“Why Your Credit Score Really Matters - In Ways You Might Not Know - And 6 Ways To Improve It”
July 24, 2008
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According to Yahoo, “Improving Your Credit Score” was a real mover and shaker for searches this week. No need to search, Ill give you some pointers right here…
Why Does It Matter?
Most of you know that a low credit score will hurt you on mortgage, car and credit card interest rates. But did you know that a low credit score can hurt you in other areas, too? Such as…
- Car and Home Insurance
- Getting a Job or a Promotion
- Utility Deposits
- Cell Phones
- Some Medical Procedures
- School Loans
- Your Marriage
6 Ways To Improve Your Credit Score:
1. Make Sure Its Right
Mistakes in your credit report will ruin your score. So, get copies of your Credit Report through Annual Credit Report.com (not free credit report.com) or by calling 877-322-8228 (it’s OK to give your Social Security Number because you called them).
For those of you who keep up with your Credit Report, Annual Credit Report.com is just fine. If not, I recommend myFico because it’s easier to read and you’ll be able to see all the info at once. It’s also the most like the one that will be sent to your creditors. Annual Credit Report.com gives you one report for each (lots and lots of pages.
You can dispute any errors by writing a letter to the credit reporting agency (you’ll have to do it for all three if the error is on all your reports). Tell them what’s not correct and send copies of any documentation you may have. Request that it be removed or corrected. Go to the post office and send it “return receipt requested” so someone has to sign for it. Keep copies of everything.
Next, let the creditor know that what’s incorrect because if they keep reporting the error, it won’t be removed from your credit report.
2. Know the Truth
Before you can improve your score, you have to know what it is!
You can get copies of your credit report at Annual Credit Report.com for free but you’ll have to pay for the credit scores.
I recommend getting your FICO score straight from the source…
If you get your score regularly and just want to make sure nothing creeps in, you can use two new free credit score website: Quizzle and Credit Karma. I tried both and was impressed with them.
3. Pay Your Bills (on time)
The best “secret” for having and keeping a great credit score is to pay your bills on time. And watch out because the credit card companies are getting sneaky - if your bill arrives after the specified due time (not just the date), it will be late, you will pay a late charge and it will affect your credit score. Mail it in plenty of time or pay online at the creditors’ website (check the fine print first). You might also want to set up automatic payments for at least the minimum payment so you’ll always pay on time even if you are out of town. You can always pay more separately.
Paying any bills late may affect all your other bills. This includes unpaid parking or speeding tickets, library fines, medical and utility bills. These creditors are reporting late and non-payments to the credit reporting agencies, too. I received a bill the other day from my daughter’s college town for a parking ticket shed thrown away; I made her pay it immediately before it hurt my credit score.
By the way, if you are on on-time payer and are late, call the creditor and ask them to reverse the late charge and not report it. Most will but you have to catch it promptly.
4. Don’t close old credit cards.
After you’ve paid it off, put the card in a safe place and keep the account open. The length of your history is an important part of the calculation. Another reason to keep it open is that your “utilization ratio” is another big part of the calculation. This means how much of your credit limits you’ve used up. The ideal is in the 30% range.
Weird, I know. Why would they give you a high credit limit and then not want you to use it? Statistics show that people who are bumping up against their credit lines have a higher chance of defaulting.
5. Don’t Go Crazy
Be cautious about applying for lots of credit in a short time frame. Lenders call this “excessive credit seeking” and it makes them think you’re desperate.
If you’re applying for home or auto loans, you have a 30 day window where multiple applications will only be counted once. You’ll want to shop around before actually applying.
6. Don’t Delay
Unfortunately, these steps will not fix your credit score overnight. It can take 3-9 months before you see improvements. However, I can pretty well guarantee you won’t see improvements if you do nothing.
The good news is that even if your score is really down in the dumps, you can improve it and the last 2 years count the most.
What Next?
I know that all of this can be overwhelming from ordering it to reviewing it to making the corrections. If you need help with your credit report, call me. I’m a Certified Credit Report Reviewer and I’ve reviewed hundreds of credit reports.
You’ll order your credit report and send it to me by mail or email. I’ll look it over and well have a 30 minute review to tell you exactly what you have to do. And… If you don’t want to write the letters, I’ll do that, too and send them to you by email so you can put in your private information, sign them and send them out. What could be easier?
You can call me directly at 541-387-2995 to find out more.
Warmly,
Cindy
Debt Payments Higher Than Income
July 7, 2008
This is part of our Pay Debt Quickly series sponsored by
PDQ Pay Debt Quickly kit.
Question:I don’t know how to pay off my debt. My debts are more than the money I earn each month. What can I do? ~ Naomi
Answer: Hi Naomi, that’s a tough spot to be in. I’m not quite sure from your question if your total debts are higher than your monthly income or if the payments are higher than your income. I’m going to address that your debts are higher than your income but you’re still able to make the payments.
It sounds like this is really worrying you — maybe that you won’t be able to make the payments soon. So, now is a good time to be asking this question.
Since you can make the payments, every month, you’re actually in a good position to be able to eliminate the debt over the next couple of years (perhaps sooner). Here’s what to do…
- From Minimum Payments to Fixed Payments. Convert all your current minimum payments to fixed payments. That means that if you are paying $55.55 this month, you’ll pay that every single month until the debt is paid off — no matter what the minimum payment is on your bill.
- Stop Using Your Credit Cards. There’s no grace period on cards that have a balance so you start paying interest on new charges immediately.
- Get Clear on Your Debt. List every one of your debts on a piece of paper (you can get my form here) so you know exactly what you’re dealing with. Sometimes it’s worse than you thought and sometimes not so bad but you won’t be able to really know until you see it all in black and white.
