obtain an application for each and every variety of these cards you can through the different institutions. Then depending on where in the country you mail them into, you try to time it so that all the applications reach their intended targets on the same day. For example, if you live on the west coast, you would mail the ones going to the east coast first, wait a day, mail the ones in the mid west, then the next day mail the ones to the middle of the country and lastly to the west coast. While it may not work perfectly, there is a high chance that many applications will be received on the same day and you could end up receiving as an example $12,000 in credit instead of $1000.

There is also a trick that can be done with a secure credit card. A secure credit card is one where there is money put up front so that any money that is spent on the card has already been deposited onto it. This trick will end up showing that someone is more credit worthy than they really are and as a result a bank would end up providing more credit to you. Here is how you do it.

You obtain a secure credit card. To begin with lets say you put $500 onto it. This is your credit limit for this card. Then you withdraw $500 from the card in cash and put it into the same bank account that you used as collateral to obtain this card. You now would have $1000 in your bank account. The bank will report this to the credit bureau which in turn will raise your credit limit on your card to $1000. You then keep doing this $500 withdrawal from your card and putting it into your bank account. Do this until your monthly payments have gone as high as you want and you could reach for example a $6000 credit limit. However it will be considered charged up because you will owe this still. But what a creditor will see is that not everyone is offered a $6000 or $10,000 or whatever you managed to raise your credit card limit to. Since you also have make payments each month on the amount owing you may very well gain favor in a creditors eyes.

Your Credit Rights

Government has implemented various consumer credit rights to help protect each and every consumer from credit bureaus business. These help to not only keep the consumer safe, but also help to keep the credit bureaus honest and in good order. Knowing them is very important when trying to do anything yourself with regards to your credit.

– According to the Fair Credit Reporting Act, you can obtain a free copy, from each of the three credit bureaus, of your credit report. You have to request this but you can do so once every 12 months.

– If you have been denied credit you can actually send a rejection letter to the credit bureau that holds your report that your potential creditor used and receive one within 30 days.

– If you feel anything on your report is inaccurate, you can dispute it and by law the bureau in question must within a reasonable amount of time re-investigate it in order to try to resolve it. These could be issues like late payment records, judgments, bankruptcies, charge offs, tax liens or anything that was an outright mistake being there.

– You can have negative points removed on your credit report after seven years have passed. In order to have a bankruptcy removed, you will need to wait 10 years. This gives you a lot of incentive to forget the past and strive towards the future if you have had some major credit problems in the past. There can be hope at the end of the tunnel.

– You can have a credit bureau contact the potential creditor that denied you credit because of having misleading or erroneous information on you. They then can report the correct information all free of charge.

– If you are wanting to block your credit report information from someone or a company that has no legal requirement for it you can do so.

– You can rightfully sue any credit bureau that has done anything illegal with regards to your credit report.

Also feel free to get in touch with the Federal Trade Commission whose responsibility is to keep an eye on credit bureaus if you feel you are being mistreated.

While these are some of your more basic rights, you may feel more comfortable hiring a credit repair firm to take these issues on themselves. If however, you have found some issues with your credit report and want to tackle them yourself, do so only a few at a time. Don’t for example go and fight 10 inaccuracies at once. You will get further doing at the most three at a time. Also be prepared for things to take several months. This kind of thing usually isn’t solved immediately.

Some Credit Repair Facts

– No one can legally remove 100% correct, and timely items on your credit report. Just because you may send a letter or have a company on your behalf challenge it will not remove items that have been placed there completely and accurately. The only issue this brings up is that there are times where the information is not completely accurate or that it is old enough to be removed.

– Credit Bureaus are NOT branches of Government. While it is a common misconception, and many people are shocked to hear, Credit Bureaus are public companies that you can buy shares in on the stockmarket. They make money by selling credit information on people to potential creditors. These credit reports have become the key piece of information that creditors will refer to when lending out money.

– A legit Credit Repair Company must provide you with a copy of the ” Consumer Credit File Rights Under State and Federal Law” prior to you signing any contract. You must also see your rights and obligations to explain everything. If you have any questions, ask them or ask someone you know that could perhaps explain it better.

– Not all creditors will view your credit report/ score the same way. While your credit report and score tell a story of your past credit, they can be interpreted slightly differently by individual companies looking to lend you credit. If you don’t like what you are being offered, consider looking elsewhere or see if they can budge at all on any offers.

– Non profit organizations created to help you are not necessarily free of charge. Just because they are non profit, they still may not be affordable or even credible.

– Bankruptcies can be removed from a credit report. If they are incorrectly reported in any way or if they bankruptcy happened 10 years ago.