If you’d like to instantly create a Debt Payoff Plan and see exactly the date you’ll be out of debt, try our PDQ Pay Debt Quickly system (with a 30 day no-questions asked guarantee). It’s great to have a plan that you can follow every month.
Naomi, please let me know if you have any other questions.
Warmly, 
Shopping Too Much?
July 3, 2008
I’m seeing more and more clients who are banking on retail therapy to get them through this recession. They’re using shopping to numb the worry and stress of unsteady income, shaky jobs, treacherous home mortgages and rising food and gas prices. When they feel bad for whatever reason, off to the mall, bookstore or even grocery store they go. We’ve all heard it: “When the going gets tough, the tough go shopping!”
Amanda recently came to see me because she was at her wit’s end. Amanda has a stressful job as a Chiropractor and she often goes shopping after work. She says, “I just need to relax before I go home to Steve and the kids”. She has a closetful of clothes many she’s never worn - and some still have the tags on.
6 months ago, Amanda tried to hide her purchases from Steve but he found out when he opened the bills and yelled at her. Recently she opened up a new credit card in her own name and used her office address so Steve wouldn’t find out. She’s scared that he’ll leave her if he ever finds out.
At the end of our last phone appointment, Amanda said, “I’m so glad I found you, Cindy. It’s such a relief to be able to tell somebody everything and not have you get mad at me or tell me I’m a bad person.”
Most of us know in our heads that this is a dangerous road but we all have a vice or two. If you’re faced with this dilemma here are a few things you can do:
- Shop with a friend or family member who will hold you accountable (and who won’t join you in making purchases you both know you shouldn’t)
- Use a list and promise yourself not to deviate from it
- Use your debit card (did you know that if you are carrying a balance on your credit card, there is not grace period - interest starts adding on immediately)
- Create a “cooling off” period by putting items on hold and coming back in 24 or 48 hours
- Ask yourself “Do I need this or do I want it?” (Download my free “Needs and Wishes” Worksheet)
- Develop a list of fun things to do and choose one when you feel like shopping
- Know that it’s OK to have the urge to shop and not respond
- Find another way to get your “fix” (thrift stores and garage sales can be just as addictive)
- Stay out of the stores and off the internet if that’s your shopping vice
What’s your vice? What are your alternatives? How will you keep from feeling deprived with your new choices?
If you’d like to talk about your shopping worries (or anything else), check the Event Calendar for my next open office hours.
Warmly,
Debt Reduction Program
June 25, 2008
This is part of our Pay Debt Quickly series sponsored by PDQ Pay Debt Quickly kit.
Question: Should I consider a Debt Program that would pay off all my high interest debt ($25,000) but leave me with no credit cards for the next three years? I am considering this because I am only able to pay the minimum monthly payments, on these five different accounts. ~ Judy
Answer
Hi Judy, one of the most important questions to ask is “will this really pay off the $25,000 in 3 years?” I used the calculator at http://www.bankrate.com/brm/calc/creditcardpay.asp to play with your numbers. You didn’t mention what interest rates you would be paying or your monthly payment.
So, I made some assumptions.
If you put in $25,000 as the balance and .01% (which is almost 0% — it doesn’t take 0%) for 36 months, your payment will be $694.55 every month. At 12%, the monthly payments are $830.36 every month.
If you can’t pay the monthly payment, you won’t be able to pay off $25,000 in 3 years.
My concern with these kind of high balance/long term plans is:
1. Are you still so strapped that the first emergency will cause the whole plan to collapse?
2. What happens if you lose your job or get sick?
I generally recommend that people also check out bankruptcy with a qualified attorney if they can’t reasonably expect to get out from under the debt in 4-6 years because if you can’t do it in that amount of time, the chances of something like #1 or #2 happening is pretty high. That would mean that you had been paying a lot of money for a lot of years and still end up in the same going through a bankruptcy.
The most important thing, Judy, is that you examine what caused the situation you are in and how it has served (or not served you). What will you do differently to make sure that you don’t slip back into the situation again?
Best wishes, Judy.
How Much Credit can you Afford?
June 19, 2008
This is part of our Pay Debt Quickly series sponsored by PDQ Pay Debt Quickly kit.
Before making the decision to add more debt, you need to make sure that you:
* Allocate sufficient money for your essentials.
* Borrow only for items that you need and can afford.
* Borrow only if you’re spending less each month than you take home.
1. Start with your monthly take-home pay.
This is the amount you have left after taxes and other deductions have been made.
2. Subtract the amount you need for necessities and fixed expenses.
This includes savings, your mortgage or rent payment, utilities, food, transportation, child care, medical care, clothing, and recreation. Include payments made on a quarterly, semi-annual, or annual basis, such insurance and taxes.
3. Subtract monthly payments for existing loans and credit cards.
4. The balance is the amount you can safely apply to debt repayment.
Avoid thinking you can spend all this amount, since emergencies do occur, and you may not wish to use your regular savings account to cover small, unexpected expenses.
Monthly Take Home $ _______________
Fixed Expenses $ _______________
Loans/Credit Cards $ _______________
Amount Available For Additional Debt $ _______________
Moral of the Story: If you’re planning to buy a new house or car, pretend you have already done so and start “making the payment” but to yourself. Within a few months, you’ll know whether or not you can really afford it and you’ll have some money set aside for repairs, etc. when you actually do make the purchase. If you can’t make the pretend payment, you certainly won’t be able to make the real one consistently. Time to go back to the drawing board and figure out what else you’re willing to give up in order to have the new debt.
I welcome your comments, ideas and tips that have worked for you.
Warmly, Cindy