– You can take on the task of improving your credit report yourself. After obtaining your credit report you can write a letter with all supporting documentation to fight any inaccurate information. The consumer reporting company must by law investigate it within 30 days and get back to you about it. However if your claim is complete foolishness you may not hear back.

– Too many inquiries into your credit report can actually hurt your score. But don’t be too caught up in this, one or two will not do enough damage to make any real difference but if there are multiple ones over a short time it can indicate to creditors that you are, in a sense, frantically seeking credit which can flag a warning to them.

Credit Repair

You may have heard of the terms credit repair, credit score or credit report and know all about what they mean and do or perhaps you are like many people who really have no clue on what your credit score, credit report or what any of this even is. That is the goal of this website, to help educate you on these topics and to help you realize that you can in most cases actually do something about it in order to improve your credit score and thus the interest you would be paying on certain loans or credit.

The truth is that there are indicating factors that help to determine how much a creditor will lend you and the interest they will charge you. But it doesn’t stop here, your rates will vary from other people’s, either for the better or for the worse based on these. Not everyone is offered the same rate of interest on lets say a mortgage or a car loan. As a result, the people charged less may end up paying thousands of dollars less over the course of their credit or loan.

Have you ever tried to receive financing for something such as a car, house and been surprised as to how expensive your interest rate would be? Like many people your credit score may be low and causing some added interest charges that you would rather not see. The truth is, that most people have some kind of flaw or imperfection on their credit report. This can easily be the case because unless you have always paid everything on time and have actually taken out a fair amount of credit in the past you will have something negative against you. These negative points then in turn are suppose to indicate what risk you are for loaning money to.

What is unfortunate is often a low credit rating can not only affect your own financial self esteem but make creditors judge you by it. But it may not really be your fault. Let me explain, you may have paid off your bills on time for years and maintained a great record but an unexpected job loss, medical trouble, or horrifying bill that insurance does not cover etc. As a result these issues take front and center stage and must be paid off and as a result, you may start to slip on credit card bills. One thing leads to the next and you have a bit of financial trouble that further impedes your ability to obtain a decent interest rate on any credit you wish to obtain.

A credit report has information added or subtracted to it by any qualified creditor and credit bureau. There can be many points and from many different companies all contributing to it. This all happens without you being aware of what points are even on it. Since there can be multiple entities using and changing issues on your credit report there can come conflicting information, inaccurate or outdated points, details that should have been removed, even issues that can legally be removed. It is actually quit surprising how many people think that their credit details are all in line and end up being skewed. In most cases your credit report can be improved or repaired as you will. This can end up saving you thousands and thousands of dollars down the road. Read more on the Ethics of Credit Repair.

Unfortunately the term Credit Repair Companies has taken a hit from unscrupulous fraud companies. This in turn has hurt the industry name. But there is a way to help protect your information and money when it comes to dealing with a business that deals with fixing credit. I would recommend looking up their business name with the Better Business Bureau (BBB). See how long they have been operating, not that a new business is necessarily unsafe, but established ones often give peace of mind to their users. Also read any complaints, see their BBB rating, this usually comes in the form of a letter grade, A+ being the best and F being the worst. Also if a business promised that they can repair your bad credit within days, be very suspicious (But not referring to bad credit loans, these are possible). Repairing your credit can take several months in reality to make a significant difference. Also never be suckered into believing they can only do this for you “now” and not tomorrow. Don’t fall for any pressure tactics or you may very well be falling into a trap. Other ways to lessen the chances of being lured into a scam is to ask to see the companies business license, and contact the licensee office and ensure they are in good standing. You can even contact the State Attorney Generals office (American citizens) and ask about the company. This information is not here to scare you, but just inform you.

Here are some Credit Tips that may help you in better understanding how credit and repairing credit work. Your credit report can be changed. The Fair Credit Reporting Act not only states but necessitates removal of any item that is not 100% accurate or that cannot be verified in an timely manner. The Fair Credit Reporting Act was actually created by congress for protecting consumers from credit bureaus. Even bankruptcies can also be removed if even slightly inaccurate, obsolete or cannot be confirmed. A bankruptcy can also be removed regardless after 10 years, but isn’t necessarily done so automatically by a credit bureau. Also be aware that a credit bureaus is not a government authority, they have no legal authority, they are private companies creating a profit by selling credit information on you to creditors. Also be aware that Simply paying a past overdue debt will not remove it from your credit report. While this is a good move, there will still be a record that at one point in time you where failing to pay back what you owed. This however can be fixed and removed. For more information on these issues see the left hand side of this website and click on what interests you.

When it comes time to do your taxes don’t overlook Registered Tax Refund Agents. There are often little issue with your taxes where you could have had more money returned. Not knowing up to date tax laws can end up costing you money.